UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the quarterly period ended June 30, 2016 
Commission File Number 001-33289

ENSTAR GROUP LIMITED
(Exact name of Registrant as specified in its charter)

BERMUDA	N/A	
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)	

Windsor Place, 3rd Floor, 22 Queen Street, Hamilton HM JX, Bermuda
(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (441) 292-3645

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   þ     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   þ     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	þ	 	Accelerated filer	¨	 	Non-accelerated filer	¨	 	Smaller reporting company	¨	
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   þ
As of August 5, 2016, the registrant had outstanding 16,225,391 voting ordinary shares and 3,130,408 non-voting convertible ordinary shares, each par value $1.00 per share.

 	

Table of Contents

Enstar Group Limited
Quarterly Report on Form 10-Q
For the Period Ended June 30, 2016

Table of Contents

 	 	 	
 	 	Page	
PART I	 	
 	 	 	
Item 1.	Financial Statements	1	
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	46	
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	82	
Item 4.	Controls and Procedures	84	
 	 	 	
PART II	 	
 	 	 	
Item 1.	Legal Proceedings	85	
Item 1A.	Risk Factors	85	
Item 6.	Exhibits	85	

Table of Contents

PART I — FINANCIAL INFORMATION
ITEM 1.   FINANCIAL STATEMENTS
ENSTAR GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2016 and December 31, 2015

 	June 30,
2016	 	December 31,
2015	
 	(expressed in thousands of U.S. dollars, except share data)	
ASSETS	 	 	 	
Short-term investments, trading, at fair value	$	122,746	
 	 	$	87,350	
 	
Short-term investments, available-for-sale, at fair value (amortized cost: 2016 — $2,406; 2015 — $8,630)	2,401	
 	 	8,622	
 	
Fixed maturities, trading, at fair value	4,986,615	
 	 	4,990,794	
 	
Fixed maturities, held-to-maturity, at amortized cost	770,655	
 	 	790,866	
 	
Fixed maturities, available-for-sale, at fair value (amortized cost: 2016 — $297,327; 2015 — $300,160)	299,929	
 	 	293,679	
 	
Equities, trading, at fair value	117,293	
 	 	115,941	
 	
Other investments, at fair value	936,158	
 	 	1,034,032	
 	
Other investments, at cost	129,636	
 	 	133,071	
 	
Total investments	7,365,433	
 	 	7,454,355	
 	
Cash and cash equivalents	800,846	
 	 	821,925	
 	
Restricted cash and cash equivalents	446,293	
 	 	511,339	
 	
Premiums receivable	416,354	
 	 	381,412	
 	
Deferred tax assets	116,047	
 	 	121,035	
 	
Prepaid reinsurance premiums	145,184	
 	 	121,427	
 	
Reinsurance balances recoverable	1,345,115	
 	 	1,474,004	
 	
Funds held by reinsured companies	1,190,899	
 	 	109,358	
 	
Deferred acquisition costs	101,227	
 	 	89,123	
 	
Goodwill and intangible assets	187,555	
 	 	191,304	
 	
Other assets	544,213	
 	 	556,850	
 	
TOTAL ASSETS	$	12,659,166	
 	 	$	11,832,132	

LIABILITIES	 	 	 	
Losses and loss adjustment expenses	$	6,433,845	
 	 	$	5,720,149	
 	
Policy benefits for life and annuity contracts	1,286,276	
 	 	1,304,697	
 	
Unearned premiums	576,970	
 	 	542,771	
 	
Insurance and reinsurance balances payable	318,072	
 	 	274,598	
 	
Deferred tax liabilities	94,676	
 	 	92,588	
 	
Loans payable	614,030	
 	 	600,250	
 	
Other liabilities	276,186	
 	 	358,633	
 	
TOTAL LIABILITIES	9,600,055	
 	 	8,893,686	

COMMITMENTS AND CONTINGENCIES	

 	 	 	 	
REDEEMABLE NONCONTROLLING INTEREST	439,656	
 	 	417,663	

SHAREHOLDERS’ EQUITY	 	 	 	
Share capital authorized, issued and fully paid, par value $1 each (authorized 2016 and 2015: 156,000,000):	

Ordinary shares (issued and outstanding 2016: 16,166,652; 2015: 16,133,334)	16,167	
 	 	16,133	
 	
Non-voting convertible ordinary shares:	 	 	 	
Series A (issued 2016: nil; 2015: 2,972,892)	—	
 	 	2,973	
 	
Series C (issued and outstanding 2016: 2,725,637; 2015: 2,725,637)	2,726	
 	 	2,726	
 	
Series E (issued and outstanding 2016: 404,771; 2015: 404,771)	405	
 	 	405	
 	
Series C Preferred Shares (issued and outstanding 2016: 388,571; 2015: nil)	389	
 	 	—	
 	
Treasury shares at cost (Preferred shares 2016: 388,571; Series A non-voting convertible ordinary shares 2015: 2,972,892)	(421,559	)	 	(421,559	)	
Additional paid-in capital	1,376,590	
 	 	1,373,044	
 	
Accumulated other comprehensive loss	(21,527	)	 	(35,162	)	
Retained earnings	1,662,623	
 	 	1,578,312	
 	
Total Enstar Group Limited Shareholders’ Equity	2,615,814	
 	 	2,516,872	
 	
Noncontrolling interest	3,641	
 	 	3,911	
 	
TOTAL SHAREHOLDERS’ EQUITY	2,619,455	
 	 	2,520,783	
 	
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS’ EQUITY	$	12,659,166	
 	 	$	11,832,132	
 	
See accompanying notes to the unaudited condensed consolidated financial statements

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Table of Contents

ENSTAR GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Three and Six Months Ended June 30, 2016 and 2015 

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Three Months Ended
June 30,	 	Six Months Ended
June 30,	
 	2016	 	2015	 	2016	 	2015	
 	(expressed in thousands of U.S.
dollars, except share and per share data)	
INCOME	 	 	 	 	 	 	 	
Net premiums earned	$	226,928	
 	 	$	212,023	
 	 	$	436,337	
 	 	$	410,929	
 	
Fees and commission income	7,243	
 	 	9,131	
 	 	12,590	
 	 	20,611	
 	
Net investment income	54,223	
 	 	34,655	
 	 	114,286	
 	 	65,072	
 	
Net realized and unrealized gains (losses)	37,987	
 	 	(11,249	)	 	75,951	
 	 	31,771	
 	
Other income	4,048	
 	 	11,838	
 	 	6,461	
 	 	15,314	
 	
 	330,429	
 	 	256,398	
 	 	645,625	
 	 	543,697	
 	
EXPENSES	 	 	 	 	 	 	 	
Net incurred losses and loss adjustment expenses	96,462	
 	 	65,900	
 	 	179,680	
 	 	136,036	
 	
Life and annuity policy benefits	19,778	
 	 	28,090	
 	 	40,758	
 	 	50,937	
 	
Acquisition costs	46,489	
 	 	37,094	
 	 	93,754	
 	 	71,644	
 	
General and administrative expenses	105,878	
 	 	93,963	
 	 	200,324	
 	 	190,561	
 	
Interest expense	5,424	
 	 	4,876	
 	 	10,825	
 	 	8,879	
 	
Net foreign exchange losses (gains)	(1,856	)	 	2,452	
 	 	(84	)	 	(2,619	)	
 	272,175	
 	 	232,375	
 	 	525,257	
 	 	455,438	
 	
EARNINGS BEFORE INCOME TAXES	58,254	
 	 	24,023	
 	 	120,368	
 	 	88,259	
 	
INCOME TAXES	(8,473	)	 	(5,816	)	 	(15,982	)	 	(16,560	)	
NET EARNINGS	49,781	
 	 	18,207	
 	 	104,386	
 	 	71,699	
 	
Less: Net earnings attributable to noncontrolling interest	(9,187	)	 	(3,662	)	 	(18,272	)	 	(12,307	)	
NET EARNINGS ATTRIBUTABLE TO ENSTAR GROUP LIMITED	$	40,594	
 	 	$	14,545	
 	 	$	86,114	
 	 	$	59,392	
 	
EARNINGS PER SHARE — BASIC	 	 	 	 	 	 	 	
Net earnings per ordinary share attributable to Enstar Group Limited shareholders	$	2.10	
 	 	$	0.76	
 	 	$	4.46	
 	 	$	3.09	
 	
EARNINGS PER SHARE — DILUTED	 	 	 	 	 	 	 	
Net earnings per ordinary share attributable to Enstar Group Limited shareholders	$	2.09	
 	 	$	0.75	
 	 	$	4.43	
 	 	$	3.07	
 	
Weighted average ordinary shares outstanding — basic	19,295,280	
 	 	19,252,359	
 	 	19,289,119	
 	 	19,244,951	
 	
Weighted average ordinary shares outstanding — diluted	19,430,464	
 	 	19,383,753	
 	 	19,420,541	
 	 	19,364,775	

See accompanying notes to the unaudited condensed consolidated financial statements

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ENSTAR GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six Months Ended June 30, 2016 and 2015 

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Three Months Ended
June 30,	 	Six Months Ended
June 30,	
 	2016	 	2015	 	2016	 	2015	
 	(expressed in thousands of U.S. dollars)	
NET EARNINGS	$	49,781	
 	 	$	18,207	
 	 	$	104,386	
 	 	$	71,699	
 	
Other comprehensive income, net of tax:	 	 	 	 	 	 	 	
Unrealized holding gains (losses) on fixed income investments arising during the period	2,174	
 	 	2,162	
 	 	9,094	
 	 	(2,194	)	
Reclassification adjustment for net realized losses (gains) included in net earnings	113	
 	 	(38	)	 	135	
 	 	(144	)	
Unrealized gains (losses) arising during the period, net of reclassification adjustment	2,287	
 	 	2,124	
 	 	9,229	
 	 	(2,338	)	
Currency translation adjustment	(4,542	)	 	3,299	
 	 	6,053	
 	 	(12,587	)	
Total other comprehensive income (loss)	(2,255	)	 	5,423	
 	 	15,282	
 	 	(14,925	)	
Comprehensive income	47,526	
 	 	23,630	
 	 	119,668	
 	 	56,774	
 	
Less comprehensive income attributable to noncontrolling interest	(9,353	)	 	(533	)	 	(19,919	)	 	(6,169	)	
COMPREHENSIVE INCOME ATTRIBUTABLE TO ENSTAR GROUP LIMITED	$	38,173	
 	 	$	23,097	
 	 	$	99,749	
 	 	$	50,605	

See accompanying notes to the unaudited condensed consolidated financial statements

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ENSTAR GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the Six Months Ended June 30, 2016 and 2015 

 	Six Months Ended
June 30,	
 	2016	 	2015	
 	(expressed in thousands of U.S. dollars)	
Share Capital — Ordinary Shares	 	 	 	
Balance, beginning of period	$	16,133	
 	 	$	15,761	
 	
Issue of shares	34	
 	 	54	
 	
Conversion of Series E Non-Voting Convertible Ordinary Shares	—	
 	 	12	
 	
Balance, end of period	$	16,167	
 	 	$	15,827	
 	
Share Capital — Series A Non-Voting Convertible Ordinary Shares	 	 	 	
Balance, beginning of period	$	2,973	
 	 	$	2,973	
 	
Shares converted to Series C Convertible Participating Non-Voting Perpetual Preferred Stock	(2,973	)	 	—	
 	
Balance, end of period	$	—	
 	 	$	2,973	
 	
Share Capital — Series C Non-Voting Convertible Ordinary Shares	 	 	 	
Balance, beginning and end of period	$	2,726	
 	 	$	2,726	
 	
Share Capital — Series E Non-Voting Convertible Ordinary Shares	 	 	 	
Balance, beginning of period	$	405	
 	 	$	714	
 	
Conversion to Ordinary Shares	—	
 	 	(12	)	
Balance, end of period	$	405	
 	 	$	702	
 	
Share Capital — Series C Convertible Participating Non-Voting Perpetual Preferred Stock	 	 	 	
Balance, beginning of period	$	—	
 	 	$	—	
 	
Conversion of Series A Non-Voting Convertible Ordinary Stock	389	
 	 	—	
 	
Balance, end of period	$	389	
 	 	$	—	
 	
Treasury Shares	 	 	 	
Balance, beginning and end of period	$	(421,559	)	 	$	(421,559	)	
Additional Paid-in Capital	 	 	 	
Balance, beginning of period	$	1,373,044	
 	 	$	1,321,715	
 	
Issue of shares and warrants	360	
 	 	911	
 	
Conversion of Series A Non-Voting Convertible Ordinary Stock	2,584	
 	 	—	
 	
Amortization of equity incentive plan	602	
 	 	2,821	
 	
Equity attributable to Enstar Group Limited on acquisition of noncontrolling shareholders’ interest in subsidiaries	—	
 	 	39,569	
 	
Balance, end of period	$	1,376,590	
 	 	$	1,365,016	
 	
Accumulated Other Comprehensive Income (Loss)	 	 	 	
Balance, beginning of period	$	(35,162	)	 	$	(12,686	)	
Currency translation adjustment	 	 	 	
Balance, beginning of period	(23,790	)	 	(2,779	)	
Change in currency translation adjustment	6,053	
 	 	(10,227	)	
Purchase of noncontrolling shareholder's interest in subsidiaries	—	
 	 	2,937	
 	
Balance, end of period	(17,737	)	 	(10,069	)	
Defined benefit pension liability	 	 	 	
Balance, beginning and end of period	(7,723	)	 	(7,726	)	
Unrealized gains (losses) on investments	 	 	 	
Balance, beginning of period	(3,649	)	 	(2,181	)	
Change in unrealized losses on investments	7,582	
 	 	(1,809	)	
Purchase of noncontrolling shareholders’ interest in subsidiaries	—	
 	 	312	
 	
Balance, end of period	3,933	
 	 	(3,678	)	
Balance, end of period	$	(21,527	)	 	$	(21,473	)	
Retained Earnings	 	 	 	
Balance, beginning of period	$	1,578,312	
 	 	$	1,395,206	
 	
Net earnings attributable to Enstar Group Limited	86,114	
 	 	59,392	
 	
Accretion of redeemable noncontrolling interests to redemption value	(1,803	)	 	—	
 	
Balance, end of period	$	1,662,623	
 	 	$	1,454,598	
 	
Noncontrolling Interest (excludes redeemable noncontrolling interests)	 	 	 	
Balance, beginning of period	$	3,911	
 	 	$	217,970	
 	
Sale of noncontrolling shareholders' interest in subsidiaries	—	
 	 	(182,819	)	
Dividends paid	—	
 	 	680	

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Contribution of capital	—	
 	 	(323	)	
Net earnings (loss) attributable to noncontrolling interest	(270	)	 	291	
 	
Foreign currency translation adjustments	—	
 	 	(1,558	)	
Net movement in unrealized holding losses on investments	—	
 	 	(123	)	
Balance, end of period	$	3,641	
 	 	$	34,118	

See accompanying notes to the unaudited condensed consolidated financial statements

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ENSTAR GROUP LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2016 and 2015 

 	Six Months Ended
June 30,	
 	2016	 	2015	
 	(expressed in thousands
 of U.S. dollars)	
OPERATING ACTIVITIES:	 	 	 	
Net earnings	$	104,386	
 	 	$	71,699	
 	
Adjustments to reconcile net earnings to cash flows used in operating activities:	 	 	 	
Realized gains on sale of investments	(786	)	 	(19,782	)	
Unrealized gains on investments	(75,165	)	 	(11,989	)	
Other non-cash items	3,811	
 	 	5,553	
 	
Depreciation and other amortization	24,320	
 	 	28,262	
 	
Net change in trading securities held on behalf of policyholders	(996	)	 	1,728	
 	
Sales and maturities of trading securities	1,666,796	
 	 	1,669,290	
 	
Purchases of trading securities	(1,615,299	)	 	(2,299,395	)	
Changes in:	 	 	 	
Reinsurance balances recoverable	132,938	
 	 	210,401	
 	
Funds held by reinsured companies	(17	)	 	20,773	
 	
Losses and loss adjustment expenses	(380,111	)	 	(188,793	)	
Policy benefits for life and annuity contracts	(20,881	)	 	(14,028	)	
Insurance and reinsurance balances payable	41,473	
 	 	33,828	
 	
Unearned premiums	34,200	
 	 	26,505	
 	
Other operating assets and liabilities	(131,001	)	 	(12,097	)	
Net cash flows used in operating activities	(216,332	)	 	(478,045	)	
INVESTING ACTIVITIES:	 	 	 	
Acquisitions, net of cash acquired	$	9,924	
 	 	$	56,369	
 	
Sales and maturities of available-for-sale securities	55,443	
 	 	97,733	
 	
Purchase of available-for-sale securities	(47,798	)	 	(48,548	)	
Maturities of held-to-maturity securities	15,302	
 	 	5,246	
 	
Movement in restricted cash and cash equivalents	65,116	
 	 	242,365	
 	
Purchase of other investments	(40,166	)	 	(133,411	)	
Redemption of other investments	125,100	
 	 	42,415	
 	
Other investing activities	(1,597	)	 	(2,016	)	
Net cash flows provided by investing activities	181,324	
 	 	260,153	
 	
FINANCING ACTIVITIES:	 	 	 	
Contribution by noncontrolling interest	$	—	
 	 	$	680	
 	
Contribution by redeemable noncontrolling interest	—	
 	 	15,728	
 	
Dividends paid to noncontrolling interest	—	
 	 	(7,433	)	
Receipt of loans	154,048	
 	 	374,700	
 	
Repayment of loans	(140,500	)	 	(46,000	)	
Net cash flows provided by financing activities	13,548	
 	 	337,675	
 	
EFFECT OF EXCHANGE RATE CHANGES ON FOREIGN CURRENCY CASH AND CASH EQUIVALENTS	381	
 	 	(6,226	)	
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(21,079	)	 	113,557	
 	
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	821,925	
 	 	963,402	
 	
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	800,846	
 	 	$	1,076,959	

Supplemental Cash Flow Information:	 	 	 	
Income taxes paid, net of refunds	$	15,830	
 	 	$	13,343	
 	
Interest paid	$	10,578	
 	 	$	7,952	

See accompanying notes to the unaudited condensed consolidated financial statements

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016 and December 31, 2015 

(Tabular information expressed in thousands of U.S. dollars except share and per share data)
 
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation and Consolidation
These unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, these financial statements reflect all adjustments consisting of normal recurring items considered necessary for a fair presentation under U.S. GAAP. The results of operations for any interim period are not necessarily indicative of results of the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2015. Inter-company accounts and transactions have been eliminated. Results of operations for subsidiaries acquired are included from the dates on which we acquired them. In these notes, the terms "we," "us," "our," or "the Company" refer to Enstar Group Limited and its consolidated subsidiaries. Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net earnings.
The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ materially from these estimates. Results of changes in estimates are reflected in earnings in the period in which the change is made. Our principal estimates include, but are not limited to:
 	 	
•	liability for losses and loss adjustment expenses ("LAE");	
 	 	
•	liability for policy benefits for life and annuity contracts;	
 	 	
•	reinsurance balances recoverable;	
 	 	
•	gross and net premiums written and net premiums earned;	
 	 	
•	impairment charges, including other-than-temporary impairments on investment securities classified as available-for-sale or held-to-maturity, and impairments on goodwill, intangible assets and deferred charges;	
 	 	
•	fair value measurements of investments;	
 	 	
•	fair value estimates associated with accounting for acquisitions; and	
 	 	
•	redeemable noncontrolling interests.	
New Accounting Standards Adopted in 2016
Accounting Standards Update ("ASU") 2015-16, Business Combinations, Simplifying the Accounting for Measurement-Period Adjustment
In September 2015, the Financial Accounting Standards Board ("FASB") issued ASU 2015-16, which eliminates the requirement for an acquirer to retrospectively adjust the financial statements for measurement-period adjustments that occur in periods after a business combination is consummated. Under the new guidance, an acquirer must recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The adoption of this guidance did not have a material impact on our consolidated financial statements and disclosures.

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ASU 2015-07, Disclosures for Investments in Certain Entities that Calculate Net Asset Value or its Equivalent
In May 2015, the FASB issued ASU No. 2015-07, which eliminates the requirement to categorize investments in the fair value hierarchy if their fair value is measured at the net asset value ("NAV") per share (or its equivalent) using the practical expedient in the FASB’s fair value measurement guidance. Instead, an entity is required to include those investments as a reconciling line item so that the total fair value amount of investments in the disclosure is consistent with the amount on the balance sheet. In addition, the scope of current disclosure requirements for investments eligible to be measured at NAV is limited to investments for which the practical expedient is applied. While the adoption of this guidance impacted our disclosures, it did not have an impact on our consolidated financial statements.
ASU 2015-02, Amendments to the Consolidation Analysis
In February 2015, the FASB issued ASU 2015-02, which requires entities to evaluate whether they should consolidate certain legal entities. The new consolidation guidance changes the way entities evaluate whether (1) they should consolidate limited partnerships and similar entities; (2) fees paid to a decision maker or service provider are variable interests in a variable interest entity ("VIE"), and (3) variable interests in a VIE held by related parties of a registrant require the registrant to consolidate the VIE. The new guidance also eliminates the VIE consolidation model based on majority exposure to variability that applied to certain investment companies and similar entities. The ASU also significantly changes how to evaluate voting rights for entities that are not similar to limited partnerships when determining whether the entity is a VIE, which may affect entities for which decision making rights are conveyed through a contractual arrangement. The adoption of this guidance did not have a material impact on our consolidated financial statements and disclosures.
Recently Issued Accounting Pronouncements Not Yet Adopted
ASU 2016-13, Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU 2016-13, which amends the guidance on impairment of financial instruments and significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The ASU will replace the existing “incurred loss” approach, with an “expected loss” model for instruments measured at amortized cost and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount under the existing other-than-temporary-impairment model. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. The ASU is effective for interim and annual reporting periods beginning after December 15, 2019. We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.
ASU 2016-09, Improvements to Employee Share-Based Payment Accounting
In March 2016, the FASB issued ASU 2016-09, which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The ASU is effective for interim and annual reporting periods beginning after December 15, 2016. We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.
ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
In March 2016, the FASB issued ASU 2016-08, which amends the principal-versus agent implementation guidance and illustrations in its new revenue standard (ASU 2014-09). The ASU clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract with a customer. Similar to ASU 2014-09, this guidance is effective for interim and reporting periods beginning after December 15, 2017, as amended by the one-year deferral and the early adoption provisions in ASU 2015-14. We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.
ASU 2016-07, Simplifying the Transition to the Equity Method of Accounting
In March 2016, the FASB issued ASU 2016-07, which simplifies the equity method of accounting by eliminating the requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result of an increase in the level of ownership interest or degree of influence. Entities are therefore required to apply the guidance prospectively to increases in the level of ownership interest or degree of influence occurring after the ASU’s effective date. The ASU further requires that unrealized holding gains or losses in accumulated

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

other comprehensive income related to an available-for-sale security that becomes eligible for the equity method be recognized in earnings as of the date on which the investment qualifies for the equity method. The ASU is effective for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.
ASU 2016-02, Leases
In February 2016, the FASB issued ASU 2016-02, which amends the guidance on the classification, measurement and disclosure of leases for both lessors and lessees. The ASU requires lessees to recognize a right-of-use asset and a lease liability on the balance sheet and to disclose qualitative and quantitative information about leasing arrangements. The ASU is effective for interim and annual reporting periods beginning after December 15, 2018. We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.
ASU 2016-01, Recognition and Measurement of Financial Instruments
In January 2016, the FASB issued ASU 2016-01, which amends the guidance on the classification and measurement of financial instruments. Although the ASU retains many of the current requirements, it significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities, and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. The ASU is effective for interim and annual reporting periods beginning after December 15, 2017. We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.
2. SIGNIFICANT NEW BUSINESS
2016
Coca-Cola
On August 5, 2016, we entered into a reinsurance transaction with The Coca-Cola Company and its subsidiaries (“Coca-Cola”) pursuant to which we reinsured certain of Coca-Cola’s retention and deductible risks under its subsidiaries’ U.S. workers’ compensation, auto liability, general liability, and product liability insurance coverage. We assumed total gross reserves of $109.1 million, received total assets of $102.7 million and recorded a deferred charge of $6.4 million, included in other assets. We have transferred approximately $109.1 million into trust to support our obligations under the reinsurance agreements. We provided a limited parental guarantee, subject to an overall maximum of approximately $27.0 million .
Allianz
On March 31, 2016, we completed our previously announced transaction with Allianz SE ("Allianz") to reinsure portfolios of Allianz's run-off business. Pursuant to the reinsurance agreement effective January 1, 2016, our subsidiary reinsured 50% of certain portfolios of workers' compensation, construction defect, and asbestos, pollution, and toxic tort business originally held by Fireman's Fund Insurance Company, and assumed net reinsurance reserves of approximately $1.1 billion. Affiliates of Allianz retained approximately $1.1 billion of reinsurance premium as funds withheld collateral for the obligations of our subsidiary under the reinsurance agreement, and we transferred approximately $110.0 million to a reinsurance trust to further support our subsidiary's obligations. Interest on the funds withheld is earned by us based upon an initial fixed interest rate. We have also provided a limited parental guarantee, which is subject to a maximum cap.  The combined monetary total of the support offered by us through the trust and parental guarantee is calculated in accordance with contractually defined terms and is capped at $270.0 million.
In addition to the reinsurance transaction described above, we have entered into a claims consulting agreement with San Francisco Reinsurance Company, an affiliate of Allianz, with respect to the entire $2.2 billion portfolio, including the 50% share retained by affiliates of Allianz.

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3. INVESTMENTS
We hold: (i) trading portfolios of fixed maturity investments, short-term investments and equities, carried at fair value; (ii) a held-to-maturity portfolio of fixed maturity investments carried at amortized cost; (iii) available-for-sale portfolios of short-term and fixed maturity investments carried at fair value; and (iv) other investments carried at either fair value or cost.
Trading
The fair values of our fixed maturity investments, short-term investments and equities classified as trading were as follows:

 	June 30,
2016	 	December 31,
2015	
U.S. government and agency	$	771,489	
 	 	$	750,957	
 	
Non-U.S. government	309,794	
 	 	359,002	
 	
Corporate	2,612,211	
 	 	2,631,682	
 	
Municipal	8,691	
 	 	22,247	
 	
Residential mortgage-backed	474,820	
 	 	391,247	
 	
Commercial mortgage-backed	281,052	
 	 	284,575	
 	
Asset-backed	651,304	
 	 	638,434	
 	
Total fixed maturity and short-term investments	5,109,361	
 	 	5,078,144	
 	
Equities — U.S.	109,903	
 	 	108,793	
 	
Equities — International	7,390	
 	 	7,148	
 	
 	$	5,226,654	
 	 	$	5,194,085	
 	
Included within residential and commercial mortgage-backed securities as at June 30, 2016 were securities issued by U.S. governmental agencies with a fair value of $447.0 million (as at December 31, 2015: $359.4 million). Included within corporate securities as at June 30, 2016 were senior secured loans of $89.9 million (as at December 31, 2015: $94.4 million).
The contractual maturities of our fixed maturity and short-term investments classified as trading are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

 	 	 	 	 	 	 	 	 	 	 	 	
As at June 30, 2016	 	Amortized
Cost	 	Fair Value	 	% of Total
Fair
Value	
One year or less	 	$	732,723	
 	 	$	723,589	
 	 	14.2	%	
More than one year through two years	 	927,837	
 	 	928,798	
 	 	18.2	%	
More than two years through five years	 	1,266,491	
 	 	1,279,337	
 	 	25.0	%	
More than five years through ten years	 	551,552	
 	 	563,660	
 	 	11.0	%	
More than ten years	 	197,290	
 	 	206,801	
 	 	4.0	%	
Residential mortgage-backed	 	473,782	
 	 	474,820	
 	 	9.3	%	
Commercial mortgage-backed	 	280,949	
 	 	281,052	
 	 	5.5	%	
Asset-backed	 	669,975	
 	 	651,304	
 	 	12.8	%	
 	 	$	5,100,599	
 	 	$	5,109,361	
 	 	100.0	%	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Held-to-maturity
We hold a portfolio of held-to-maturity securities to support our annuity business. The amortized cost and fair values of our fixed maturity investments classified as held-to-maturity were as follows:  

As at June 30, 2016	 	Amortized
Cost	 	Gross
Unrealized
Gains	 	Gross
Unrealized
Losses
Non-OTTI	 	Fair
Value	
U.S. government and agency	 	$	19,886	
 	 	$	1,068	
 	 	$	(62	)	 	$	20,892	
 	
Non-U.S. government	 	33,233	
 	 	1,193	
 	 	—	
 	 	34,426	
 	
Corporate	 	717,536	
 	 	36,782	
 	 	(1,457	)	 	752,861	
 	
 	 	$	770,655	
 	 	$	39,043	
 	 	$	(1,519	)	 	$	808,179	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
As at December 31, 2015	 	Amortized
Cost	 	Gross
Unrealized
Gains	 	Gross
Unrealized
Losses
Non-OTTI	 	Fair Value	
U.S. government and agency	 	$	19,771	
 	 	$	8	
 	 	$	(458	)	 	$	19,321	
 	
Non-U.S. government	 	40,503	
 	 	48	
 	 	(1,493	)	 	39,058	
 	
Corporate	 	730,592	
 	 	3,398	
 	 	(23,298	)	 	710,692	
 	
 	 	$	790,866	
 	 	$	3,454	
 	 	$	(25,249	)	 	$	769,071	
 	
The contractual maturities of our fixed maturity investments classified as held-to-maturity are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.  

As at June 30, 2016	 	Amortized
Cost	 	Fair
Value	 	% of Total
Fair
Value	
One year or less	 	$	17,293	
 	 	$	17,318	
 	 	2.1	%	
More than one year through two years	 	23,600	
 	 	23,784	
 	 	3.0	%	
More than two years through five years	 	66,940	
 	 	68,813	
 	 	8.5	%	
More than five years through ten years	 	107,660	
 	 	110,845	
 	 	13.7	%	
More than ten years	 	555,162	
 	 	587,419	
 	 	72.7	%	
 	 	$	770,655	
 	 	$	808,179	
 	 	100.0	%	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Available-for-sale
The amortized cost and fair values of our short-term and fixed maturity investments classified as available-for-sale were as follows:

As at June 30, 2016	 	Amortized
Cost	 	Gross
Unrealized
Gains	 	Gross
Unrealized
Losses
Non-OTTI	 	Fair
Value	
U.S. government and agency	 	$	13,364	
 	 	$	164	
 	 	$	—	
 	 	$	13,528	
 	
Non-U.S. government	 	89,836	
 	 	2,530	
 	 	(2,159	)	 	90,207	
 	
Corporate	 	184,886	
 	 	3,820	
 	 	(1,945	)	 	186,761	
 	
Municipal	 	6,500	
 	 	102	
 	 	—	
 	 	6,602	
 	
Residential mortgage-backed	 	569	
 	 	55	
 	 	—	
 	 	624	
 	
Asset-backed	 	4,578	
 	 	30	
 	 	—	
 	 	4,608	
 	
 	 	$	299,733	
 	 	$	6,701	
 	 	$	(4,104	)	 	$	302,330	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
As at December 31, 2015	 	Amortized
Cost	 	Gross
Unrealized
Gains	 	Gross
Unrealized
Losses
Non-OTTI	 	Fair
Value	
U.S. government and agency	 	$	25,102	
 	 	$	80	
 	 	$	(341	)	 	$	24,841	
 	
Non-U.S. government	 	89,631	
 	 	42	
 	 	(3,889	)	 	$	85,784	
 	
Corporate	 	182,773	
 	 	1,040	
 	 	(3,429	)	 	$	180,384	
 	
Municipal	 	5,959	
 	 	4	
 	 	(36	)	 	$	5,927	
 	
Residential mortgage-backed	 	665	
 	 	51	
 	 	(1	)	 	$	715	
 	
Asset-backed	 	4,660	
 	 	—	
 	 	(10	)	 	$	4,650	
 	
 	 	$	308,790	
 	 	$	1,217	
 	 	$	(7,706	)	 	$	302,301	
 	
 The contractual maturities of our short-term and fixed maturity investments classified as available-for-sale are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

As at June 30, 2016	 	Amortized
Cost	 	Fair
Value	 	% of Total
Fair
Value	
One year or less	 	$	51,327	
 	 	$	50,119	
 	 	16.6	%	
More than one year through two years	 	68,189	
 	 	67,500	
 	 	22.3	%	
More than two years through five years	 	87,040	
 	 	86,492	
 	 	28.6	%	
More than five years through ten years	 	41,192	
 	 	42,841	
 	 	14.2	%	
More than ten years	 	46,838	
 	 	50,146	
 	 	16.6	%	
Residential mortgage-backed	 	569	
 	 	624	
 	 	0.2	%	
Asset-backed	 	4,578	
 	 	4,608	
 	 	1.5	%	
 	 	$	299,733	
 	 	$	302,330	
 	 	100.0	%	

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Gross Unrealized Losses
The following tables summarize our fixed maturity and short-term investments in a gross unrealized loss position:

 	 	12 Months or Greater	 	Less Than 12 Months	 	Total	
As at June 30, 2016	 	Fair
Value	 	Gross Unrealized
Losses	 	Fair
Value	 	Gross Unrealized
Losses	 	Fair
Value	 	Gross Unrealized
Losses	
Fixed maturity and short-term investments, at fair value	 	 	 	 	 	 	 	 	 	 	 	 	
Non-U.S. government	 	$	—	
 	 	$	—	
 	 	$	20,177	
 	 	$	(2,159	)	 	$	20,177	
 	 	$	(2,159	)	
Corporate	 	3,089	
 	 	(137	)	 	32,647	
 	 	(1,808	)	 	35,736	
 	 	(1,945	)	
Total	 	$	3,089	
 	 	$	(137	)	 	$	52,824	
 	 	$	(3,967	)	 	$	55,913	
 	 	$	(4,104	)	
Fixed maturity investments, at amortized cost	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. government and agency	 	$	447	
 	 	$	(62	)	 	$	—	
 	 	$	—	
 	 	$	447	
 	 	$	(62	)	
Corporate	 	18,469	
 	 	(643	)	 	37,889	
 	 	(814	)	 	56,358	
 	 	(1,457	)	
Total	 	18,916	
 	 	(705	)	 	37,889	
 	 	(814	)	 	56,805	
 	 	(1,519	)	
Total fixed maturity and short-term investments	 	$	22,005	
 	 	$	(842	)	 	$	90,713	
 	 	$	(4,781	)	 	$	112,718	
 	 	$	(5,623	)	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	12 Months or Greater	 	Less Than 12 Months	 	Total	
As at December 31, 2015	 	Fair
Value	 	Gross Unrealized
Losses	 	Fair
Value	 	Gross Unrealized
Losses	 	Fair
Value	 	Gross Unrealized
Losses	
Fixed maturity and short-term investments, at fair value	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. government and agency	 	$	523	
 	 	$	(2	)	 	$	21,694	
 	 	$	(339	)	 	$	22,217	
 	 	$	(341	)	
Non-U.S. government	 	18,995	
 	 	(2,633	)	 	50,080	
 	 	(1,256	)	 	69,075	
 	 	(3,889	)	
Corporate	 	54,295	
 	 	(2,394	)	 	81,047	
 	 	(1,035	)	 	135,342	
 	 	(3,429	)	
Municipal	 	—	
 	 	—	
 	 	4,609	
 	 	(36	)	 	4,609	
 	 	(36	)	
Residential mortgage-backed	 	71	
 	 	(1	)	 	—	
 	 	—	
 	 	71	
 	 	(1	)	
Asset-backed	 	4,649	
 	 	(10	)	 	—	
 	 	—	
 	 	4,649	
 	 	(10	)	
Total	 	$	78,533	
 	 	$	(5,040	)	 	$	157,430	
 	 	$	(2,666	)	 	$	235,963	
 	 	$	(7,706	)	
Fixed maturity investments, at amortized cost	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. government and agency	 	$	7,221	
 	 	$	(48	)	 	$	12,024	
 	 	$	(410	)	 	$	19,245	
 	 	$	(458	)	
Non-U.S. government	 	24,424	
 	 	(1,255	)	 	8,885	
 	 	(238	)	 	33,309	
 	 	(1,493	)	
Corporate	 	209,000	
 	 	(9,038	)	 	330,833	
 	 	(14,260	)	 	539,833	
 	 	(23,298	)	
Total	 	240,645	
 	 	(10,341	)	 	351,742	
 	 	(14,908	)	 	592,387	
 	 	(25,249	)	
Total fixed maturity and short-term investments	 	$	319,178	
 	 	$	(15,381	)	 	$	509,172	
 	 	$	(17,574	)	 	$	828,350	
 	 	$	(32,955	)	
As at June 30, 2016 and December 31, 2015, the number of securities classified as available-for-sale in an unrealized loss position was 120 and 332, respectively. Of these securities, the number of securities that had been in an unrealized loss position for twelve months or longer was 13 and 124, respectively.
As at June 30, 2016 and December 31, 2015, the number of securities classified as held-to-maturity in an unrealized loss position was 14 and 109, respectively. Of these securities, the number of securities that had been in an unrealized loss position for twelve months or longer was 6 and 53, respectively.

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other-Than-Temporary Impairment
For the six months ended June 30, 2016 and 2015, we did not recognize any other-than-temporary impairment losses on either our available-for-sale or held-to-maturity securities. We determined that no credit losses existed as at June 30, 2016. A description of our other-than-temporary impairment process is included in Note 2 to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2015. There were no changes to our process during the six months ended June 30, 2016.
Credit Ratings
The following table sets forth the credit ratings of our fixed maturity and short-term investments as of June 30, 2016:

 	 	Amortized
Cost	 	Fair Value	 	% of Total
Investments	 	AAA Rated	 	AA Rated	 	A Rated	 	BBB
Rated	 	Non-
Investment
Grade	 	Not Rated	
Fixed maturity and short-term investments, at fair value	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. government and agency	 	$	771,905	
 	 	$	785,017	
 	 	12.6	%	 	$	778,456	
 	 	$	6,561	
 	 	$	—	
 	 	$	—	
 	 	$	—	
 	 	$	—	
 	
Non-U.S. government	 	405,688	
 	 	400,001	
 	 	6.4	%	 	129,956	
 	 	185,750	
 	 	52,705	
 	 	20,284	
 	 	11,306	
 	 	—	
 	
Corporate	 	2,777,899	
 	 	2,798,972	
 	 	45.1	%	 	164,171	
 	 	451,121	
 	 	1,312,900	
 	 	721,700	
 	 	143,010	
 	 	6,070	
 	
Municipal	 	14,987	
 	 	15,293	
 	 	0.2	%	 	5,395	
 	 	7,710	
 	 	2,188	
 	 	—	
 	 	—	
 	 	—	
 	
Residential mortgage-backed	 	474,351	
 	 	475,444	
 	 	7.6	%	 	465,622	
 	 	452	
 	 	6,029	
 	 	2,302	
 	 	1,036	
 	 	3	
 	
Commercial mortgage-backed	 	280,949	
 	 	281,052	
 	 	4.5	%	 	114,235	
 	 	34,730	
 	 	73,995	
 	 	15,538	
 	 	2,674	
 	 	39,880	
 	
Asset-backed	 	674,553	
 	 	655,912	
 	 	10.6	%	 	232,047	
 	 	128,948	
 	 	182,307	
 	 	43,362	
 	 	69,051	
 	 	197	
 	
Total	 	5,400,332	
 	 	5,411,691	
 	 	87.0	%	 	1,889,882	
 	 	815,272	
 	 	1,630,124	
 	 	803,186	
 	 	227,077	
 	 	46,150	
 	
% of total fair value	 	 	 	 	 	 	 	34.9	%	 	15.1	%	 	30.0	%	 	14.9	%	 	4.2	%	 	0.9	%	
Fixed maturity investments, at amortized cost	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. government and agency	 	19,886	
 	 	20,892	
 	 	0.3	%	 	19,491	
 	 	1,378	
 	 	—	
 	 	—	
 	 	—	
 	 	23	
 	
Non-U.S. government	 	33,233	
 	 	34,426	
 	 	0.6	%	 	—	
 	 	9,446	
 	 	24,980	
 	 	—	
 	 	—	

Corporate	 	717,536	
 	 	752,861	
 	 	12.1	%	 	41,800	
 	 	114,014	 	488,429	 	108,522	
 	 	—	
 	 	96	
 	
Total	 	770,655	
 	 	808,179	
 	 	13.0	%	 	61,291	
 	 	124,838	
 	 	513,409	
 	 	108,522	
 	 	—	
 	 	119	
 	
% of total fair value	 	 	 	 	 	 	 	8.3	%	 	15.4	%	 	64.7	%	 	11.5	%	 	—	%	 	0.1	%	
Total fixed maturity and short-term investments	 	$	6,170,987	
 	 	$	6,219,870	
 	 	100.0	%	 	$	1,951,173	
 	 	$	940,110	
 	 	$	2,143,533	
 	 	$	911,708	
 	 	$	227,077	
 	 	$	46,269	
 	
% of total fair value	 	 	 	 	 	 	 	31.4	%	 	15.1	%	 	34.4	%	 	14.7	%	 	3.7	%	 	0.7	%	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other Investments, at fair value
The following table summarizes our other investments carried at fair value:

 	 	June 30,
2016	 	December 31,
2015	
Private equities and private equity funds	 	$	229,756	
 	 	$	254,883	
 	
Fixed income funds	 	248,815	
 	 	291,736	
 	
Fixed income hedge funds	 	111,543	
 	 	109,400	
 	
Equity funds	 	163,050	
 	 	147,390	
 	
Multi-strategy hedge fund	 	98,416	
 	 	99,020	
 	
Real estate debt fund	 	—	
 	 	54,829	
 	
CLO equities	 	65,156	
 	 	61,702	
 	
CLO equity funds	 	13,513	
 	 	13,928	
 	
Call options on equities	 	4,850	
 	 	—	
 	
Other	 	1,059	
 	 	1,144	
 	
 	 	$	936,158	
 	 	$	1,034,032	
 	
The valuation of our other investments is described in Note 4 - "Fair Value Measurements." Due to a lag in the valuations of certain funds reported by the managers, we may record changes in valuation with up to a three-month lag. We regularly review and discuss fund performance with the fund managers to corroborate the reasonableness of the reported net asset values and to assess whether any events have occurred within the lag period that would affect the valuation of the investments. The following is a description of the nature of each of these investment categories:
 	 	
•	Private equities and private equity funds invest primarily in the financial services industry. All of our investments in private equities and private equity funds are subject to restrictions on redemptions and sales that are determined by the governing documents and limit our ability to liquidate those investments. These restrictions have been in place since the dates of our initial investments.	
 	 	
•	Fixed income funds comprise a number of positions in diversified fixed income funds that are managed by third-party managers. Underlying investments vary from high-grade corporate bonds to non-investment grade senior secured loans and bonds, but are generally invested in liquid fixed income markets. These funds have regularly published prices. The funds have liquidity terms that vary from daily up to quarterly.	
 	 	
•	Fixed income hedge funds invest in a diversified portfolio of debt securities. The hedge funds have imposed lock-up periods of up to three years from the time of initial investment. Once eligible, redemptions are permitted quarterly with 60 days’ notice.	
 	 	
•	Equity funds invest in a diversified portfolio of international publicly traded equity securities. The funds are eligible for bi-monthly redemption.	
 	 	
•	Multi-strategy hedge fund comprises an investment in a hedge fund that invests in a variety of asset classes including funds, fixed income, equity securities and other investments. The fund is eligible for quarterly redemption after September 1, 2016. Once eligible, redemptions will be permitted quarterly with 60 days’ notice.	
 	 	
•	Real estate debt fund invests primarily in U.S. commercial real estate loans and securities. A redemption request for this fund can be made 10 days after the date of any monthly valuation. The fund was fully redeemed as at March 31, 2016.	
 	 	
•	CLO equities comprise investments in the equity tranches of term-financed securitizations of diversified pools of corporate bank loans. CLO equities denote direct investments by us in these securities.	
 	 	
•	CLO equity funds comprise two funds that invest primarily in the equity tranches of term-financed securitizations of diversified pools of corporate bank loans. One of the funds has a fair value of $3.6 million, part of a self-liquidating structure that is expected to pay out over two to six years. The other fund has a fair value of $9.9 million and is eligible for redemption in 2018.	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 	 	
•	Call options on equities comprise directly held options to purchase the common equity of publicly traded corporations.	
 	 	
•	Other primarily comprises a fund that provides loans to educational institutions throughout the United States and its territories.	
Investments of $0.8 million in fixed income hedge funds were subject to gates or side-pockets, where redemptions are subject to the sale of underlying investments. A gate is the ability to deny or delay a redemption request, whereas a side-pocket is a designated account for which the investor loses its redemption rights.
As at June 30, 2016, we had unfunded commitments to private equity funds of $138.4 million.
Other Investments, at cost
Our other investments carried at cost of $129.6 million as of June 30, 2016 consist of life settlement contracts acquired during 2015. During the six months ended June 30, 2016 and 2015, net investment income included $10.0 million and $2.0 million, respectively, related to investments in life settlements. There were impairment charges of $2.9 million and nil recognized during the six month periods ended June 30, 2016 and 2015, respectively. The following table presents further information regarding our investments in life settlements as of June 30, 2016 and December 31, 2015.

 	 	June 30, 2016	 	December 31, 2015	

 	 	Number of Contracts	 	Carrying
Value	 	Face Value (Death Benefits)	 	Number of Contracts	 	Carrying
Value	 	Face Value (Death Benefits)	
Remaining Life Expectancy of Insureds:	 	 	 	 	 	 	 	 	 	 	 	 	
0 – 1 year	 	2	
 	 	$	436	
 	 	$	700	
 	 	2	
 	 	$	417	
 	 	$	700	
 	
1 – 2 years	 	3	
 	 	2,725	
 	 	4,500	
 	 	4	
 	 	3,032	
 	 	5,000	
 	
2 – 3 years	 	18	
 	 	25,556	
 	 	53,900	
 	 	19	
 	 	24,072	
 	 	39,123	
 	
3 – 4 years	 	16	
 	 	14,855	
 	 	30,328	
 	 	14	
 	 	9,695	
 	 	20,932	
 	
4 – 5 years	 	21	
 	 	9,882	
 	 	22,759	
 	 	16	
 	 	9,025	
 	 	22,457	
 	
Thereafter	 	187	
 	 	76,182	
 	 	432,601	
 	 	221	
 	 	86,830	
 	 	491,499	
 	
Total	 	247	
 	 	$	129,636	
 	 	$	544,788	
 	 	276	
 	 	$	133,071	
 	 	$	579,711	
 	
Remaining life expectancy for year 0-1 in the table above references policies whose current life expectancy is less than 12 months as of the reporting date. Remaining life expectancy is not an indication of expected maturity. Actual maturity in any category above may vary significantly (either earlier or later) from the remaining life expectancies reported.
At June 30, 2016, our best estimate of the life insurance premiums required to keep the policies in force, payable in the 12 months ending June 30, 2017 and the four succeeding years ending June 30, 2021 is $17.5 million, $17.4 million, $17.5 million, $17.2 million and $15.7 million, respectively.

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Net Realized and Unrealized Gains (Losses)
Components of net realized and unrealized gains (losses) for the three and six months ended June 30, 2016 and 2015 are summarized as follows:

 	 	Three Months Ended
June 30,	 	Six Months Ended
June 30,	
 	 	2016	
 	2015	 	2016	 	2015	
Net realized gains on sale:	 	 	 	 	 	 	 	 	
Gross realized gains on fixed maturity securities, available-for-sale	 	$	114	
 	 	$	39	
 	 	$	379	
 	 	$	153	
 	
Gross realized (losses) on fixed maturity securities, available-for-sale	 	(1	)	 	(1	)	 	(244	)	 	(9	)	
Net realized investment gains (losses) on fixed maturity securities, trading	 	1,535	
 	 	1,886	
 	 	(377	)	 	3,752	
 	
Net realized investment gains on equity securities, trading	 	555	
 	 	5,169	
 	 	1,028	
 	 	15,886	
 	
Total net realized gains on sale	 	$	2,203	
 	 	$	7,093	
 	 	$	786	
 	 	$	19,782	
 	
Net unrealized gains (losses):	 	

Fixed maturity securities, trading	 	$	40,472	
 	 	$	(22,953	)	 	$	82,212	
 	 	$	(9,065	)	
Equity securities, trading	 	617	
 	 	(6,445	)	 	2,223	
 	 	(13,564	)	
Other investments	 	(5,305	)	 	11,056	
 	 	(9,270	)	 	34,618	
 	
Total net unrealized gains (losses)	 	35,784	
 	 	(18,342	)	 	75,165	
 	 	11,989	
 	
Net realized and unrealized gains (losses)	 	$	37,987	
 	 	$	(11,249	)	 	$	75,951	
 	 	$	31,771	
 	
The gross realized gains and losses on available-for-sale securities included in the table above resulted from sales of $18.2 million and $33.6 million for the three and six months ended June 30, 2016, respectively, and $16.5 million and $59.8 million for the three and six months ended June 30, 2015, respectively.
Net Investment Income
Major categories of net investment income for the three and six months ended June 30, 2016 and 2015 are summarized as follows:

 	 	Three Months Ended
June 30,	 	Six Months Ended
June 30,	
 	 	2016	 	2015	 	2016	 	2015	
Fixed maturity investments	 	$	40,531	
 	 	$	28,551	
 	 	$	77,109	
 	 	$	54,800	
 	
Short-term investments and cash and cash equivalents	 	870	
 	 	1,387	
 	 	2,049	
 	 	4,106	
 	
Equity securities	 	1,387	
 	 	1,315	
 	 	2,509	
 	 	2,996	
 	
Other investments	 	5,693	
 	 	3,558	
 	 	11,727	
 	 	4,440	
 	
Funds held	 	7,633	
 	 	(184	)	 	15,237	
 	 	(10	)	
Life settlements and other	 	1,335	
 	 	2,788	
 	 	10,161	
 	 	3,095	
 	
Gross investment income	 	57,449	
 	 	37,415	
 	 	118,792	
 	 	69,427	
 	
Investment expenses	 	(3,226	)	 	(2,760	)	 	(4,506	)	 	(4,355	)	
Net investment income	 	$	54,223	
 	 	$	34,655	
 	 	$	114,286	
 	 	$	65,072	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Restricted Assets
We are required to maintain investments and cash and cash equivalents on deposit to support our insurance and reinsurance operations. The investments and cash and cash equivalents on deposit are available to settle insurance and reinsurance liabilities. We also utilize trust accounts to collateralize business with our insurance and reinsurance counterparties. These trust accounts generally take the place of letter of credit requirements. The assets in trusts as collateral are primarily highly rated fixed maturity securities. The carrying value of our restricted assets, including restricted cash of $446.3 million and $511.3 million, as of June 30, 2016 and December 31, 2015, respectively, was as follows:  

 	 	June 30,
2016	 	December 31,
2015	
Collateral in trust for third party agreements	 	$	2,863,608	
 	 	$	3,053,692	
 	
Assets on deposit with regulatory authorities	 	955,123	
 	 	915,346	
 	
Collateral for secured letter of credit facilities	 	195,277	
 	 	212,544	
 	
Funds at Lloyd's (1)	 	350,146	
 	 	382,624	
 	
 	 	$	4,364,154	
 	 	$	4,564,206	
 	
(1) Our underwriting businesses include three Lloyd's syndicates. Lloyd's determines the required capital principally through the annual business plan of each syndicate. This capital is referred to as "Funds at Lloyd's" and will be drawn upon in the event that a syndicate has a loss that cannot be funded from other sources. As at June 30, 2016, our combined Funds at Lloyd's were comprised of cash and investments of $312.2 million and letters of credit supported by collateral of $37.9 million.
4. FAIR VALUE MEASUREMENTS
Fair Value Hierarchy
Fair value is defined as the price at which to sell an asset or transfer a liability (i.e. the "exit price") in an orderly transaction between market participants. We use a fair value hierarchy that gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. The hierarchy is broken down into three levels as follows:
 	 	
•	Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments.	
 	 	
•	Level 2 - Valuations based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.	
 	 	
•	Level 3 - Valuations based on unobservable inputs where there is little or no market activity. Unadjusted third party pricing sources or management's assumptions and internal valuation models may be used to determine the fair values.	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We have categorized our investments that are recorded at fair value on a recurring basis among levels based on the observability of inputs as follows:   

 	 	June 30, 2016	
 	 	Quoted Prices in
Active Markets for
Identical Assets
(Level 1)	 	Significant
Other Observable
Inputs
(Level 2)	 	Significant
Unobservable
Inputs
(Level 3)	 	Total Fair
Value	
U.S. government and agency	 	$	—	
 	 	$	785,017	
 	 	$	—	
 	 	$	785,017	
 	
Non-U.S. government	 	—	
 	 	400,001	
 	 	—	
 	 	400,001	
 	
Corporate	 	—	
 	 	2,771,188	
 	 	27,784	
 	 	2,798,972	
 	
Municipal	 	—	
 	 	15,293	
 	 	—	
 	 	15,293	
 	
Residential mortgage-backed	 	—	
 	 	472,663	
 	 	2,781	
 	 	475,444	
 	
Commercial mortgage-backed	 	—	
 	 	226,217	
 	 	54,835	
 	 	281,052	
 	
Asset-backed	 	—	
 	 	579,208	
 	 	76,704	
 	 	655,912	
 	
Equities — U.S.	 	102,734	
 	 	7,169	
 	 	—	
 	 	109,903	
 	
Equities — International	 	2,850	
 	 	4,540	
 	 	—	
 	 	7,390	
 	
Other investments	 	—	
 	 	310,266	
 	 	80,470	
 	 	390,736	
 	
Total investments	 	$	105,584	
 	 	$	5,571,562	
 	 	$	242,574	
 	 	$	5,919,720	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	December 31, 2015	
 	 	Quoted Prices in
Active Markets for
Identical Assets
(Level 1)	 	Significant
Other Observable
Inputs
(Level 2)	 	Significant
Unobservable
Inputs
(Level 3)	 	Total Fair
Value	
U.S. government and agency	 	$	—	
 	 	$	775,798	
 	 	$	—	
 	 	$	775,798	
 	
Non-U.S. government	 	—	
 	 	444,786	
 	 	—	
 	 	444,786	
 	
Corporate	 	—	
 	 	2,812,066	
 	 	—	
 	 	2,812,066	
 	
Municipal	 	—	
 	 	28,174	
 	 	—	
 	 	28,174	
 	
Residential mortgage-backed	 	—	
 	 	391,962	
 	 	—	
 	 	391,962	
 	
Commercial mortgage-backed	 	—	
 	 	255,169	
 	 	29,406	
 	 	284,575	
 	
Asset-backed	 	—	
 	 	458,328	
 	 	184,756	
 	 	643,084	
 	
Equities — U.S.	 	99,467	
 	 	9,326	
 	 	—	
 	 	108,793	
 	
Equities — International	 	2,702	
 	 	4,446	
 	 	—	
 	 	7,148	
 	
Other investments	 	—	
 	 	321,076	
 	 	77,016	
 	 	398,092	
 	
Total investments	 	$	102,169	
 	 	$	5,501,131	
 	 	$	291,178	
 	 	$	5,894,478	
 	
Certain of our other investments are measured at fair value using NAV per share (or its equivalent) as a practical expedient and have not been classified within the fair value hierarchy above. The following table reconciles our other investments in the tables above with the amounts presented on our consolidated balance sheets:

Other investments:	 	June 30, 2016	 	December 31, 2015	
Other investments measured at fair value	 	$	390,736	
 	 	$	398,092	
 	
Other investments measured at NAV as practical expedient	 	545,422	
 	 	635,940	
 	
Total other investments shown on balance sheets	 	$	936,158	
 	 	$	1,034,032	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Valuation Methodologies of Financial Instruments Measured at Fair Value
Fixed Maturity Investments
The fair values for all securities in the fixed maturity investments portfolio are independently provided by the investment accounting service providers, investment managers and investment custodians, each of which utilize internationally recognized independent pricing services. We record the unadjusted price provided by the investment accounting service providers, investment managers or investment custodians and validate this price through a process that includes, but is not limited to: (i) comparison of prices against alternative pricing sources; (ii) quantitative analysis (e.g. comparing the quarterly return for each managed portfolio to its target benchmark); (iii) evaluation of methodologies used by external parties to estimate fair value, including a review of the inputs used for pricing; and (iv) comparing the price to our knowledge of the current investment market. Our internal price validation procedures and review of fair value methodology documentation provided by independent pricing services have not historically resulted in adjustment in the prices obtained from the pricing service.
The independent pricing services used by the investment accounting service providers, investment managers and investment custodians obtain actual transaction prices for securities that have quoted prices in active markets. For determining the fair value of securities that are not actively traded, in general, pricing services use "matrix pricing" in which the independent pricing service uses observable market inputs including, but not limited to, reported trades, benchmark yields, broker-dealer quotes, interest rates, prepayment speeds, default rates and such other inputs as are available from market sources to determine a reasonable fair value. In addition, pricing services use valuation models, using observable data, such as an Option Adjusted Spread model, to develop prepayment and interest rate scenarios. The Option Adjusted Spread model is commonly used to estimate fair value for securities such as mortgage-backed and asset-backed securities.
The following describes the techniques generally used to determine the fair value of our fixed maturity investments by asset class.
 	 	
•	U.S. government and agency securities consist of securities issued by the U.S. Treasury and mortgage pass-through agencies such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and other agencies. Non-U.S. government securities consist of bonds issued by non-U.S. governments and agencies along with supranational organizations. The significant inputs used to determine the fair value of these securities include the spread above the risk-free yield curve, reported trades and broker-dealer quotes. These are considered to be observable market inputs and, therefore, the fair values of these securities are classified as Level 2.	
 	 	
•	Corporate securities consist primarily of investment-grade debt of a wide variety of corporate issuers and industries. The fair values of these securities are determined using the spread above the risk-free yield curve, reported trades, broker-dealer quotes, benchmark yields, and industry and market indicators. These are considered observable market inputs and, therefore, the fair values of these securities are classified as Level 2. Where pricing is unavailable from pricing services, such as in periods of low trading activity or when transactions are not orderly, we obtain non-binding quotes from broker-dealers. Where significant inputs are unable to be corroborated with market observable information, we classify the securities as Level 3.	
 	 	
•	Municipal securities consist primarily of bonds issued by U.S.-domiciled state and municipal entities. The fair values of these securities are determined using the spread above the risk-free yield curve, reported trades, broker-dealer quotes and benchmark yields. These are considered observable market inputs and, therefore, the fair values of these securities are classified as Level 2.	
 	 	
•	Asset-backed securities consist primarily of investment-grade bonds backed by pools of loans with a variety of underlying collateral. Residential and commercial mortgage-backed securities include both agency and non-agency originated securities. The significant inputs used to determine the fair value of these securities include the spread above the risk-free yield curve, reported trades, benchmark yields, broker-dealer quotes, prepayment speeds and default rates. These are considered observable market inputs and, therefore, the fair values of these securities are classified as Level 2. Where pricing is unavailable from pricing services, we obtain non-binding quotes from broker-dealers. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. Where significant inputs are unable to be corroborated with market observable information, we classify the securities as Level 3.	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Equities
Our investments in equities are predominantly traded on the major exchanges and are primarily managed by our external advisors. We use an internationally recognized pricing service to estimate the fair value of our equities. Our equities are widely diversified and there is no significant concentration in any specific industry.
We have categorized all of our investments in equities other than preferred stock as Level 1 investments because the fair values of these investments are based on unadjusted quoted prices in active markets for identical assets or liabilities. The fair value estimates of our investments in preferred stock are based on observable market data and, as a result, have been categorized as Level 2.
Other investments, at fair value
We have ongoing due diligence processes with respect to the other investments carried at fair value in which we invest and their managers. These processes are designed to assist us in assessing the quality of information provided by, or on behalf of, each fund and in determining whether such information continues to be reliable or whether further review is warranted. Certain funds do not provide full transparency of their underlying holdings; however, we obtain the audited financial statements for funds annually, and regularly review and discuss the fund performance with the fund managers to corroborate the reasonableness of the reported net asset values.
The use of NAV as an estimate of the fair value for investments in certain entities that calculate NAV is a permitted practical expedient. Due to the time lag in the NAV reported by the fund managers we adjust the valuation for capital calls and distributions. Other investments measured at fair value using NAV as a practical expedient have not been classified in the fair value hierarchy. Other investments for which we do not use NAV as a practical expedient have been valued using prices from independent pricing services, investment managers and broker-dealers.
The following describes the techniques generally used to determine the fair value of our other investments.
 	 	
•	For our investments in private equities and private equity funds, we measure fair value by obtaining the most recently available NAV from the external fund manager or third-party administrator. The fair values of these investments are measured using the NAV as a practical expedient and therefore have not been categorized within the fair value hierarchy.	
 	 	
•	Our investments in fixed income funds and equity funds are valued based on a combination of prices from independent pricing services, external fund managers or third-party administrators. For the publicly available prices we have classified the investments as Level 2. For the non-publicly available prices we are using NAV as a practical expedient and therefore these have not been categorized within the fair value hierarchy.	
 	 	
•	For our investments in fixed income and multi-strategy hedge funds, we measure fair value by obtaining the most recently available NAV as advised by the external fund manager or third-party administrator. The fair values of these investments are measured using the NAV as a practical expedient and therefore have not been categorized within the fair value hierarchy.	
 	 	
•	Our investment in the real estate debt fund is valued based on the most recently available NAV from the external fund manager. The fair value of this investment is measured using the NAV practical expedient and therefore has not been categorized within the fair value hierarchy. As at March 31, 2016 this fund was fully redeemed.	
 	 	
•	We measure the fair value of our direct investment in CLO equities based on valuations provided by our external CLO equity manager. If the investment does not involve an external CLO equity manager, the fair value of the investment is valued based on valuations provided by the broker or lead underwriter of the investment (the "broker"). Our CLO equity investments have been classified as Level 3 due to the use of unobservable inputs in the valuation and the limited number of relevant trades in secondary markets.	
In providing valuations, the CLO equity manager and brokers use observable and unobservable inputs. Of the significant unobservable market inputs used, the default and loss severity rates involve the most judgment and create the most sensitivity. A significant increase (or decrease) in either of these significant inputs in isolation would result in lower (or higher) fair value estimates for direct investments in CLO equities and, in general, a change in default rate assumptions will be accompanied by a directionally similar change in loss severity rate assumptions. Collateral spreads and estimated maturity dates are less judgmental inputs because they are based on the historical average of actual spreads and the weighted average life of the current underlying

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

portfolios, respectively. A significant increase (or decrease) in either of these significant inputs in isolation would result in higher (or lower) fair value estimates for direct investments in CLO equities. In general, these inputs have no significant interrelationship with each other or with default and loss severity rates.
On a quarterly basis, we receive the valuation from the external CLO manager and brokers and then review the underlying cash flows and key assumptions used by the manager/broker. We review and update the significant unobservable inputs based on information obtained from secondary markets. These inputs are our responsibility and we assess the reasonableness of the inputs (and if necessary, update the inputs) through communicating with industry participants, monitoring of the transactions in which we participate (for example, to evaluate default and loss severity rate trends), and reviewing market conditions, historical results, and emerging trends that may impact future cash flows.
If valuations from the external CLO equity manager or brokers are not available, we use an income approach based on certain observable and unobservable inputs to value these investments. An income approach is also used to corroborate the reasonableness of the valuations provided by the external manager and brokers. Where an income approach is followed, the valuation is based on available trade information, such as expected cash flows and market assumptions on default and loss severity rates. Other inputs used in the valuation process include asset spreads, loan prepayment speeds, collateral spreads and estimated maturity dates.
 	 	
•	For our investments in the CLO equity funds, we measure fair value by obtaining the most recently available NAV as advised by the external fund manager or third party administrator. The fair values of these investments are measured using the NAV as a practical expedient and therefore have not been categorized within the fair value hierarchy.	
 	 	
•	For our investments in call options on publicly traded equities, we measure fair value by obtaining the latest option price as of our reporting date. These are classified as Level 2.	
Changes in Leveling of Financial Instruments
Transfers into or out of levels are recorded at their fair values as of the end of the reporting period, consistent with the date of determination of fair value. During the six months ended June 30, 2016, we transferred $28.2 million of corporate, $24.1 million of asset-backed, $40.1 million of commercial mortgaged-backed and $2.8 million of residential mortgaged-backed securities from Level 2 to Level 3. The transfers from Level 2 to Level 3 were securities valued using single prices for which we were unable to obtain sufficient information to determine whether the inputs used were observable. Where we utilize single unadjusted broker-dealer quotes, they are generally provided by market makers or broker-dealers who are recognized as market participants in the markets in which they are providing the quotes. During the six months ended June 30, 2016, we transferred $12.1 million of commercial mortgaged-backed and $126.2 million of asset-backed securities from Level 3 to Level 2. The transfers from Level 3 to Level 2 were based upon us obtaining market observable information regarding the valuations of the specific assets. There were no transfers between Levels 1 and 2.
The following table presents a reconciliation of the beginning and ending balances for all investments measured at fair value on a recurring basis using Level 3 inputs during the three months ended June 30, 2016 and 2015:

 	 	Three Months Ended June 30, 2016	 	Three Months Ended June 30, 2015	
 	 	Fixed
Maturity
Investments	 	Other Investments	 	Equity Securities	 	Total	 	Fixed
Maturity
Investments	 	Other Investments	 	Equity Securities	 	Total	
Beginning fair value	 	$	112,577	
 	 	$	74,289	
 	 	$	—	
 	 	$	186,866	
 	 	$	—	
 	 	$	427,362	
 	 	$	—	
 	 	$	427,362	
 	
Purchases	 	32,616	
 	 	664	
 	 	—	
 	 	33,280	
 	 	—	
 	 	54,407	
 	 	—	
 	 	54,407	
 	
Sales	 	(12,618	)	 	—	
 	 	—	
 	 	(12,618	)	 	—	
 	 	(28,533	)	 	—	
 	 	(28,533	)	
Total realized and unrealized gains	 	1,576	
 	 	5,517	
 	 	—	
 	 	7,093	
 	 	—	
 	 	10,669	
 	 	—	
 	 	10,669	
 	
Net transfers into (out of) Level 3	 	27,953	
 	 	—	
 	 	—	
 	 	27,953	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	
Ending fair value	 	$	162,104	
 	 	$	80,470	
 	 	$	—	
 	 	$	242,574	
 	 	$	—	
 	 	$	463,905	
 	 	$	—	
 	 	$	463,905	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table presents a reconciliation of the beginning and ending balances for all investments measured at fair value on a recurring basis using Level 3 inputs during the six months ended June 30, 2016 and 2015:

 	 	Six Months Ended June 30, 2016	 	Six Months Ended June 30, 2015	
 	 	Fixed
Maturity
Investments	 	Other Investments	 	Equity Securities	 	Total	 	Fixed
Maturity
Investments	 	Other Investments	 	Equity Securities	 	Total	
Beginning fair value	 	$	214,162	
 	 	$	77,016	
 	 	$	—	
 	 	$	291,178	
 	 	$	600	
 	 	$	349,790	
 	 	$	4,850	
 	 	$	355,240	
 	
Purchases	 	32,616	
 	 	6,885	
 	 	—	
 	 	39,501	
 	 	—	
 	 	136,385	
 	 	—	
 	 	136,385	
 	
Sales	 	(36,720	)	 	(4,658	)	 	—	
 	 	(41,378	)	 	(600	)	 	(42,415	)	 	(5,000	)	 	(48,015	)	
Total realized and unrealized gains (losses)	 	(4,851	)	 	1,227	
 	 	—	
 	 	(3,624	)	 	—	
 	 	20,145	
 	 	150	
 	 	20,295	
 	
Net transfers into (out of) Level 3	 	(43,103	)	 	—	
 	 	—	
 	 	(43,103	)	 	—	
 	 	—	
 	 	—	
 	 	—	
 	
Ending fair value	 	$	162,104	
 	 	$	80,470	
 	 	$	—	
 	 	$	242,574	
 	 	$	—	
 	 	$	463,905	
 	 	$	—	
 	 	$	463,905	
 	
Net realized and unrealized gains (losses) related to Level 3 assets in the table above are included in net realized and unrealized gains (losses) in our unaudited condensed consolidated statements of earnings.

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Disclosure of Fair Values for Financial Instruments Carried at Cost
The following tables present our fair value hierarchy for those assets carried at cost or amortized cost in the unaudited condensed consolidated balance sheet but for which disclosure of the fair value is required:

 	 	June 30, 2016	
 	 	Quoted Prices in
Active Markets for
Identical Assets
(Level 1)	 	Significant
Other Observable
Inputs
(Level 2)	 	Significant
Unobservable
Inputs
(Level 3)	 	Fair Value	 	Carrying Value	
Fixed maturity investments, held-to-maturity:	 	

 	

 	 	

 	
U.S. government and agency	 	$	—	
 	 	$	20,892	
 	 	$	—	
 	 	$	20,892	
 	 	$	19,886	
 	
Non-U.S. government	 	—	
 	 	34,426	
 	 	—	
 	 	34,426	
 	 	33,233	
 	
Corporate	 	—	
 	 	752,861	
 	 	—	
 	 	752,861	
 	 	717,536	
 	
Sub-total	 	—	
 	 	808,179	
 	 	—	
 	 	808,179	
 	 	770,655	
 	
Other investments:	 	

 	

 	 	 	 	

Life settlements	 	—	
 	 	—	
 	 	126,442	
 	 	126,442	
 	 	129,636	
 	
Total	 	$	—	
 	 	$	808,179	
 	 	$	126,442	
 	 	$	934,621	
 	 	$	900,291	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	December 31, 2015	
  	 	Quoted Prices in
Active Markets for
Identical Assets
(Level 1)	 	Significant
Other Observable
Inputs
(Level 2)	 	Significant
Unobservable
Inputs
(Level 3)	 	Fair Value	 	Carrying Value	
Fixed maturity investments, held-to-maturity:	 	

 	

 	 	

 	
U.S. government and agency	 	$	—	
 	 	$	19,321	
 	 	$	—	
 	 	$	19,321	
 	 	$	19,771	
 	
Non-U.S. government	 	—	
 	 	39,058	
 	 	—	
 	 	39,058	
 	 	40,503	
 	
Corporate	 	—	
 	 	710,692	
 	 	—	
 	 	710,692	
 	 	730,592	
 	
Sub-total	 	—	
 	 	769,071	
 	 	—	
 	 	769,071	
 	 	790,866	
 	
Other investments:	 	 	 	 	 	 	 	 	 	 	
Life settlements	 	—	
 	 	—	
 	 	130,268	
 	 	130,268	
 	 	133,071	
 	
Total	 	$	—	
 	 	$	769,071	
 	 	$	130,268	
 	 	$	899,339	
 	 	$	923,937	
 	
The fair value of investments in life settlement contracts, in the table above, is determined using a discounted cash flow methodology that utilizes unobservable inputs. Due to the individual nature of each investment in life settlement contracts and the illiquidity of the existing market, significant inputs to the fair value include our estimates of premiums necessary to keep the policies in-force, and our assumptions for mortality and discount rates. Our mortality assumptions are based on a combination of medical underwriting information obtained from a third-party underwriter for each referenced life and internal proprietary mortality studies of older aged U.S. insured lives. These assumptions are used to develop an estimate of future net cash flows that, after discounting, are intended to be reflective of the asset's value in the life settlement market.
Disclosure of fair value of amounts relating to insurance contracts is not required. Our remaining assets and liabilities were generally carried at cost or amortized cost, which due to their short-term nature approximates fair value as of June 30, 2016 and December 31, 2015.

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5. DERIVATIVE INSTRUMENTS
From time to time, we may utilize derivative instruments as part of our overall foreign currency risk management strategy or to obtain exposure to a particular financial market, as well as for yield enhancement.
The following table sets forth the estimated fair value of derivative instruments recorded within other investments on the unaudited condensed consolidated balance sheet as at June 30, 2016 and the unrealized losses on derivative instruments recorded in net earnings for the three and six months ended June 30, 2016:

 	 	 	 	Fair Value	 	Unrealized losses in net earnings	
 	 	Purchase Date	 	June 30, 2016	 	December 31, 2015	 	Three Months Ended June 30, 2016	 	Six Months Ended June 30, 2016	
Call options on equities	 	March 1, 2016	 	$	4,850	
 	 	$	—	
 	 	$	(1,210	)	 	$	(650	)	
The derivatives in the table above are not designated as hedging instruments. We had no derivative instruments as at June 30, 2015 and December 31, 2015 or during the three and six months ended June 30, 2015.
Subsequent to June 30, 2016, we entered into forward exchange contracts for notional amounts of AUD $63.0 million and CAD $50.0 million. These contracts are designated as hedges of the net investments in our Australian and Canadian operations.
6. REINSURANCE BALANCES RECOVERABLE
The following tables provide the total reinsurance balances recoverable as at June 30, 2016 and December 31, 2015:

 	 	June 30, 2016	
 	 	Non-life
Run-off	 	Atrium	 	StarStone	 	Life and
Annuities	 	Total	
Recoverable from reinsurers on unpaid:	 	 	 	 	 	 	 	 	 	 	
Outstanding losses	 	$	502,667	
 	 	$	7,142	
 	 	$	171,289	
 	 	$	20,940	
 	 	$	702,038	
 	
IBNR	 	441,240	
 	 	17,798	
 	 	121,997	
 	 	298	
 	 	581,333	
 	
Fair value adjustments	 	(16,182	)	 	1,916	
 	 	(4,085	)	 	—	
 	 	(18,351	)	
Total reinsurance reserves recoverable	 	927,725	
 	 	26,856	
 	 	289,201	
 	 	21,238	
 	 	1,265,020	
 	
Paid losses recoverable	 	62,454	
 	 	762	
 	 	15,885	
 	 	994	
 	 	80,095	
 	
 	 	$	990,179	
 	 	$	27,618	
 	 	$	305,086	
 	 	$	22,232	
 	 	$	1,345,115	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	December 31, 2015	
 	 	Non-life
Run-off	 	Atrium	 	StarStone	 	Life and
Annuities	 	Total	
Recoverable from reinsurers on unpaid:	 	 	 	 	 	 	 	 	 	 	
Outstanding losses	 	$	587,164	
 	 	$	6,772	
 	 	$	182,076	
 	 	$	22,786	
 	 	$	798,798	
 	
IBNR	 	465,211	
 	 	16,581	
 	 	123,732	
 	 	306	
 	 	605,830	
 	
Fair value adjustments	 	(17,628	)	 	2,499	
 	 	(6,025	)	 	—	
 	 	(21,154	)	
Total reinsurance reserves recoverable	 	1,034,747	
 	 	25,852	
 	 	299,783	
 	 	23,092	
 	 	1,383,474	
 	
Paid losses recoverable	 	72,213	
 	 	430	
 	 	16,568	
 	 	1,319	
 	 	90,530	
 	
 	 	$	1,106,960	
 	 	$	26,282	
 	 	$	316,351	
 	 	$	24,411	
 	 	$	1,474,004	
 	
Our insurance and reinsurance run-off subsidiaries, prior to acquisition, used retrocessional agreements to reduce their exposure to the risk of insurance and reinsurance assumed. On an annual basis, both Atrium and StarStone purchase a tailored outwards reinsurance program designed to manage their risk profiles. The majority of Atrium’s and StarStone's third-party reinsurance cover is with highly rated reinsurers or is collateralized by letters of credit.
The fair value adjustments, determined on acquisition of insurance and reinsurance subsidiaries, are based on the estimated timing of loss and LAE recoveries and an assumed interest rate equivalent to a risk free rate for securities with similar duration to the acquired reinsurance recoverables plus a spread for credit risk, and are amortized over the estimated recovery period, as adjusted for accelerations in timing of payments as a result of commutation settlements.

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of June 30, 2016 and December 31, 2015, we had reinsurance balances recoverable of approximately $1.35 billion and $1.47 billion, respectively. The decrease of $128.9 million in reinsurance balances recoverable was primarily a result of commutations in our Non-life Run-off segment and cash collections made during the six months ended June 30, 2016 in our Non-life Run-off and StarStone segments.
Top Ten Reinsurers

 	June 30, 2016	 	December 31, 2015	
 	Non-life
Run-off	 	Atrium	 	StarStone	 	Life and
Annuities	 	Total	 	% of
Total	 	Non-life
Run-off	 	Atrium	 	StarStone	 	Life and
Annuities	 	Total	 	% of
Total	
Top ten reinsurers	$	661,380	
 	 	$	22,369	
 	 	$	146,115	
 	 	$	12,211	
 	 	$	842,075	
 	 	62.6	%	 	$	713,743	
 	 	$	21,394	
 	 	$	155,171	
 	 	$	13,254	
 	 	$	903,562	
 	 	61.3	%	
Other reinsurers > $1 million	317,169	
 	 	4,508	
 	 	156,576	
 	 	8,298	
 	 	486,551	
 	 	36.2	%	 	383,898	
 	 	4,253	
 	 	158,417	
 	 	8,363	
 	 	554,931	
 	 	37.6	%	
Other reinsurers < $1 million	11,630	
 	 	741	
 	 	2,395	
 	 	1,723	
 	 	16,489	
 	 	1.2	%	 	9,319	
 	 	635	
 	 	2,763	
 	 	2,794	
 	 	15,511	
 	 	1.1	%	
Total	$	990,179	
 	 	$	27,618	
 	 	$	305,086	
 	 	$	22,232	
 	 	$	1,345,115	
 	 	100.0	%	 	$	1,106,960	
 	 	$	26,282	
 	 	$	316,351	
 	 	$	24,411	
 	 	$	1,474,004	
 	 	100.0	%	
Seven of the top ten external reinsurers, as at June 30, 2016 and December 31, 2015, were rated A- or better, with the remaining three being non-rated reinsurers from which $297.0 million was recoverable (December 31, 2015: $337.6 million recoverable from three reinsurers). For the three non-rated reinsurers, we hold security in the form of pledged assets in trust or letters of credit issued to us in the full amount of the recoverable. As at June 30, 2016, reinsurance balances recoverable of $158.4 million (December 31, 2015: $165.6 million) related to Lloyd’s syndicates and represented 10% or more of total reinsurance balances recoverable. Lloyd’s is rated A+ by Standard & Poor’s and A by A.M. Best.
 Provisions for Uncollectible Reinsurance Recoverables
We remain liable to the extent that retrocessionaires do not meet their obligations under these agreements, and therefore, we evaluate and monitor concentration of credit risk among our reinsurers. Provisions are made for amounts considered potentially uncollectible.
The following table shows our reinsurance balances recoverable by rating of reinsurer and our provisions for uncollectible reinsurance balances recoverable ("provisions for bad debt") as at June 30, 2016 and December 31, 2015. The provisions for bad debt all relate to the Non-life Run-off segment.

 	June 30, 2016	 	December 31, 2015	
 	Gross	 	Provisions for Bad Debt	 	Net	 	Provisions as a
% of Gross	 	Gross	 	Provisions for Bad Debt	 	Net	 	Provisions as a
% of Gross	
Reinsurers rated A- or above	$	983,600	
 	 	$	39,264	
 	 	$	944,336	
 	 	4.0	%	 	$	1,051,927	
 	 	$	46,969	
 	 	$	1,004,958	
 	 	4.5	%	
Reinsurers rated below A-, secured	338,795	
 	 	—	
 	 	338,795	
 	 	—	%	 	388,399	
 	 	—	
 	 	388,399	
 	 	—	%	
Reinsurers rated below A-, unsecured	219,445	
 	 	157,461	
 	 	61,984	
 	 	71.8	%	 	244,005	
 	 	163,358	
 	 	80,647	
 	 	66.9	%	
Total	$	1,541,840	
 	 	$	196,725	
 	 	$	1,345,115	
 	 	12.8	%	 	$	1,684,331	
 	 	$	210,327	
 	 	$	1,474,004	
 	 	12.5	%	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7. LOSSES AND LOSS ADJUSTMENT EXPENSES
The liability for losses and loss adjustment expenses ("LAE") includes an amount determined from reported claims and an amount based on historical loss experience and industry statistics for incurred but not reported ("IBNR") using a variety of actuarial methods. Our loss reserves cover multiple lines of business, which include workers' compensation, general casualty, asbestos and environmental, marine, aviation and transit, construction defects and other non-life lines of business. Refer to Note 9 to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2015 for more information on establishing the liability for losses and LAE.
The following table summarizes the liability for losses and LAE by segment as at June 30, 2016 and December 31, 2015:

 	June 30, 2016	 	December 31, 2015	
 	Non-life
Run-off	 	Atrium	 	StarStone	 	Total	 	Non-life
Run-off	 	Atrium	 	StarStone	 	Total	
Outstanding losses	$	2,991,786	
 	 	$	69,268	
 	 	$	476,941	
 	 	$	3,537,995	
 	 	$	2,757,774	
 	 	$	68,913	
 	 	$	457,175	
 	 	$	3,283,862	
 	
IBNR	2,385,358	
 	 	129,422	
 	 	518,558	
 	 	3,033,338	
 	 	1,991,009	
 	 	115,613	
 	 	477,990	
 	 	2,584,612	
 	
Fair value adjustments	(151,017	)	 	14,534	
 	 	(1,005	)	 	(137,488	)	 	(163,329	)	 	16,491	
 	 	(1,487	)	 	(148,325	)	
Total	$	5,226,127	
 	 	$	213,224	
 	 	$	994,494	
 	 	$	6,433,845	
 	 	$	4,585,454	
 	 	$	201,017	
 	 	$	933,678	
 	 	$	5,720,149	
 	
The overall increase in the liability for losses and LAE between December 31, 2015 and June 30, 2016 was primarily attributable to the assumed reinsurance agreement with Allianz in our Non-life Run-off segment as described in Note 2 - "Significant New Business."
The table below provides a reconciliation of the beginning and ending liability for losses and LAE for the three and six months ended June 30, 2016 and 2015:

 	Three Months Ended
June 30,	 	Six Months Ended
June 30,	
 	2016	 	2015	 	2016	 	2015	
Balance as at beginning of period	$	6,641,507	
 	 	$	5,724,623	
 	 	$	5,720,149	
 	 	$	4,509,421	
 	
Less: reinsurance reserves recoverable	1,302,738	
 	 	1,518,102	
 	 	1,360,382	
 	 	1,154,196	
 	
Less: deferred charges on retroactive reinsurance	254,300	
 	 	—	
 	 	255,911	
 	 	—	
 	
Net balance as at beginning of period	5,084,469	
 	 	4,206,521	
 	 	4,103,856	
 	 	3,355,225	
 	
Net incurred losses and LAE:	 	 	 	 	 	 	

  Current period	126,634	
 	 	121,335	
 	 	241,936	
 	 	234,349	
 	
  Prior periods	(30,172	)	 	(55,435)	
 	 	(62,256	)	 	(98,313	)	
  Total net incurred losses and LAE	96,462	
 	 	65,900	
 	 	179,680	
 	 	136,036	
 	
Net paid losses:	 	 	 	 	 	 	

  Current period	(17,022	)	 	(21,490)	
 	 	(22,356	)	 	(32,654	)	
  Prior periods	(203,010	)	 	(194,485)	
 	 	(389,413	)	 	(312,641	)	
  Total net paid losses	(220,032	)	 	(215,975)	
 	 	(411,769	)	 	(345,295	)	
Effect of exchange rate movement	(28,127	)	 	24,723	
 	 	(23,246	)	 	(29,423	)	
Acquired on purchase of subsidiaries	10,019	
 	 	—	
 	 	10,019	
 	 	774,758	
 	
Assumed business	—	
 	 	305,763	
 	 	1,084,251	
 	 	495,631	
 	
Net balance as at June 30	4,942,791	
 	 	4,386,932	
 	 	4,942,791	
 	 	4,386,932	
 	
Plus: reinsurance reserves recoverable	1,243,782	
 	 	1,491,113	
 	 	1,243,782	
 	 	1,491,113	
 	
Plus: deferred charge on retroactive reinsurance	247,272	
 	 	265,426	
 	 	247,272	
 	 	265,426	
 	
Balance as at June 30	$	6,433,845	
 	 	$	6,143,471	
 	 	$	6,433,845	
 	 	$	6,143,471	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The tables below provide the net incurred losses and LAE in the Non-life Run-off, Atrium and StarStone segments for the three and six months ended June 30, 2016 and 2015:  

 	Three Months Ended June 30, 2016	 	Three Months Ended June 30, 2015	
 	Non-life Run-off	 	Atrium	 	StarStone	 	Total	 	Non-life
Run-off	 	Atrium	 	StarStone	 	Total	
Net losses paid	$	143,056	
 	 	$	12,523	
 	 	$	64,453	
 	 	$	220,032	
 	 	$	164,440	
 	 	$	12,121	
 	 	$	39,414	
 	 	$	215,975	
 	
Net change in case and LAE reserves	(74,560	)	 	2,035	
 	 	21,736	
 	 	(50,789	)	 	(104,330	)	 	136	
 	 	46,729	
 	 	(57,465	)	
Net change in IBNR reserves	(102,836	)	 	3,538	
 	 	17,285	
 	 	(82,013	)	 	(75,957	)	 	5,186	
 	 	(5,690	)	 	(76,461	)	
Increase (reduction) in estimates of net ultimate losses	(34,340	)	 	18,096	
 	 	103,474	
 	 	87,230	
 	 	(15,847	)	 	17,443	
 	 	80,453	
 	 	82,049	
 	
Reduction in provisions for bad debt	(5,184	)	 	—	
 	 	—	
 	 	(5,184	)	 	(625	)	 	—	
 	 	—	
 	 	(625	)	
Increase (reduction) in provisions for unallocated LAE	(6,571	)	 	50	
 	 	758	
 	 	(5,763	)	 	(7,711	)	 	(8	)	 	1,055	
 	 	(6,664	)	
Amortization of fair value adjustments	21,405	
 	 	(1,013	)	 	(213	)	 	20,179	
 	 	(4,687	)	 	(3,678	)	 	(495	)	 	(8,860	)	
Net incurred losses and LAE	$	(24,690	)	 	$	17,133	
 	 	$	104,019	
 	 	$	96,462	
 	 	$	(28,870	)	 	$	13,757	
 	 	$	81,013	
 	 	$	65,900	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Six Months Ended June 30, 2016	 	Six Months Ended June 30, 2015	
 	Non-life Run-off	 	Atrium	 	StarStone	 	Total	 	Non-life
Run-off	 	Atrium	 	StarStone	 	Total	
Net losses paid	$	275,369	
 	 	$	20,271	
 	 	$	116,129	
 	 	$	411,769	
 	 	$	229,700	
 	 	$	24,032	
 	 	$	91,563	
 	 	$	345,295	
 	
Net change in case and LAE reserves	(183,345	)	 	263	
 	 	34,391	
 	 	(148,691	)	 	(111,330	)	 	(883	)	 	44,943	
 	 	(67,270	)	
Net change in IBNR reserves	(139,899	)	 	13,429	
 	 	44,372	
 	 	(82,098	)	 	(113,235	)	 	1,376	
 	 	20,049	
 	 	(91,810	)	
Increase (reduction) in estimates of net ultimate losses	(47,875	)	 	33,963	
 	 	194,892	
 	 	180,980	
 	 	5,135	
 	 	24,525	
 	 	156,555	
 	 	186,215	
 	
Reduction in provisions for bad debt	(6,630	)	 	—	
 	 	—	
 	 	(6,630	)	 	(20,439	)	 	—	
 	 	—	
 	 	(20,439	)	
Increase (reduction) in provisions for unallocated LAE	(14,361	)	 	134	
 	 	1,768	
 	 	(12,459	)	 	(21,686	)	 	(70	)	 	1,711	
 	 	(20,045	)	
Amortization of fair value adjustments	20,622	
 	 	(1,375	)	 	(1,458	)	 	17,789	
 	 	(4,980	)	 	(3,678	)	 	(1,037	)	 	(9,695	)	
Net incurred losses and LAE	$	(48,244	)	 	$	32,722	
 	 	$	195,202	
 	 	$	179,680	
 	 	$	(41,970	)	 	$	20,777	
 	 	$	157,229	
 	 	$	136,036	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Non-Life Run-off Segment
The table below provides a reconciliation of the beginning and ending reserves for losses and LAE for the three and six months ended June 30, 2016 and 2015 for the Non-life Run-off segment:

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	2016	 	2015	
Balance as at beginning of period	$	5,459,216	
 	 	$	4,693,262	
 	 	$	4,585,454	
 	 	$	3,435,010	
 	
Less: reinsurance reserves recoverable	977,096	
 	 	1,210,933	
 	 	1,034,747	
 	 	800,709	
 	
Less: deferred charges on retroactive insurance	254,300	
 	 	—	
 	 	255,911	
 	 	—	
 	
Net balance as at beginning of period	4,227,820	
 	 	3,482,329	
 	 	3,294,796	
 	 	2,634,301	
 	
Net incurred losses and LAE:	 	 	 	 	 	 	 	
  Current period	518	
 	 	22,547	
 	 	6,587	
 	 	43,273	
 	
  Prior periods	(25,208)	
 	 	(51,417	)	 	(54,831)	
 	 	(85,243	)	
  Total net incurred losses and LAE	(24,690)	
 	 	(28,870	)	 	(48,244)	
 	 	(41,970	)	
Net paid losses:	 	 	 	 	 	 	 	
  Current period	(2,058)	
 	 	(9,434	)	 	(4,048)	
 	 	(14,005	)	
  Prior periods	(140,998)	
 	 	(155,006	)	 	(271,321)	
 	 	(215,695	)	
  Total net paid losses	(143,056)	
 	 	(164,440	)	 	(275,369)	
 	 	(229,700	)	
Effect of exchange rate movement	(18,963)	
 	 	25,876	
 	 	(14,323)	
 	 	(12,362	)	
Acquired on purchase of subsidiaries	10,019	
 	 	—	
 	 	10,019	
 	 	774,758	
 	
Assumed business	0	
 	 	305,763	
 	 	1,084,251	
 	 	495,631	
 	
Net balance as at June 30	4,051,130	
 	 	3,620,658	
 	 	4,051,130	
 	 	3,620,658	
 	
Plus: reinsurance reserves recoverable	927,725	
 	 	1,178,053	
 	 	927,725	
 	 	1,178,053	
 	
Plus: deferred charge on retroactive reinsurance	247,272	
 	 	265,426	
 	 	247,272	
 	 	265,426	
 	
Balance as at June 30	$	5,226,127	
 	 	$	5,064,137	
 	 	$	5,226,127	
 	 	$	5,064,137	
 	
Net incurred losses and LAE in the Non-life Run-off segment for the three months ended June 30, 2016 and 2015 were as follows:

 	Three Months Ended June 30,	
 	2016	 	2015	
 	Prior
Period	 	Current
Period	 	Total	 	Prior
Period	 	Current
Period	 	Total	
Net losses paid	$	140,998	
 	 	$	2,058	
 	 	$	143,056	
 	 	$	155,006	
 	 	$	9,434	
 	 	$	164,440	
 	
Net change in case and LAE reserves	(74,832	)	 	272	
 	 	(74,560	)	 	(108,819	)	 	4,489	
 	 	(104,330	)	
Net change in IBNR reserves	(101,240	)	 	(1,596	)	 	(102,836	)	 	(84,581	)	 	8,624	
 	 	(75,957	)	
Increase (reduction) in estimates of net ultimate losses	(35,074	)	 	734	
 	 	(34,340	)	 	(38,394	)	 	22,547	
 	 	(15,847	)	
Increase (reduction) in provisions for bad debt	(5,184	)	 	—	
 	 	(5,184	)	 	(625	)	 	—	
 	 	(625	)	
Increase (reduction) in provisions for unallocated LAE	(6,355	)	 	(216	)	 	(6,571	)	 	(7,711	)	 	—	
 	 	(7,711	)	
Amortization of fair value adjustments	21,405	
 	 	—	
 	 	21,405	
 	 	(4,687	)	 	—	
 	 	(4,687	)	
Net incurred losses and LAE	$	(25,208	)	 	$	518	
 	 	$	(24,690	)	 	$	(51,417	)	 	$	22,547	
 	 	$	(28,870	)	
Net change in case and LAE reserves comprises the movement during the year in specific case reserve liabilities as a result of claims settlements or changes advised to us by our policyholders and attorneys, less changes in case reserves recoverable advised by us to our reinsurers as a result of the settlement or movement of assumed claims. Net change in IBNR represents the gross change in our actuarial estimates of IBNR, less amounts recoverable.
Three Months Ended June 30, 2016 
The reduction in net incurred losses and LAE for the three months ended June 30, 2016 of $24.7 million included net incurred losses and LAE of $0.5 million related to current period net earned premium of $0.5 million, primarily for

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the run-off business acquired with Sussex. Excluding current period net incurred losses and LAE of $0.5 million, net incurred losses and LAE liabilities relating to prior periods were reduced by $25.2 million, which was attributable to a reduction in estimates of net ultimate losses of $35.1 million, a reduction in provisions for bad debt of $5.2 million and a reduction in provisions for unallocated LAE of $6.4 million, relating to 2016 run-off activity, partially offset by amortization of fair value adjustments over the estimated payout period relating to companies acquired amounting to $21.4 million.
The reduction in provisions for bad debt of $5.2 million was a result of the collection of certain reinsurance recoverables against which provisions for bad debt had been provided in earlier periods.
Three Months Ended June 30, 2015 
The reduction in net incurred losses and LAE for the three months ended June 30, 2015 of $28.9 million included net incurred losses and LAE of $22.5 million related to current period net earned premium of $17.2 million, primarily for the run-off business acquired with Sussex. Excluding current period net incurred losses and LAE of $22.5 million, net incurred losses and LAE liabilities relating to prior periods were reduced by $51.4 million, which was attributable to a reduction in estimates of net ultimate losses of $38.4 million, a reduction in provisions for bad debt of $0.6 million, a reduction in provisions for unallocated LAE of $7.7 million, relating to 2015 run-off activity, and amortization of fair value adjustments over the estimated payout period relating to companies acquired amounting to $4.7 million.
Net incurred losses and LAE in the Non-life Run-off segment for the six months ended June 30, 2016 and 2015 were as follows:

 	Six Months Ended June 30,	
 	2016	 	2015	
 	Prior
Period	 	Current
Period	 	Total	 	Prior
Period	 	Current
Period	 	Total	
Net losses paid	$	271,321	
 	 	$	4,048	
 	 	$	275,369	
 	 	$	215,695	
 	 	$	14,005	
 	 	$	229,700	
 	
Net change in case and LAE reserves	(183,801	)	 	456	
 	 	(183,345	)	 	(118,813	)	 	7,483	
 	 	(111,330	)	
Net change in IBNR reserves	(141,753	)	 	1,854	
 	 	(139,899	)	 	(135,020	)	 	21,785	
 	 	(113,235	)	
Increase (reduction) in estimates of net ultimate losses	(54,233	)	 	6,358	
 	 	(47,875	)	 	(38,138	)	 	43,273	
 	 	5,135	
 	
Increase (reduction) in provisions for bad debt	(6,630	)	 	—	
 	 	(6,630	)	 	(20,439	)	 	—	
 	 	(20,439	)	
Increase (reduction) in provisions for unallocated LAE	(14,590	)	 	229	
 	 	(14,361	)	 	(21,686	)	 	—	
 	 	(21,686	)	
Amortization of fair value adjustments	20,622	
 	 	—	
 	 	20,622	
 	 	(4,980	)	 	—	
 	 	(4,980	)	
Net incurred losses and LAE	$	(54,831	)	 	$	6,587	
 	 	$	(48,244	)	 	$	(85,243	)	 	$	43,273	
 	 	$	(41,970	)	
Six Months Ended June 30, 2016 
The reduction in net incurred losses and LAE for the six months ended June 30, 2016 of $48.2 million included net incurred losses and LAE of $6.6 million related to current period net earned premium of $5.0 million, primarily for the run-off business acquired with Sussex. Excluding current period net incurred losses and LAE of $6.6 million, net incurred losses and LAE liabilities relating to prior periods were reduced by $54.8 million, which was attributable to a reduction in estimates of net ultimate losses of $54.2 million, a reduction in provisions for bad debt of $6.6 million and a reduction in provisions for unallocated LAE of $14.6 million, relating to 2016 run-off activity, partially offset by amortization of fair value adjustments over the estimated payout period relating to companies acquired amounting to $20.6 million.
The reduction in provisions for bad debt of $6.6 million was a result of the collection of certain reinsurance recoverables against which provisions for bad debt had been provided in earlier periods.
Six Months Ended June 30, 2015 
The reduction in net incurred losses and LAE for the six months ended June 30, 2015 of $42.0 million included net incurred losses and LAE of $43.3 million related to current period net earned premium of $35.8 million, primarily for the run-off business acquired with Sussex. Excluding current period net incurred losses and LAE of $43.3 million, net incurred losses and LAE liabilities relating to prior periods were reduced by $85.2 million, which was attributable to a reduction in estimates of net ultimate losses of $38.1 million, reduction in provisions for bad debt of $20.4 million, a reduction in provisions for unallocated LAE liabilities of $21.7 million, relating to 2015 run-off activity, and amortization of fair value adjustments over the estimated payout period relating to companies acquired amounting to $5.0 million.

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Atrium
The table below provides a reconciliation of the beginning and ending liability for losses and LAE for the three and six months ended June 30, 2016 and 2015:

 	Three Months Ended
June 30,	 	Six Months Ended
June 30,	
 	2016	 	2015	 	2016	 	2015	
Balance as at beginning of period	$	209,919	
 	 	$	202,873	
 	 	$	201,017	
 	 	$	212,611	
 	
Less: reinsurance reserves recoverable	26,249	
 	 	26,629	
 	 	25,852	
 	 	28,278	
 	
Net balance as at beginning of period	183,670	
 	 	176,244	
 	 	175,165	
 	 	184,333	
 	
Net incurred losses and LAE:	
 	 	 	 	 	 	 	
  Current period	20,568	
 	 	17,495	
 	 	36,631	
 	 	32,373	
 	
  Prior periods	(3,435)	
 	 	(3,738)	
 	 	(3,909)	
 	 	(11,596)	
 	
  Total net incurred losses and LAE	17,133	
 	 	13,757	
 	 	32,722	
 	 	20,777	
 	
Net paid losses:	

  Current period	(5,255)	
 	 	(4,538)	
 	 	(7,493)	
 	 	(7,408)	
 	
  Prior periods	(7,268)	
 	 	(7,583)	
 	 	(12,778)	
 	 	(16,624)	
 	
  Total net paid losses	(12,523)	
 	 	(12,121)	
 	 	(20,271)	
 	 	(24,032)	
 	
Effect of exchange rate movement	(1,912)	
 	 	1,608	
 	 	(1,248)	
 	 	(1,590)	
 	
Net balance as at June 30	186,368	
 	 	179,488	
 	 	186,368	
 	 	179,488	
 	
Plus: reinsurance reserves recoverable	26,856	
 	 	26,011	
 	 	26,856	
 	 	26,011	
 	
Balance as at June 30	$	213,224	
 	 	$	205,499	
 	 	$	213,224	
 	 	$	205,499	
 	
Net incurred losses and LAE in the Atrium segment for the three and six months ended June 30, 2016 and 2015 were as follows:

 	Three Months Ended June 30,	
 	2016	 	2015	
 	Prior
Period	 	Current
Period	 	Total	 	Prior
Period	 	Current
Period	 	Total	
Net losses paid	$	7,268	
 	 	$	5,255	
 	 	$	12,523	
 	 	$	7,583	
 	 	$	4,538	
 	 	$	12,121	
 	
Net change in case and LAE reserves	(3,391	)	 	5,426	
 	 	2,035	
 	 	(3,946	)	 	4,082	
 	 	136	
 	
Net change in IBNR reserves	(6,181	)	 	9,719	
 	 	3,538	
 	 	(3,560	)	 	8,746	
 	 	5,186	
 	
Increase (reduction) in estimates of net ultimate losses	(2,304	)	 	20,400	
 	 	18,096	
 	 	77	
 	 	17,366	
 	 	17,443	
 	
Increase (reduction) in provisions for unallocated LAE	(118	)	 	168	
 	 	50	
 	 	(137	)	 	129	
 	 	(8	)	
Amortization of fair value adjustments	(1,013	)	 	—	
 	 	(1,013	)	 	(3,678	)	 	—	
 	 	(3,678	)	
Net incurred losses and LAE	$	(3,435	)	 	$	20,568	
 	 	$	17,133	
 	 	$	(3,738	)	 	$	17,495	
 	 	$	13,757	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Six Months Ended June 30,	
 	2016	 	2015	
 	Prior Period	 	Current Period	 	Total	 	Prior Period	 	Current Period	 	Total	
Net losses paid	$	12,778	
 	 	$	7,493	
 	 	$	20,271	
 	 	$	16,624	
 	 	$	7,408	
 	 	$	24,032	
 	
Net change in case and LAE reserves	(7,351)	
 	 	7,614	
 	 	263	
 	 	(7,657)	
 	 	6,774	
 	 	(883)	
 	
Net change in IBNR reserves	(7,772)	
 	 	21,201	
 	 	13,429	
 	 	(16,553)	
 	 	17,929	
 	 	1,376	
 	
Increase (reduction) in estimates of net ultimate losses	(2,345)	
 	 	36,308	
 	 	33,963	
 	 	(7,586)	
 	 	32,111	
 	 	24,525	
 	
Increase (reduction) in provisions for unallocated LAE	(189)	
 	 	323	
 	 	134	
 	 	(332)	
 	 	262	
 	 	(70)	
 	
Amortization of fair value adjustments	(1,375)	
 	 	—	
 	 	(1,375)	
 	 	(3,678)	
 	 	—	
 	 	(3,678)	
 	
Net incurred losses and LAE	$	(3,909	)	 	$	36,631	
 	 	$	32,722	
 	 	$	(11,596	)	 	$	32,373	
 	 	$	20,777	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

StarStone
The table below provides a reconciliation of the beginning and ending liability for losses and LAE for the three and six months ended June 30, 2016 and 2015:

 	Three Months Ended
June 30,	 	Six Months Ended
June 30,	
 	2016	 	2015	 	2016	 	2015	
Balance as at beginning of period	$	972,372	
 	 	$	828,488	
 	 	$	933,678	
 	 	$	861,800	
 	
Less: reinsurance reserves recoverable	299,393	
 	 	280,540	
 	 	299,783	
 	 	325,209	
 	
Net balance as at beginning of period	672,979	
 	 	547,948	
 	 	633,895	
 	 	536,591	
 	
Net incurred losses and LAE:	 	 	 	 	 	 	 	
  Current period	105,548	
 	 	81,293	
 	 	198,718	
 	 	158,703	
 	
  Prior periods	(1,529)	
 	 	(280	)	 	(3,516	)	 	(1,474	)	
  Total net incurred losses and LAE	104,019	
 	 	81,013	
 	 	195,202	
 	 	157,229	
 	
Net paid losses:	 	 	 	 	 	 	 	
  Current period	(9,709)	
 	 	(7,518	)	 	(10,815	)	 	(11,241	)	
  Prior periods	(54,744)	
 	 	(31,896	)	 	(105,314	)	 	(80,322	)	
  Total net paid losses	(64,453)	
 	 	(39,414	)	 	(116,129	)	 	(91,563	)	
Effect of exchange rate movement	(7,252)	
 	 	(2,761	)	 	(7,675	)	 	(15,471	)	
Net balance as at June 30	705,293	
 	 	586,786	
 	 	705,293	
 	 	586,786	
 	
Plus: reinsurance reserves recoverable	289,201	
 	 	287,049	
 	 	289,201	
 	 	287,049	
 	
Balance as at June 30	$	994,494	
 	 	$	873,835	
 	 	$	994,494	
 	 	$	873,835	
 	
Net incurred losses and LAE in the StarStone segment for the three and six months ended June 30, 2016 and 2015 were as follows:

 	Three Months Ended June 30,	
 	2016	 	2015	
 	Prior Period	 	Current Period	 	Total	 	Prior Period	 	Current Period	 	Total	
Net losses paid	$	54,744	
 	 	$	9,709	
 	 	$	64,453	
 	 	$	31,896	
 	 	$	7,518	
 	 	$	39,414	
 	
Net change in case and LAE reserves	(26,737	)	 	48,473	
 	 	21,736	
 	 	6,397	
 	 	40,332	
 	 	46,729	
 	
Net change in IBNR reserves	(28,321	)	 	45,606	
 	 	17,285	
 	 	(38,584	)	 	32,894	
 	 	(5,690	)	
Increase (reduction) in estimates of net ultimate losses	(314	)	 	103,788	
 	 	103,474	
 	 	(291	)	 	80,744	
 	 	80,453	
 	
Increase (reduction) in provisions for unallocated LAE	(1,002	)	 	1,760	
 	 	758	
 	 	506	
 	 	549	
 	 	1,055	
 	
Amortization of fair value adjustments	(213	)	 	—	
 	 	(213	)	 	(495	)	 	—	
 	 	(495	)	
Net incurred losses and LAE	$	(1,529	)	 	$	105,548	
 	 	$	104,019	
 	 	$	(280	)	 	$	81,293	
 	 	$	81,013	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Six Months Ended June 30,	
 	2016	 	2015	
 	Prior Period	 	Current Period	 	Total	 	Prior Period	 	Current Period	 	Total	
Net losses paid	$	105,314	
 	 	$	10,815	
 	 	$	116,129	
 	 	$	80,322	
 	 	$	11,241	
 	 	$	91,563	
 	
Net change in case and LAE reserves	(22,102	)	 	56,493	
 	 	34,391	
 	 	(3,934	)	 	48,877	
 	 	44,943	
 	
Net change in IBNR reserves	(83,234	)	 	127,606	
 	 	44,372	
 	 	(76,262	)	 	96,311	
 	 	20,049	
 	
Increase (reduction) in estimates of net ultimate losses	(22	)	 	194,914	
 	 	194,892	
 	 	126	
 	 	156,429	
 	 	156,555	
 	
Increase (reduction) in provisions for unallocated LAE	(2,036	)	 	3,804	
 	 	1,768	
 	 	(563	)	 	2,274	
 	 	1,711	
 	
Amortization of fair value adjustments	(1,458	)	 	—	
 	 	(1,458	)	 	(1,037	)	 	—	
 	 	(1,037	)	
Net incurred losses and LAE	$	(3,516	)	 	$	198,718	
 	 	$	195,202	
 	 	$	(1,474	)	 	$	158,703	
 	 	$	157,229	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8. POLICY BENEFITS FOR LIFE AND ANNUITY CONTRACTS
Policy benefits for life and annuity contracts as at June 30, 2016 and December 31, 2015 were as follows:

 	June 30,
2016	 	December 31,
2015	
Life	$	419,453	
 	 	$	436,603	
 	
Annuities	916,729	
 	 	921,654	
 	
 	1,336,182	
 	 	1,358,257	
 	
Fair value adjustments	(49,906	)	 	(53,560	)	
 	$	1,286,276	
 	 	$	1,304,697	
 	
 Refer to Note 10 of the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2015 for more information on establishing policy benefit reserves.
9. PREMIUMS WRITTEN AND EARNED
The following table provides a summary of net premiums written and earned in our Non-life Run-off, Atrium, StarStone and Life and Annuities segments for the three and six months ended June 30, 2016 and 2015:

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	2016	 	2015	
 	Premiums
Written	 	Premiums
Earned	 	Premiums
Written	 	Premiums
Earned	 	Premiums
Written	 	Premiums
Earned	 	Premiums
Written	 	Premiums
Earned	
Non-life Run-off	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross	$	7,066	
 	 	$	9,216	
 	 	$	14,797	
 	 	$	53,184	
 	 	$	13,763	
 	 	$	17,163	
 	 	$	24,914	
 	 	$	78,157	
 	
Ceded	(4,290	)	 	(4,740	)	 	(39,590	)	 	(35,886	)	 	(5,716	)	 	(7,252	)	 	(39,867	)	 	(42,367	)	
Net	$	2,776	
 	 	$	4,476	
 	 	$	(24,793	)	 	$	17,298	
 	 	$	8,047	
 	 	$	9,911	
 	 	$	(14,953	)	 	$	35,790	
 	
Atrium	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross	$	37,781	
 	 	$	35,908	
 	 	$	35,786	
 	 	$	37,913	
 	 	$	79,299	
 	 	$	71,342	
 	 	$	84,699	
 	 	$	76,067	
 	
Ceded	(4,619	)	 	(4,150	)	 	(3,966	)	 	(3,956	)	 	(7,957	)	 	(7,673	)	 	(8,521	)	 	(8,238	)	
Net	$	33,162	
 	 	$	31,758	
 	 	$	31,820	
 	 	$	33,957	
 	 	$	71,342	
 	 	$	63,669	
 	 	$	76,178	
 	 	$	67,829	
 	
StarStone	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross	$	223,368	
 	 	$	208,548	
 	 	$	241,057	
 	 	$	195,963	
 	 	$	440,412	
 	 	$	402,664	
 	 	$	431,754	
 	 	$	364,495	
 	
Ceded	(41,023	)	 	(37,513	)	 	(59,692	)	 	(58,267	)	 	(107,930	)	 	(77,547	)	 	(125,566	)	 	(103,177	)	
Net	$	182,345	
 	 	$	171,035	
 	 	$	181,365	
 	 	$	137,696	
 	 	$	332,482	
 	 	$	325,117	
 	 	$	306,188	
 	 	$	261,318	
 	
Life and Annuities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Life	$	20,533	
 	 	$	19,659	
 	 	$	22,922	
 	 	$	23,072	
 	 	$	38,459	
 	 	$	37,640	
 	 	$	45,655	
 	 	$	45,992	
 	
Total	$	238,816	
 	 	$	226,928	
 	 	$	211,314	
 	 	$	212,023	
 	 	$	450,330	
 	 	$	436,337	
 	 	$	413,068	
 	 	$	410,929	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

10. GOODWILL, INTANGIBLE ASSETS AND DEFERRED CHARGE
The following table presents a reconciliation of the beginning and ending goodwill, intangible assets and the deferred charge during the six months ended June 30, 2016:

 	Goodwill	 	Intangible
assets with
a definite life - Other	 	Intangible 
assets with
an indefinite life	 	Total	 	Intangible 
assets with
a definite life - FVA	 	Other assets - Deferred Charge	
Balance as at December 31, 2015	$	73,071	
 	 	$	31,202	
 	 	$	87,031	
 	 	$	191,304	
 	 	$	180,730	
 	 	$	255,911	
 	
Amortization	—	
 	 	(3,749	)	 	—	
 	 	(3,749	)	 	(11,687	)	 	(8,639	)	
Balance as at June 30, 2016	$	73,071	
 	 	$	27,453	
 	 	$	87,031	
 	 	$	187,555	
 	 	$	169,043	
 	 	$	247,272	
 	
Refer to Note 12 to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2015 for more information on goodwill, intangible assets and the deferred charge.
Intangible asset amortization for the three and six months ended June 30, 2016 and 2015 was $15.3 million and $15.4 million, respectively, compared to $(4.9) million and $(2.2) million for the comparative periods in 2015.
The gross carrying value, accumulated amortization and net carrying value of intangible assets by type and the deferred charge at June 30, 2016 and December 31, 2015 were as follows:

 	June 30, 2016	 	December 31, 2015	
 	Gross
Carrying
Value	 	Accumulated
Amortization	 	Net
Carrying
Value	 	Gross
Carrying
Value	 	Accumulated
Amortization	 	Net
Carrying
Value	
Intangible assets with a definite life:	 	 	 	 	 	 	 	 	 	 	 	
Fair value adjustments:	 	 	 	 	 	 	 	 	 	 	 	
Losses and LAE liabilities	$	458,202	
 	 	$	(320,714	)	 	$	137,488	
 	 	$	456,110	
 	 	$	(307,785	)	 	$	148,325	
 	
Reinsurance balances recoverable	(175,924	)	 	157,573	
 	 	(18,351	)	 	(175,774	)	 	154,619	
 	 	(21,155	)	
Policy benefits for life and annuity contracts	86,332	
 	 	(36,426	)	 	49,906	
 	 	86,332	
 	 	(32,772	)	 	53,560	
 	
Total	$	368,610	
 	 	$	(199,567	)	 	$	169,043	
 	 	$	366,668	
 	 	$	(185,938	)	 	$	180,730	
 	
Other:	 	 	 	 	 	 	 	 	 	 	 	
Distribution channel	$	20,000	
 	 	$	(3,445	)	 	$	16,555	
 	 	$	20,000	
 	 	$	(2,777	)	 	$	17,223	
 	
Technology	15,000	
 	 	(9,294	)	 	5,706	
 	 	15,000	
 	 	(6,561	)	 	8,439	
 	
Brand	7,000	
 	 	(1,808	)	 	5,192	
 	 	7,000	
 	 	(1,460	)	 	5,540	
 	
Total	$	42,000	
 	 	$	(14,547	)	 	$	27,453	
 	 	$	42,000	
 	 	$	(10,798	)	 	$	31,202	
 	
Intangible assets with an indefinite life:	 	 	 	 	 	 	 	 	 	 	 	
Lloyd’s syndicate capacity	$	37,031	
 	 	$	—	
 	 	$	37,031	
 	 	$	37,031	
 	 	$	—	
 	 	$	37,031	
 	
Licenses	19,900	
 	 	—	
 	 	19,900	
 	 	19,900	
 	 	—	
 	 	19,900	
 	
Management contract	30,100	
 	 	—	
 	 	30,100	
 	 	30,100	
 	 	—	
 	 	30,100	
 	
Total	$	87,031	
 	 	$	—	
 	 	$	87,031	
 	 	$	87,031	
 	 	$	—	
 	 	$	87,031	

Deferred charge on retroactive reinsurance	$	271,176	
 	 	$	(23,904	)	 	$	247,272	
 	 	$271,176	 	$	(15,265	)	 	$255,911	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

11. LOANS PAYABLE
We utilize debt facilities primarily for acquisitions and, from time to time, for general corporate purposes. Under these facilities, loans payable and accrued interest as of June 30, 2016 and December 31, 2015 were as follows:

Facility	 	Origination Date	 	Term	 	June 30, 2016	 	December 31, 2015	
EGL Revolving Credit Facility	 	September 16, 2014	 	5 years	 	$	549,798	
 	 	$	505,750	
 	
Sussex Facility	 	December 24, 2014	 	4 years	 	63,500	
 	 	94,000	
 	
Total long-term bank debt	 	 	 	613,298	
 	 	599,750	
 	
Accrued interest	 	 	 	732	
 	 	500	
 	
Total loans payable	 	 	 	$	614,030	
 	 	$	600,250	
 	
For the three months ended June 30, 2016 and 2015, interest expense was $5.4 million and $4.8 million, respectively. For the six months ended June 30, 2016 and 2015, interest expense was $10.8 million and $8.8 million, respectively.
EGL Revolving Credit Facility
This 5-year revolving credit facility, originated on September 16, 2014, and amended on February 27, 2015, February 15, 2016, and most recently on August 5, 2016, is among Enstar Group Limited and certain of its subsidiaries, as borrowers and as guarantors, and various financial institutions. We are permitted to borrow up to an aggregate of $665.0 million, and as of August 5, 2016 we have an option to obtain additional commitments of up to $166.25 million. As of June 30, 2016, there was $115.2 million of available unutilized capacity under this facility. We are in compliance with the covenants of the EGL Revolving Credit Facility.
During the three months ended June 30, 2016 we borrowed €75.0 million. This has been designated as a non-derivative hedge of our net investment in certain subsidiaries whose functional currency is denominated in Euros. The foreign exchange effect of revaluing these Euro borrowings resulted in a gain of $2.1 million recognized in the currency translation adjustment within accumulated other comprehensive income (loss) for the three and six months ended June 30, 2016. This gain was offset against an equivalent loss recognized upon the translation of those subsidiaries' financial statements from functional currency into U.S. dollars. There were no ineffective portions of the net investment hedge during the three or six months ended June 30, 2016, which would have required reclassification from accumulated other comprehensive income (loss) into earnings.
Sussex Facility
On December 24, 2014, we entered into a 4-year term loan (the "Sussex Facility", formerly called the Companion Facility) with two financial institutions. This facility was fully utilized to initially borrow $109.0 million to fund 50% of the consideration payable for the acquisition of Sussex, which was completed on January 27, 2015. During 2015, we repaid $15.0 million and during the six months ended June 30, 2016, we repaid $30.5 million of the outstanding principal on the facility, bringing the outstanding principal to $63.5 million. We are in compliance with the covenants of the Sussex Facility.
Refer to Note 13 to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2015 for further information on the terms of the above facilities.

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12. NONCONTROLLING INTERESTS
Redeemable Noncontrolling Interest
Redeemable noncontrolling interest ("RNCI") as of June 30, 2016 and December 31, 2015 comprised the ownership interests held by Trident (39.32%) and Dowling (1.71%) in our subsidiary North Bay Holdings Limited ("North Bay"). North Bay owns our investments in StarStone and Atrium as well as certain non-life run-off portfolios. The following is a reconciliation of the beginning and ending carrying amount of the equity attributable to the RNCI as of June 30, 2016 and December 31, 2015:  

 	 	Six Months Ended June 30, 2016	 	Year Ended December 31, 2015	
Balance at beginning of period	 	$	417,663	
 	 	$	374,619	
 	
Capital contributions	 	—	
 	 	15,728	
 	
Dividends paid	 	—	
 	 	(16,128	)	
Net earnings (loss) attributable to RNCI	 	18,541	
 	 	(8,797	)	
Accumulated other comprehensive earnings (loss) attributable to RNCI	 	1,649	
 	 	(745	)	
Transfer from noncontrolling interest	 	—	
 	 	15,801	
 	
Accretion of RNCI to redemption value	 	1,803	
 	 	37,185	
 	
Balance at end of period	 	$	439,656	
 	 	$	417,663	
 	
Refer to Note 17 - "Related Party Transactions" andNote 18 - "Commitments and Contingencies" for additional information regarding RNCI.
Noncontrolling Interest
As of June 30, 2016 and December 31, 2015, we had $3.6 million and $3.9 million, respectively, of noncontrolling interest ("NCI") primarily related to an external interest in one of our non-life run-off subsidiaries.
13. SHARE CAPITAL
In June 2016, pursuant to an internal reorganization, we issued Series C Participating Non-Voting Perpetual Preferred Stock (“Series C Preferred Shares”) to one of our wholly-owned subsidiaries to be held in treasury, in exchange for all our Series A Non-Voting Convertible Ordinary Shares (“Series A Non-Voting Shares”), which had been issued to, and held in treasury by, one of our wholly-owned subsidiaries. The Series A Non-Voting Shares were subsequently canceled. The Series C Preferred Shares have no voting rights, other than with respect to certain limited matters whereby the consent of a majority of the holders of the outstanding Series C Preferred Shares, voting as a separate class, would be required.          
Refer to Note 15 of the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2015 for additional information on our Share Capital.

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

14. EARNINGS PER SHARE
The following table sets forth the comparison of basic and diluted earnings per share for the three and six months ended June 30, 2016 and 2015:

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	2016	 	2015	
Basic earnings per ordinary share:	 	 	 	 	 	 	 	
Net earnings attributable to Enstar Group Limited	$	40,594	
 	 	$	14,545	
 	 	$	86,114	
 	 	$	59,392	
 	
Weighted-average ordinary shares outstanding — basic	19,295,280	
 	 	19,252,359	
 	 	19,289,119	
 	 	19,244,951	
 	
Net earnings per ordinary share attributable to Enstar Group Limited — basic	$	2.10	
 	 	$	0.76	
 	 	$	4.46	
 	 	$	3.09	
 	
Diluted earnings per ordinary share:	 	 	 	 	 	 	 	
Net earnings attributable to Enstar Group Limited	$	40,594	
 	 	$	14,545	
 	 	$	86,114	
 	 	$	59,392	
 	
Weighted-average ordinary shares outstanding — basic	19,295,280	
 	 	19,252,359	
 	 	19,289,119	
 	 	19,244,951	
 	
Effect of dilutive securities:	 	 	 	 	 	 	 	
Unvested shares	25,762	
 	 	39,524	
 	 	25,448	
 	 	38,017	
 	
Restricted share units	17,092	
 	 	13,620	
 	 	16,014	
 	 	12,031	
 	
Warrants	92,330	
 	 	78,250	
 	 	89,960	
 	 	69,776	
 	
Weighted-average ordinary shares outstanding — diluted	19,430,464	
 	 	19,383,753	
 	 	19,420,541	
 	 	19,364,775	
 	
Net earnings per ordinary share attributable to Enstar Group Limited — diluted	$	2.09	
 	 	$	0.75	
 	 	$	4.43	
 	 	$	3.07	
 	
15. EMPLOYEE BENEFITS
 We provide various employee benefits including share-based compensation, an employee share purchase plan, an annual incentive compensation program, and pension plans. These are described in Note 17 to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2015. On June 14, 2016, our shareholders approved the 2016 Equity Incentive Plan, which governs the terms of awards granted subsequent to its adoption. The plan replaced the expiring 2006 Equity Incentive Plan. Any outstanding awards granted under the 2006 plan remain in effect pursuant to their terms.
Share-based compensation expense for the three and six months ended June 30, 2016 was $3.7 million and$11.9 million, respectively, as compared to $7.7 million and $9.1 million for the comparative periods in 2015.
Employee share purchase plan expense for the three and six months ended June 30, 2016 and 2015, was less than $0.1 million and $0.2 million, respectively.
Annual incentive compensation program expense for the three and six months ended June 30, 2016, was $4.2 million and $5.0 million, respectively, as compared to $(0.9) million and $7.0 million for the comparative periods in 2015.
Pension expense for the three and six months ended June 30, 2016 was $2.8 million and $5.9 million, respectively, as compared to $2.8 million and $5.2 million for the comparative periods in 2015.

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

16. TAXATION
Interim Tax Calculation Method
We use the estimated annual effective tax rate method for computing our interim tax provision. This method applies our best estimate of the effective tax rate expected for the full year to our year-to-date earnings before income taxes. We provide for income tax expense or benefit based upon our pre-tax earnings and the provisions of currently enacted tax laws. Certain items deemed to be unusual, infrequent or not reliably estimated, are excluded from the estimated annual effective tax rate. In the event such items are identified, the actual tax expense or benefit is reported in the same period as the related item. Certain other items are not included in the estimated annual effective tax rate, such as changes in the assessment of valuation allowance on deferred tax assets and uncertain tax positions, if any.
Interim Tax Expense (Benefit)
The effective tax rates on income for the three and six months ended June 30, 2016 were 14.5% and 13.3%, respectively, as compared to 24.2% and 18.8%, respectively, for the comparative periods in 2015. The effective tax rate on income differs from the statutory rate of 0% due to tax on foreign operations (primarily the United States and United Kingdom) and an increase in the assessment of valuation allowance on deferred tax assets. We have foreign operating subsidiaries and branch operations principally located in the United States, United Kingdom, Continental Europe and Australia that are subject to federal, foreign, state and local taxes in those jurisdictions. Deferred income tax liabilities have not been accrued with respect to the undistributed earnings of our foreign subsidiaries. If the earnings were to be distributed, as dividends or other distributions, withholding taxes may be imposed by the jurisdiction of the paying subsidiary. For our U.S. subsidiaries, we have not currently accrued any withholding taxes with respect to un-remitted earnings as management has no current intention of remitting these earnings. For our United Kingdom subsidiaries, there are no withholding taxes imposed. For our other foreign subsidiaries, it would not be practicable to compute such amounts due to a variety of factors, including the amount, timing, and manner of any repatriation. Because we operate in many jurisdictions, our net earnings are subject to risk due to changing tax laws and tax rates around the world. The current, rapidly changing economic environment may increase the likelihood of substantial changes to tax laws in the jurisdictions in which we operate.
Assessment of Valuation Allowance on Deferred Tax Assets
We have estimated the future taxable income of our foreign subsidiaries and have provided a valuation allowance in respect of loss carryforwards where we do not expect to realize a benefit. We have considered all available evidence using a “more likely than not” standard in determining the amount of the valuation allowance. During the three and six months ended June 30, 2016, we recognized an increase of $1.3 million and $2.2 million, respectively, in our deferred tax asset valuation allowance.
Accounting for Uncertainty in Income Taxes
We had no unrecognized tax benefits relating to uncertain tax positions as at either June 30, 2016 or December 31, 2015.
Tax Examinations
Our operating subsidiaries may be subject to audit by various tax authorities and may have different statutes of limitations expiration dates. With limited exceptions, our major subsidiaries that operate in the United States, United Kingdom and Australia are no longer subject to tax examinations for years before 2012, 2012 and 2009, respectively.

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

17. RELATED PARTY TRANSACTIONS
Stone Point Capital LLC
Through several private transactions occurring from May 2012 to July 2012, Trident acquired 1,350,000 of our Voting Ordinary Shares (which now constitutes approximately 8.3% of our outstanding Voting Ordinary Shares). On November 6, 2013, we appointed James D. Carey to our Board of Directors. Mr. Carey is the sole member of an entity that is one of four general partners of the entities serving as general partners for Trident, is a member of the investment committees of such general partners, and is a member and senior principal of Stone Point Capital LLC ("Stone Point"), the manager of the Trident funds.
In addition, we have entered into certain agreements with Trident with respect to Trident’s co-investments in the Atrium, Arden, and StarStone acquisitions. These include investors’ agreements and shareholders’ agreements, which provide for, among other things: (i) our right to redeem Trident’s equity interest in the Atrium/Arden and StarStone transactions in cash at fair market value within the 90 days following the fifth anniversary of the Arden and StarStone closings, respectively, and at any time following the seventh anniversary of the Arden and StarStone closings, respectively; and (ii) Trident’s right to have its equity co-investment interests in the Atrium/Arden and StarStone transactions redeemed by us at fair market value (which we may satisfy in either cash or our ordinary shares) following the seventh anniversaries of the Arden closing and StarStone closing, respectively. As of June 30, 2016, we have included $439.7 million (December 31, 2015: $417.7 million) as RNCI on our balance sheet relating to these Trident co-investment transactions. Pursuant to the terms of the shareholders’ agreements, Mr. Carey serves as a Trident representative on the boards of the holding companies established in connection with the Atrium/Arden and StarStone co-investment transactions. Trident also has a second representative on these boards who is a Stone Point employee. 
As at June 30, 2016, we had investments in funds (carried within other investments) and a registered investment company affiliated with entities owned by Trident or otherwise affiliated with Stone Point. The fair value of the investments in the funds was $190.1 million and $237.9 million as of June 30, 2016 and December 31, 2015, respectively. The decrease was primarily due to a sale of one of the fund investments during the three months ended June 30, 2016. The fair value of our investment in the registered investment company was $21.2 million and $21.0 million as at June 30, 2016 and December 31, 2015, respectively. For the six months ended June 30, 2016 and 2015, we recognized net realized and unrealized gains of $5.8 million and $5.5 million, respectively, in respect of the fund investments and net unrealized losses of $0.5 million and net unrealized gains of $0.2 million, respectively, in respect of the registered investment company investment. For the six months ended June 30, 2016 and 2015, we recognized interest income of $1.3 million in respect of the registered investment company.
We also have separate accounts, with a balance of $237.9 million and $157.8 million as at June 30, 2016 and December 31, 2015, respectively, managed by Eagle Point Credit Management and PRIMA Capital Advisors, which are affiliates of entities owned by Trident, with respect to which we incurred approximately $0.2 million and $0.1 million in management fees for the six months ended June 30, 2016 and 2015, respectively.
In addition, we are invested in funds (carried within other investments) managed by Sound Point Capital, an entity in which Mr. Carey has an indirect minority ownership interest and serves as a director. The fair value of our investments in Sound Point Capital funds was $24.1 million and $34.5 million as of June 30, 2016 and December 31, 2015, respectively; the decrease was primarily due to a partial sale of a fund investment during the six months ended June 30, 2016. For the six months ended June 30, 2016 and 2015, we have recognized net unrealized gains of $0.7 million and $1.6 million, respectively, in respect of investments managed by Sound Point Capital.
Sound Point Capital has acted as collateral manager for certain of our direct investments in CLO equity securities. The fair value of these investments was $18.8 million and $18.2 million as at June 30, 2016 and December 31, 2015, respectively. For the six months ended June 30, 2016 and 2015, we recognized net unrealized gains of $0.7 million and net unrealized losses of $0.7 million, respectively. For the six months ended June 30, 2016 and 2015, we recognized interest income of $3.6 million and $0.9 million in respect of these investments
During 2015 we opened a separate account managed by Sound Point Capital, with a balance of $56.8 million and $53.5 million as at June 30, 2016 and December 31, 2015, respectively, with respect to which we incurred approximately $0.1 million in management fees for the six months ended June 30, 2016 and 2015, respectively.
Fees charged pursuant to investments affiliated with entities owned by Trident or Sound Point Capital were negotiated on an arm's-length basis.

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Goldman Sachs & Co.
Affiliates of Goldman Sachs own approximately 4.1% of our Voting Ordinary Shares and 100% of our Series C Non-Voting Ordinary Shares. Sumit Rajpal, a managing director of Goldman Sachs, was appointed to our Board of Directors in connection with Goldman Sachs’ investment in Enstar. As of both June 30, 2016 and December 31, 2015, we had investments in funds (carried within other investments) affiliated with entities owned by Goldman Sachs, which had a fair value of $13.9 million and $39.6 million, respectively. The decrease was primarily due to a sale of one of the fund investments during the three months ended June 30, 2016. As of June 30, 2016 and December 31, 2015, we had an indirect investment in non-voting interests of two companies affiliated with Hastings Insurance Group Limited, which had a fair value of $42.6 million and $44.6 million, respectively. Goldman Sachs affiliates have an approximately 38% interest in the Hastings companies, and Mr. Rajpal serves as a director of the entities in which we have invested. For the six months ended June 30, 2016 and 2015, we recognized net unrealized gains of $2.8 million and net unrealized losses of $2.4 million, respectively, in respect of the Goldman Sachs-affiliated investments. For the six months ended June 30, 2016 and 2015, we recognized interest income of $0.7 million and $nil in respect of the Goldman Sachs-affiliated investments.
During 2015, a Goldman Sachs affiliate began providing investment management services to one of our subsidiaries. Our interests are held in accounts managed by affiliates of Goldman Sachs, with a balance of $786.6 million and $758.9 million as at June 30, 2016 and December 31, 2015, respectively, with respect to which we incurred approximately $0.4 million and $0.3 million in management fees for the six months ended June 30, 2016 and 2015, respectively.
Fees charged pursuant to investments with affiliates of Goldman Sachs were negotiated on an arm's-length basis.
CPPIB
Canada Pension Plan Investment Board ("CPPIB"), together with management of Wilton Re, own 100% of the common stock of Wilton Re. Subsequent to the closing of our transaction with Wilton Re, on June 3, 2015, CPPIB purchased voting and non-voting shares in Enstar from FR XI Offshore AIV, L.P., First Reserve Fund XII, L.P., FR XII-A Parallel Vehicle L.P. and FR Torus Co-Investment, L.P. (collectively, "First Reserve", and the transaction, the "CPPIB-First Reserve Transaction"). These shares constitute a 9.3% voting interest and a 9.8% aggregate economic interest in Enstar. On September 29, 2015, CPPIB exercised its acquired right to appoint a representative to our Board of Directors. In addition, 4.6% of our voting shares are held indirectly by CPPIB through CPPIB Epsilon Ontario Limited Partnership ("CPPIB LP"). CPPIB is the sole limited partner of CPPIB LP, CPPIB Epsilon Ontario Trust ("CPPIB Trust") is the general partner, and CPPIB's director representative is the trustee of CPPIB Trust.
We also have a pre-existing reinsurance recoverable based on normal commercial terms from a company later acquired by Wilton Re, which was carried on our balance sheet at $11.2 million as of June 30, 2016.
18. COMMITMENTS AND CONTINGENCIES
Concentrations of Credit Risk
We believe that there are no significant concentrations of credit risk associated with our cash and cash equivalents, fixed maturity investments, or other investments. Cash, cash equivalents and fixed maturity investments are managed pursuant to guidelines that follow prudent standards of diversification and limit the allowable holdings of a single issue and issuers. Other investments are managed pursuant to guidelines that emphasize diversification and liquidity. Pursuant to these guidelines, we manage and monitor risk across a variety of investment funds and vehicles, markets and counterparties. We are also subject to custodial credit risk on our fixed maturity and equity investments, which we manage by diversifying our holdings amongst large financial institutions that are highly regulated.
We have exposure to credit risk on certain of our assets pledged to ceding companies under insurance contracts. In addition, we are potentially exposed should any insurance intermediaries be unable to fulfill their contractual obligations with respect to payments of balances owed to and by us.
Credit risk exists in relation to reinsurance balances recoverable. We remain liable to the extent that retrocessionaires do not meet their contractual obligations and, therefore, we evaluate and monitor concentration of credit risk among our reinsurers. These amounts are discussed in Note 6 - "Reinsurance Balances Recoverable."

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We are also subject to credit risk in relation to funds held by reinsured companies. Under funds held arrangements, the reinsured company has retained funds that would otherwise have been remitted to our reinsurance subsidiaries. The funds balance is credited with investment income and losses payable are deducted. We are subject to credit risk if the reinsured company is unable to honor the value of the funds held balances, such as in the event of insolvency. However, we generally have the contractual ability to offset any shortfall in the payment of the funds held balances with amounts owed by us to the reinsured for losses payable and other amounts contractually due. We routinely monitor the creditworthiness of reinsured companies with whom we have funds held arrangements. We have a significant concentration of $1.1 billion to one reinsured company which has financial strength credit ratings of A+ from A.M. Best and AA from Standard & Poor's.
We limit the amount of credit exposure to any one counterparty, and none of our counterparty credit exposures, excluding U.S. Government instruments and the funds held counterparty noted above, exceeded 10% of shareholders’ equity as of June 30, 2016.
Legal Proceedings
We are, from time to time, involved in various legal proceedings in the ordinary course of business, including litigation and arbitration regarding claims. Estimated losses relating to claims arising in the ordinary course of business, including the anticipated outcome of any pending arbitration or litigation, are included in the liability for losses and LAE in our consolidated balance sheets. In addition to claims litigation, we may be subject to other lawsuits and regulatory actions in the normal course of business, which may involve, among other things, allegations of underwriting errors or omissions, employment claims or regulatory activity. We do not believe that the resolution of any currently pending legal proceedings, either individually or taken as a whole, will have a material effect on our business, results of operations or financial condition. We anticipate that, similar to the rest of the insurance and reinsurance industry, we will continue to be subject to litigation and arbitration proceedings in the ordinary course of business, including litigation generally related to the scope of coverage with respect to asbestos and environmental and other claims.
Unfunded Investment Commitments
As at June 30, 2016, we had original commitments to investment funds of $380.0 million, of which $241.6 million has been funded, and $138.4 million remains outstanding as unfunded commitments.
Guarantees
As at June 30, 2016 and December 31, 2015, parental guarantees supporting subsidiaries' insurance obligations were $501.7 million and $334.2 million, respectively.
Redeemable Noncontrolling Interest
We have the right to purchase the RNCI interests from the RNCI holders at certain times in the future (each such right, a "call right"), and the RNCI holders have the right to sell their RNCI interests to us at certain times in the future (each such right, a "put right"). The RNCI rights held by Trident are described in Note 17 - "Related Party Transactions." Dowling has a right to participate if Trident exercises its put right.

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

19. SEGMENT INFORMATION
We monitor and report our results of operations in four segments: Non-life Run-off, Atrium, StarStone and Life and Annuities. These segments are described in Note 1 and Note 22 to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2015.
The following tables set forth selected and condensed consolidated statement of earnings results by segment for the three and six months ended June 30, 2016 and 2015:

 	Three Months Ended June 30, 2016	
 	Non-life
Run-off	 	Atrium	 	StarStone	 	Life and
Annuities	 	Eliminations	 	Consolidated	
INCOME	 	 	 	 	 	 	 	 	 	 	 	
Net premiums earned	$	4,476	
 	 	$	31,758	
 	 	$	171,035	
 	 	$	19,659	
 	 	$	—	
 	 	$	226,928	
 	
Fees and commission income	865	
 	 	6,378	
 	 	—	
 	 	—	
 	 	—	
 	 	7,243	
 	
Net investment income	37,581	
 	 	635	
 	 	5,753	
 	 	11,113	
 	 	(859	)	 	54,223	
 	
Net realized and unrealized gains (losses)	26,161	
 	 	68	
 	 	8,021	
 	 	3,737	
 	 	—	
 	 	37,987	
 	
Other income	2,036	
 	 	65	
 	 	1,584	
 	 	363	
 	 	—	
 	 	4,048	
 	
 	71,119	
 	 	38,904	
 	 	186,393	
 	 	34,872	
 	 	(859	)	 	330,429	
 	
EXPENSES	 	 	 	 	 	 	 	 	 	 	 	
Net incurred losses and LAE	(24,690	)	 	17,133	
 	 	104,019	
 	 	—	
 	 	—	
 	 	96,462	
 	
Life and annuity policy benefits	—	
 	 	—	
 	 	—	
 	 	19,778	
 	 	—	
 	 	19,778	
 	
Acquisition costs	(56	)	 	11,240	
 	 	32,518	
 	 	2,804	
 	 	(17	)	 	46,489	
 	
General and administrative expenses	61,449	
 	 	6,629	
 	 	31,311	
 	 	6,467	
 	 	22	
 	 	105,878	
 	
Interest expense	6,016	
 	 	—	
 	 	—	
 	 	272	
 	 	(864	)	 	5,424	
 	
Net foreign exchange losses (gains)	(3,096	)	 	256	
 	 	1,027	
 	 	(43	)	 	—	
 	 	(1,856	)	
 	39,623	
 	 	35,258	
 	 	168,875	
 	 	29,278	
 	 	(859	)	 	272,175	
 	
EARNINGS BEFORE INCOME TAXES	31,496	
 	 	3,646	
 	 	17,518	
 	 	5,594	
 	 	—	
 	 	58,254	
 	
INCOME TAXES	(3,486	)	 	(580	)	 	(3,970	)	 	(437	)	 	—	
 	 	(8,473	)	
NET EARNINGS	28,010	
 	 	3,066	
 	 	13,548	
 	 	5,157	
 	 	—	
 	 	49,781	
 	
Less: Net losses (earnings) attributable to noncontrolling interest	(2,370	)	 	(1,258	)	 	(5,559	)	 	—	
 	 	—	
 	 	(9,187	)	
NET EARNINGS ATTRIBUTABLE TO ENSTAR GROUP LIMITED	$	25,640	
 	 	$	1,808	
 	 	$	7,989	
 	 	$	5,157	
 	 	$	—	
 	 	$	40,594	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Six Months Ended June 30, 2016	
 	Non-life
run-off	 	Atrium	 	StarStone	 	Life and annuities	 	Eliminations	 	Consolidated	
INCOME	 	 	 	 	 	 	 	 	 	 	 	
Net premiums earned	$	9,911	
 	 	$	63,669	
 	 	$	325,117	
 	 	$	37,640	
 	 	$	—	
 	 	$	436,337	
 	
Fees and commission income	7,431	
 	 	10,210	
 	 	—	
 	 	—	
 	 	(5,051	)	 	12,590	
 	
Net investment income	73,811	
 	 	1,189	
 	 	11,033	
 	 	29,534	
 	 	(1,281	)	 	114,286	
 	
Net realized and unrealized gains (losses)	49,551	
 	 	108	
 	 	22,370	
 	 	3,922	
 	 	—	
 	 	75,951	
 	
Other income	3,836	
 	 	99	
 	 	1,595	
 	 	931	
 	 	—	
 	 	6,461	
 	
 	144,540	
 	 	75,275	
 	 	360,115	
 	 	72,027	
 	 	(6,332	)	 	645,625	
 	
EXPENSES	 	 	 	 	 	 	 	 	 	 	 	
Net incurred losses and LAE	(48,244	)	 	32,722	
 	 	195,202	
 	 	—	
 	 	—	
 	 	179,680	
 	
Life and annuity policy benefits	—	
 	 	—	
 	 	—	
 	 	40,758	
 	 	—	
 	 	40,758	
 	
Acquisition costs	1,926	
 	 	22,327	
 	 	64,578	
 	 	5,206	
 	 	(283	)	 	93,754	
 	
General and administrative expenses	119,562	
 	 	13,037	
 	 	61,466	
 	 	11,027	
 	 	(4,768	)	 	200,324	
 	
Interest expense	11,496	
 	 	—	
 	 	—	
 	 	610	
 	 	(1,281	)	 	10,825	
 	
Net foreign exchange losses (gains)	(2,216	)	 	2,071	
 	 	(272	)	 	333	
 	 	—	
 	 	(84	)	
 	82,524	
 	 	70,157	
 	 	320,974	
 	 	57,934	
 	 	(6,332	)	 	525,257	
 	
EARNINGS BEFORE INCOME TAXES	62,016	
 	 	5,118	
 	 	39,141	
 	 	14,093	
 	 	—	
 	 	120,368	
 	
INCOME TAXES	(8,159	)	 	(1,258	)	 	(5,988	)	 	(577	)	 	—	
 	 	(15,982	)	
NET EARNINGS	53,857	
 	 	3,860	
 	 	33,153	
 	 	13,516	
 	 	—	
 	 	104,386	
 	
Less: Net earnings attributable to noncontrolling interest	(3,085	)	 	(1,584	)	 	(13,603	)	 	—	
 	 	—	
 	 	(18,272	)	
NET EARNINGS ATTRIBUTABLE TO ENSTAR GROUP LIMITED	$	50,772	
 	 	$	2,276	
 	 	$	19,550	
 	 	$	13,516	
 	 	$	—	
 	 	$	86,114	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Three Months Ended June 30, 2015	
 	Non-life
Run-off	 	Atrium	 	StarStone	 	Life and
Annuities	 	Eliminations	 	Consolidated	
INCOME	 	 	 	 	 	 	 	 	 	 	 	
Net premiums earned	$	17,298	
 	 	$	33,957	
 	 	$	137,696	
 	 	$	23,072	
 	 	$	—	
 	 	$	212,023	
 	
Fees and commission income	4,892	
 	 	7,457	
 	 	—	
 	 	—	
 	 	(3,218	)	 	9,131	
 	
Net investment income	18,569	
 	 	523	
 	 	4,058	
 	 	11,577	
 	 	(72	)	 	34,655	
 	
Net realized and unrealized gains	(4,308	)	 	38	
 	 	(3,355	)	 	(3,624	)	 	—	
 	 	(11,249	)	
Other income	9,875	
 	 	76	
 	 	1,303	
 	 	584	
 	 	—	
 	 	11,838	
 	
 	46,326	
 	 	42,051	
 	 	139,702	
 	 	31,609	
 	 	(3,290	)	 	256,398	
 	
EXPENSES	 	 	 	 	 	 	 	 	 	 	 	
Net incurred losses and LAE	(28,870	)	 	13,757	
 	 	81,013	
 	 	—	
 	 	—	
 	 	65,900	
 	
Life and annuity policy benefits	—	
 	 	—	
 	 	—	
 	 	28,090	
 	 	—	
 	 	28,090	
 	
Acquisition costs	(5,871	)	 	12,301	
 	 	27,365	
 	 	3,299	
 	 	—	
 	 	37,094	
 	
General and administrative expenses	53,168	
 	 	6,670	
 	 	32,891	
 	 	4,452	
 	 	(3,218	)	 	93,963	
 	
Interest expense	2,826	
 	 	1,482	
 	 	—	
 	 	640	
 	 	(72	)	 	4,876	
 	
Net foreign exchange losses (gains)	(4,543	)	 	2,213	
 	 	4,200	
 	 	582	
 	 	—	
 	 	2,452	
 	
 	16,710	
 	 	36,423	
 	 	145,469	
 	 	37,063	
 	 	(3,290	)	 	232,375	
 	
EARNINGS BEFORE INCOME TAXES	29,616	
 	 	5,628	
 	 	(5,767	)	 	(5,454	)	 	—	
 	 	24,023	
 	
INCOME TAXES	(6,104	)	 	(2,252	)	 	694	
 	 	1,846	
 	 	—	
 	 	(5,816	)	
NET EARNINGS	23,512	
 	 	3,376	
 	 	(5,073	)	 	(3,608	)	 	—	
 	 	18,207	
 	
Less: Net losses (earnings) attributable to noncontrolling interest	(3,761	)	 	(1,982	)	 	2,081	
 	 	—	
 	 	—	
 	 	(3,662	)	
NET EARNINGS ATTRIBUTABLE TO ENSTAR GROUP LIMITED	$	19,751	
 	 	$	1,394	
 	 	$	(2,992	)	 	$	(3,608	)	 	$	—	
 	 	$	14,545	

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ENSTAR GROUP LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Six Months Ended June 30, 2015	
 	Non-life
run-off	 	Atrium	 	StarStone	 	Life and annuities	 	Eliminations	 	Consolidated	
INCOME	 	 	 	 	 	 	 	 	 	 	 	
Net premiums earned	$	35,790	
 	 	$	67,829	
 	 	$	261,318	
 	 	$	45,992	
 	 	$	—	
 	 	$	410,929	
 	
Fees and commission income	9,729	
 	 	16,985	
 	 	14	
 	 	—	
 	 	(6,117	)	 	20,611	
 	
Net investment income	37,433	
 	 	1,030	
 	 	6,189	
 	 	20,652	
 	 	(232	)	 	65,072	
 	
Net realized and unrealized gains (losses)	30,352	
 	 	129	
 	 	1,347	
 	 	(57	)	 	—	
 	 	31,771	
 	
Other income	12,915	
 	 	154	
 	 	1,366	
 	 	879	
 	 	—	
 	 	15,314	
 	
 	126,219	
 	 	86,127	
 	 	270,234	
 	 	67,466	
 	 	(6,349	)	 	543,697	
 	
EXPENSES	 	 	 	 	 	 	 	 	 	 	 	
Net incurred losses and LAE	(41,970	)	 	20,777	
 	 	157,229	
 	 	—	
 	 	—	
 	 	136,036	
 	
Life and annuity policy benefits	—	
 	 	—	
 	 	—	
 	 	50,937	
 	 	—	
 	 	50,937	
 	
Acquisition costs	(7,576	)	 	21,707	
 	 	51,508	
 	 	6,005	
 	 	—	
 	 	71,644	
 	
General and administrative expenses	108,159	
 	 	18,293	
 	 	63,104	
 	 	7,122	
 	 	(6,117	)	 	190,561	
 	
Interest expense	5,346	
 	 	2,965	
 	 	—	
 	 	800	
 	 	(232	)	 	8,879	
 	
Net foreign exchange losses (gains)	595	
 	 	(302	)	 	(2,180	)	 	(732	)	 	—	
 	 	(2,619	)	
 	64,554	
 	 	63,440	
 	 	269,661	
 	 	64,132	
 	 	(6,349	)	 	455,438	
 	
EARNINGS BEFORE INCOME TAXES	61,665	
 	 	22,687	
 	 	573	
 	 	3,334	
 	 	—	
 	 	88,259	
 	
INCOME TAXES	(11,211	)	 	(4,136	)	 	12	
 	 	(1,225	)	 	—	
 	 	(16,560	)	
NET EARNINGS	50,454	
 	 	18,551	
 	 	585	
 	 	2,109	
 	 	—	
 	 	71,699	
 	
Less: Net earnings attributable to noncontrolling interest	(3,357	)	 	(8,710	)	 	(240	)	 	—	
 	 	—	
 	 	(12,307	)	
NET EARNINGS ATTRIBUTABLE TO ENSTAR GROUP LIMITED	$	47,097	
 	 	$	9,841	
 	 	$	345	
 	 	$	2,109	
 	 	$	—	
 	 	$	59,392	

Assets by Segment
Invested assets are managed on a subsidiary-by-subsidiary basis, and investment income and realized and unrealized gains (losses) on investments are recognized in each segment as earned. Our total assets as at June 30, 2016 and December 31, 2015 by segment were as follows (the elimination items include the elimination of intersegment assets):

 	2016	 	2015	
Total assets:	 	 	 	
Non-life Run-off	$	8,337,022	
 	 	$	7,629,184	
 	
Atrium	577,235	
 	 	555,621	
 	
StarStone	2,915,503	
 	 	2,778,275	
 	
Life and annuities	1,687,902	
 	 	1,734,945	
 	
Less:	 	 	 	
Eliminations	(858,496	)	 	(865,893	)	
 	$	12,659,166	
 	 	$	11,832,132	

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ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition as of June 30, 2016 and results of operations for the three and six months ended June 30, 2016 and 2015 should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report and the audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2015. Some of the information contained in this discussion and analysis or included elsewhere in this quarterly report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and the timing of events could differ materially from those anticipated by these forward-looking statements as a result of many factors, including those discussed under "Cautionary Statement Regarding Forward-Looking Statements", and "Risk Factors" included in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015.
Table of Contents

Section	 	Page	
Business Overview	 	47	
Key Performance Indicator	 	47	
Current Outlook	 	47	
Recent Developments	 	48	
Non-GAAP Financial Measures	 	48	
Consolidated Results of Operations — for the Three and Six Months Ended June 30, 2016 and 2015	 	50	
Results of Operations by Segment — for the Three and Six Months Ended June 30, 2016 and 2015	 	53	
Non-life Run-off Segment	 	54	
Atrium Segment	 	58	
StarStone Segment	 	62	
Life and Annuities Segment	 	66	
Investments	 	69	
Liquidity and Capital Resources	 	76	
Overview	 	76	
Cash and Cash Equivalents	 	76	
Investments	 	77	
Reinsurance Balances Recoverable	 	77	
Funds Held by Reinsured Companies	 	77	
Loan Facilities	 	78	
Contractual Obligations	 	78	
Off-Balance Sheet Arrangements	 	79	
Critical Accounting Policies	 	79	
Cautionary Statement Regarding Forward-looking Statements	 	80	

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Business Overview
We are a Bermuda-based holding company with a core focus of acquiring and managing insurance and reinsurance companies in run-off and portfolios of insurance and reinsurance business in run-off, and providing management, consulting and other services to the insurance and reinsurance industry. We operate our business internationally through our insurance and reinsurance subsidiaries and our consulting subsidiaries in Bermuda, the United States, the United Kingdom, Continental Europe, Australia, and other international locations.
The majority of our acquisitions have been in the non-life run-off business, which for us generally includes property and casualty, workers’ compensation, asbestos and environmental, construction defect, marine, aviation and transit, and other closed business.
While our core focus remains acquiring and managing non-life run-off business, in recent years, we expanded our business to include active underwriting through our acquisitions of Atrium and StarStone. We partnered with the Trident V Funds ("Trident") in the Atrium and StarStone acquisitions, with Enstar owning a 59.0% interest, Trident owning a 39.3% interest, and Dowling Capital Partners, L.P. ("Dowling") owning a 1.7% interest. We also expanded our portfolio of run-off businesses to include closed life and annuities, primarily through our acquisition of Pavonia from HSBC Holdings plc in 2013.
We have four segments of business that are each managed, operated and reported upon separately: (i) Non-life Run-off; (ii) Atrium; (iii) StarStone; and (iv) Life and Annuities. For additional information relating to our segments, see "Item 1. Business - Operating Segments" in our Annual Report on Form 10-K for the year ended December 31, 2015.

Our business strategies are discussed in "Item 1. Business - Company Overview", "- Business Strategy", and "- Recent Acquisitions and Significant New Business" in our Annual Report on Form 10-K for the year ended December 31, 2015.
Key Performance Indicator
Our primary corporate objective is to grow our fully diluted book value per share. This is driven primarily by growth in our net earnings, which is in turn driven in large part by successfully completing new acquisitions, effectively managing companies and portfolios of business that we have acquired, and executing our active underwriting strategies. The drivers of our book value growth are discussed in "Item 1. Business - Business Strategy" in our Annual Report on Form 10-K for the year ended December 31, 2015.
During the six months ended June 30, 2016, we increased our book value per share on a fully diluted basis by 3.9% to $134.68 per share. The increase was primarily due to net earnings attributable to Enstar Group Limited of $86.1 million.
Current Outlook
Our business strategy includes generating growth through acquisitions and reinsurance transactions, particularly in our Non-life Run-off segment. On August 5, 2016, we entered into a transaction to assume $109.0 million of reserves from The Coca-Cola Company and its subsidiaries (“Coca-Cola”). On March 31, 2016, we completed an agreement to assume net reserves of $1.1 billion from Allianz SE ("Allianz") effective January 1, 2016. We are also providing claims consulting services to Allianz on this portfolio of business. We will continue to employ a disciplined approach when assessing, acquiring and managing portfolios of risk.
Our industry continues to experience challenging market conditions in underwriting and investing. We continue to see overcapacity in many markets for insurable risks, resulting in continued pressure on premium rates and terms and conditions. We seek to maintain a disciplined underwriting approach to underwrite for profitability in our active underwriting segments, StarStone and Atrium. For the six months ended June 30, 2016 compared to 2015, gross premiums written decreased in our Atrium segment as certain business no longer met our underwriting standards. In our StarStone segment, gross premiums written increased through selective growth in certain specialty lines, which included the addition of new underwriting teams during late 2015.
Low yields persist in the investment markets and investment returns remain volatile. We expect to maintain our investment strategy, which emphasizes the preservation of our assets, credit quality, and diversification. We will continue to seek superior risk-adjusted returns by allocating a portion of our portfolio to non-investment grade securities or alternative investments in accordance with our investment guidelines. For the six months ended June 30, 2016 compared to the six months ended June 30, 2015, net investment income increased primarily due to our higher average

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invested assets and a higher yield obtained on those assets. Net investment income for the six months ended June 30, 2016 also benefited from income on life settlements contracts and interest on funds held relating to the portfolio assumed from Allianz.
In a referendum on June 23, 2016, the United Kingdom voted to leave the European Union (commonly referred to as "Brexit"). Although there was significant volatility in the financial and foreign exchange markets during the three months ended June 30, 2016, this did not have a material impact on our financial statements. This volatility is expected to continue as the timing and nature of the United Kingdom's exit is yet to be determined. For companies based in the United Kingdom there is heightened uncertainty regarding trading relationships with countries in the European Union. Both our StarStone and Atrium operations have well-diversified sources of premium which may mitigate the potential impact of Brexit. The majority of business written in StarStone and Atrium is in United States dollars, so the impact of currency volatility on those segments has not been significant. In addition, StarStone already has established operations within the European Economic Area. Lloyd's has stated its intention is to retain passporting rights and to lobby the government to include this in its negotiations with the European Union, whilst also evaluating alternative models to access the markets. In the near-term, access to markets is unaffected until the United Kingdom triggers Article 50, and all contracts entered into up until that time are expected to remain valid into the post-Brexit period.
Recent Developments
Our transactions take the form of either acquisition of companies or loss portfolio transfer, where a reinsurance contract transfers a portfolio of loss and loss adjustment expenses ("LAE") liabilities from a (re)insurance counterparty to an Enstar-owned reinsurer.
Coca-Cola
On August 5, 2016, we entered into a reinsurance transaction with Coca-Cola pursuant to which we reinsured certain of Coca-Cola’s retention and deductible risks under its subsidiaries’ U.S. workers’ compensation, auto liability, general liability, and product liability insurance coverage. We assumed total gross reserves of $109.1 million, received total assets of $102.7 million and recorded a deferred charge of $6.4 million, included in other assets. We have transferred approximately $109.1 million into trust to support our obligations under the reinsurance agreements.  We provided a limited parental guarantee, subject to an overall maximum of approximately $27.0 million.

Allianz

On March 31, 2016, we completed our previously announced transaction with Allianz to reinsure portfolios of Allianz's run-off business. Pursuant to the reinsurance agreement effective January 1, 2016, our subsidiary reinsured 50% of certain portfolios of workers' compensation, construction defect, and asbestos, pollution, and toxic tort business originally held by Fireman's Fund Insurance Company, and assumed net reinsurance reserves of approximately $1.1 billion. Affiliates of Allianz retained approximately $1.1 billion of reinsurance premium as funds withheld collateral for the obligations of our subsidiary under the reinsurance agreement and we transferred approximately $110.0 million to a reinsurance trust to further support our subsidiary's obligations. We earn interest on the funds withheld based upon an initial fixed interest rate. We have also provided a limited parental guarantee, which is subject to a maximum cap.  The combined monetary total of the support offered by us through the trust and parental guarantee is calculated in accordance with contractually defined terms and is capped at $270.0 million.
In addition to the reinsurance transaction described above, we have entered into a claims consulting agreement with San Francisco Reinsurance Company, an affiliate of Allianz, with respect to the entire $2.2 billion portfolio, including the 50% share retained by affiliates of Allianz.
Non-GAAP Financial Measures
In presenting our results for the Atrium and StarStone segments, we discuss the loss ratio, acquisition cost ratio, other operating expense ratio, and the combined ratio of our active underwriting operations within these segments. While we consider these measures to be non-GAAP, management believes that these ratios provide the most meaningful measure for understanding our underwriting profitability. These non-GAAP measures may be defined or calculated differently by other companies. There are no comparable GAAP measures to our insurance ratios.
The loss ratio is calculated by dividing net incurred losses and LAE by net premiums earned. The acquisition cost ratio is calculated by dividing acquisition costs by net premiums earned. The other operating expense ratio is calculated by dividing other operating expenses by net earned premiums earned. The combined ratio is the sum of the loss ratio, the acquisition cost ratio and the other operating expense ratio. The ratios exclude expenses related to

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the holding companies, which we believe is the most meaningful presentation because these expenses are not incremental and/or directly related to the individual underwriting operations.
In the loss ratio, the excluded net premiums earned and net incurred losses and LAE of the holding companies relate to the amortization of our fair value adjustments associated with the liabilities for unearned premiums and losses and LAE acquired on acquisition date. Fair value purchase accounting adjustments established at the date of acquisition are recorded by the holding companies.
In Atrium’s other operating expense ratio, the excluded general and administrative expenses relate to amortization of the definite-lived intangible assets in the holding company, and expenses relating to Atrium Underwriters Limited ("AUL") including managing agency employee salaries, benefits, bonuses and current year share grant costs. The excluded AUL general and administrative expenses relate to expenses incurred in managing the syndicate, and eliminated items represent Atrium 5’s share of the fees and commissions paid to AUL. We believe it is a more meaningful presentation to exclude the costs in managing the syndicate because they are principally funded by the profit commission fees earned from Syndicate 609, which is a revenue item not included in the insurance ratios.
In StarStone’s other operating expense ratio for 2016, the excluded general and administrative expenses relate to the amortization of the definite-lived intangible assets, recorded at the holding company level. In StarStone’s other operating expense ratio for 2015, the excluded general and administrative expenses relate to management fee expenses charged by our Non-life Run-off segment primarily related to our costs incurred in managing StarStone, the amortization of the definite-lived intangible assets, and acquisition-related expenses, in each case recorded at the holding company level.

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Consolidated Results of Operations - For the Three and Six Months Ended June 30, 2016, and 2015
The following table sets forth our consolidated statements of earnings for each of the periods indicated. For a discussion of the critical accounting policies that affect the results of operations, see "Critical Accounting Policies" in our Annual Report on Form 10-K for the year ended December 31, 2015.  

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	2016	 	2015	
 	(in thousands of U.S. dollars)	
INCOME	 	 	 	 	 	 	 	
Net premiums earned	$	226,928	
 	 	$	212,023	
 	 	$	436,337	
 	 	$	410,929	
 	
Fees and commission income	7,243	
 	 	9,131	
 	 	12,590	
 	 	20,611	
 	
Net investment income	54,223	
 	 	34,655	
 	 	114,286	
 	 	65,072	
 	
Net realized and unrealized gains (losses)	37,987	
 	 	(11,249	)	 	75,951	
 	 	31,771	
 	
Other income	4,048	
 	 	11,838	
 	 	6,461	
 	 	15,314	
 	
 	330,429	
 	 	256,398	
 	 	645,625	
 	 	543,697	
 	
EXPENSES	 	 	 	 	 	 	 	
Net incurred losses and LAE	96,462	
 	 	65,900	
 	 	179,680	
 	 	136,036	
 	
Life and annuity policy benefits	19,778	
 	 	28,090	
 	 	40,758	
 	 	50,937	
 	
Acquisition costs	46,489	
 	 	37,094	
 	 	93,754	
 	 	71,644	
 	
General and administrative expenses	105,878	
 	 	93,963	
 	 	200,324	
 	 	190,561	
 	
Interest expense	5,424	
 	 	4,876	
 	 	10,825	
 	 	8,879	
 	
Net foreign exchange losses (gains)	(1,856	)	 	2,452	
 	 	(84	)	 	(2,619	)	
 	272,175	
 	 	232,375	
 	 	525,257	
 	 	455,438	
 	
EARNINGS BEFORE INCOME TAXES	58,254	
 	 	24,023	
 	 	120,368	
 	 	88,259	
 	
INCOME TAXES	(8,473	)	 	(5,816	)	 	(15,982	)	 	(16,560	)	
NET EARNINGS	49,781	
 	 	18,207	
 	 	104,386	
 	 	71,699	
 	
Less: Net earnings attributable to noncontrolling interest	(9,187	)	 	(3,662	)	 	(18,272	)	 	(12,307	)	
NET EARNINGS ATTRIBUTABLE TO ENSTAR GROUP LIMITED	$	40,594	
 	 	$	14,545	
 	 	$	86,114	
 	 	$	59,392	
 	
Highlights
Consolidated Results of Operations for the Three Months Ended June 30, 2016
 	 	
•	Consolidated net earnings of $40.6 million and basic and diluted earnings per share of $2.10 and $2.09, respectively	
 	 	
•	Net earnings from Non-life Run-off and Life and Annuities segments of $25.6 million and $5.2 million, respectively	
 	 	
•	Net premiums earned of $226.9 million, including $171.0 million and $31.8 million in our StarStone and Atrium segments	
 	 	
•	Combined ratios of 98.2% and 100.1% for the active underwriting operations within our StarStone and Atrium segments, respectively (refer to "Non-GAAP Financial Measures" above)	
 	 	
•	Net investment income of $54.2 million and net realized and unrealized gains of $38.0 million 	
Consolidated Results of Operations for the Six Months Ended June 30, 2016
 	 	
•	Consolidated net earnings of $86.1 million and basic and diluted earnings per share of $4.46 and $4.43, respectively	
 	 	
•	Net earnings from Non-life Run-off and Life and Annuities segments of $50.8 million and $13.5 million, respectively	

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•	Net premiums earned of $436.3 million, including $325.1 million and $63.7 million in our StarStone and Atrium segments	
 	 	
•	Combined ratios of 99.0% and 97.3% for the active underwriting operations within our StarStone and Atrium segments, respectively (refer to "Non-GAAP Financial Measures" above)	
 	 	
•	Net investment income of $114.3 million and net realized and unrealized gains of $76.0 million 	
Consolidated Financial Condition as at June 30, 2016:
 	 	
•	Total investments and cash of $8,612.6 million	
 	 	
•	Total reinsurance balances recoverable of $1,345.1 million 	
 	 	
•	Total assets of $12,659.2 million 	
 	 	
•	Shareholder's equity of $2,615.8 million and redeemable noncontrolling interest of $439.7 million	
 	 	
•	Total gross reserves for losses and LAE of $6,433.8 million, with $1,094.3 million of net reserves assumed in our non-life run-off operations during the six months ended June 30, 2016	
 	 	
•	Policy benefits for life and annuity contracts of $1,286.3 million 	
 	 	
•	Diluted book value per common share of $134.68	
Consolidated Overview - For the Three Months Ended June 30, 2016 and 2015
We reported consolidated net earnings attributable to Enstar Group Limited shareholders of $40.6 million for the three months ended June 30, 2016, an increase of $26.1 million from $14.5 million for the three months ended June 30, 2015. Our comparative results were impacted by our acquisition activity during 2015, when we acquired Sussex, Wilton Re’s life settlements business, and Alpha, and by our completed loss portfolio transfer reinsurance transactions during 2016 and 2015 with Allianz SE, Reciprocal of America, Voya and Sun Life.
The most significant drivers of our consolidated financial performance during the three months ended June 30, 2016 as compared to the three months ended June 30, 2015 included:
 	 	
•	Non-life Run-off - Net earnings provided by the Non-life Run-off segment for the three months ended June 30, 2016 were $25.6 million compared to $19.8 million for the three months ended June 30, 2015. The increase in net earnings was primarily due to improved investment results, partially offset by a lower reduction in estimates of net ultimate incurred losses and higher general and administrative expenses;	
 	 	
•	StarStone - Net earnings attributable to the StarStone segment were $8.0 million for the three months ended June 30, 2016, compared to net losses of $3.0 million for the three months ended June 30, 2015. This was primarily due to improved investment performance during the period;	
 	 	
•	Atrium - Net earnings for the three months ended June 30, 2016 and 2015 were relatively consistent at $1.8 million and $1.4 million, respectively;	
 	 	
•	Life and Annuities - Net earnings for the three months ended June 30, 2016 were $5.2 million compared to net losses of $3.6 million for the three months ended June 30, 2015, with the 2016 earnings primarily due to improved investment performance during the period;	
 	 	
•	Net Investment Income - Total net investment income was $54.2 million and $34.7 million for the three months ended June 30, 2016 and 2015, respectively. The increase in net investment income was primarily attributable to a higher yield obtained on our invested assets. Net investment income for the three months ended June 30, 2016 also benefited from an increase of $7.6 million from the interest on funds held relating to the portfolio assumed from Allianz;	
 	 	
•	Net Realized and Unrealized Gains (Losses) - For the three months ended June 30, 2016, net realized and unrealized gains were $38.0 million compared to net realized and unrealized losses of $11.2 million in 2015. This increase was primarily attributable to higher net unrealized gains in 2016 due to the increase in valuations of our fixed maturity securities as treasury yields moved lower and credit spreads tightened during the period, which was partially offset by a decrease in net realized gains in 2016;	

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•	Noncontrolling Interest - Noncontrolling interest in earnings is directly attributable to the results from those subsidiary companies in which there are either noncontrolling interests or redeemable noncontrolling interests. For the three months ended June 30, 2016 and 2015, the noncontrolling interest in earnings was $9.2 million and $3.7 million, respectively, primarily reflecting improved results in the StarStone segment.	
Consolidated Overview - For the Six Months Ended June 30, 2016 and 2015
We reported consolidated net earnings attributable to Enstar Group Limited shareholders of $86.1 million for the six months ended June 30, 2016, an increase of $26.7 million from $59.4 million for the six months ended June 30, 2015. Our comparative results were impacted by our acquisition activity and completed loss portfolio transfer reinsurance transactions noted above.
The most significant drivers of our consolidated financial performance during the six months ended June 30, 2016 as compared to the six months ended June 30, 2015 included:
 	 	
•	Non-life Run-off - Net earnings provided by the Non-life Run-off segment for the six months ended June 30, 2016 and 2015 were relatively consistent at $50.8 million and $47.1 million respectively, as improved investment results were partially offset by a lower reduction in estimates of net ultimate incurred losses and higher general and administrative expenses;	
 	 	
•	StarStone - Net earnings attributable to the StarStone segment were $19.6 million for the six months ended June 30, 2016, compared to $0.3 million for the six months ended June 30, 2015. This was primarily due to improved investment results during the period and some improvement in underwriting profitability;	
 	 	
•	Atrium - Net earnings for the six months ended June 30, 2016 were $2.3 million compared to $9.8 million for the six months ended June 30, 2015. The current period included lower favorable prior year loss development and some large loss activity, partially offset by a decrease in general and administrative expenses;	
 	 	
•	Life and Annuities - Net earnings for the six months ended June 30, 2016 were $13.5 million compared to $2.1 million for the six months ended June 30, 2015. The increase was primarily due to higher net investment income in the six months ended June 30, 2016, which included net earnings of $8.6 million from our life settlements business that we acquired in May 2015;	
 	 	
•	Net Investment Income - Total net investment income was $114.3 million and $65.1 million for the six months ended June 30, 2016 and 2015, respectively. Net investment income increased due to our higher average invested assets and a higher yield obtained on those assets. Net investment income for the six months ended June 30, 2016 also benefited from an increase in income from our life settlements business as well as interest on funds held of $15.2 million relating to the portfolio assumed from Allianz;	
 	 	
•	Net Realized and Unrealized Gains (Losses) - For the six months ended June 30, 2016, net realized and unrealized gains were $76.0 million compared to $31.8 million in 2015. This increase was primarily attributable to higher net unrealized gains due to the increase in valuations of our fixed maturity securities as treasury yields moved lower and credit spreads tightened during the period, which was partially offset by a decrease in net realized gains in 2016;	
 	 	
•	Noncontrolling Interest - Noncontrolling interest in earnings is directly attributable to the results from those subsidiary companies in which there are either noncontrolling interests or redeemable noncontrolling interests. For the six months ended June 30, 2016 and 2015, the noncontrolling interest in earnings was $18.3 million and $12.3 million, respectively, primarily reflecting improved results in the StarStone segment.	

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Results of Operations by Segment - For the Three and Six Months Ended June 30, 2016, and 2015
We have four segments of business that are each managed, operated and reported on separately: (i) Non-life Run-off; (ii) Atrium; (iii) StarStone; and (iv) Life and Annuities. For a description of our segments, see "Item 1. Business - Operating Segments" in our Annual Report on Form 10-K for the year ended December 31, 2015.
The below table provides a split by operating segment of the net earnings attributable to Enstar Group Limited:  

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	2016	 	2015	
 	(in thousands of U.S. dollars)	
Segment split of net earnings attributable to Enstar Group Limited:	 	 	 	 	 	 	 	
Non-life Run-off	$	25,640	
 	 	$	19,751	
 	 	$	50,772	
 	 	$	47,097	
 	
Atrium	1,808	
 	 	1,394	
 	 	2,276	
 	 	9,841	
 	
StarStone	7,989	
 	 	(2,992	)	 	19,550	
 	 	345	
 	
Life and Annuities	5,157	
 	 	(3,608	)	 	13,516	
 	 	2,109	
 	
Net earnings attributable to Enstar Group Limited	$	40,594	
 	 	$	14,545	
 	 	$	86,114	
 	 	$	59,392	
 	
The following is a discussion of our results of operations by segment.

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Non-life Run-off Segment
Our Non-Life Run-off segment comprises the operations of our subsidiaries that are running off their property and casualty and other non-life lines of business, including the run-off business of Arden Reinsurance Company Ltd. ("Arden") and StarStone. It also includes our smaller management business, which manages the run-off portfolios of third parties through our service companies. The following is a discussion and analysis of the results of operations for our Non-life Run-off segment for the three and six months ended June 30, 2016, and 2015, which are summarized below.

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	(in thousands of U.S. dollars)	
INCOME	 	 	 	 	 	 	 	 	 	 	 	
Net premiums earned	$	4,476	
 	 	$	17,298	
 	 	$	(12,822	)	 	$	9,911	
 	 	$	35,790	
 	 	$	(25,879	)	
Fees and commission income	865	
 	 	4,892	
 	 	(4,027	)	 	7,431	
 	 	9,729	
 	 	(2,298	)	
Net investment income	37,581	
 	 	18,569	
 	 	19,012	
 	 	73,811	
 	 	37,433	
 	 	36,378	
 	
Net realized and unrealized gains (losses)	26,161	
 	 	(4,308	)	 	30,469	
 	 	49,551	
 	 	30,352	
 	 	19,199	
 	
Other income	2,036	
 	 	9,875	
 	 	(7,839	)	 	3,836	
 	 	12,915	
 	 	(9,079	)	
 	71,119	
 	 	46,326	
 	 	24,793	
 	 	144,540	
 	 	126,219	
 	 	18,321	
 	
EXPENSES	 	 	 	 	 	 	 	 	 	 	 	
Net incurred losses and LAE	(24,690	)	 	(28,870	)	 	4,180	
 	 	(48,244	)	 	(41,970	)	 	(6,274	)	
Acquisition costs	(56	)	 	(5,871	)	 	5,815	
 	 	1,926	
 	 	(7,576	)	 	9,502	
 	
General and administrative expenses	61,449	
 	 	53,168	
 	 	8,281	
 	 	119,562	
 	 	108,159	
 	 	11,403	
 	
Interest expense	6,016	
 	 	2,826	
 	 	3,190	
 	 	11,496	
 	 	5,346	
 	 	6,150	
 	
Net foreign exchange losses (gains)	(3,096	)	 	(4,543	)	 	1,447	
 	 	(2,216	)	 	595	
 	 	(2,811	)	
 	39,623	
 	 	16,710	
 	 	22,913	
 	 	82,524	
 	 	64,554	
 	 	17,970	
 	
EARNINGS BEFORE INCOME TAXES	31,496	
 	 	29,616	
 	 	1,880	
 	 	62,016	
 	 	61,665	
 	 	351	
 	
INCOME TAXES	(3,486	)	 	(6,104	)	 	2,618	
 	 	(8,159	)	 	(11,211	)	 	3,052	
 	
NET EARNINGS	28,010	
 	 	23,512	
 	 	4,498	
 	 	53,857	
 	 	50,454	
 	 	3,403	
 	
Less: Net loss (earnings) attributable to noncontrolling interest	(2,370	)	 	(3,761	)	 	1,391	
 	 	(3,085	)	 	(3,357	)	 	272	
 	
NET EARNINGS ATTRIBUTABLE TO ENSTAR GROUP LIMITED	$	25,640	
 	 	$	19,751	
 	 	$	5,889	
 	 	$	50,772	
 	 	$	47,097	
 	 	$	3,675	
 	
Overall Results
Three Months Ended June 30: Net earnings were $25.6 million and $19.8 million for the three months ended June 30, 2016 and 2015, respectively, an increase of $5.9 million. This was primarily due to more favorable investment results, partially offset by higher general and administrative expenses, amongst other items.
Six Months Ended June 30: Net earnings for the six months ended June 30, 2016 and 2015 were relatively consistent period over period, as favorable investment results in 2016 were partially offset by increases in general and administrative expenses, amongst other items.
The major components of earnings are discussed below, except for investment results which are separately discussed below in "Investments."

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Net Premiums Earned:

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	(in thousands of U.S. dollars)	
Gross premiums written	$	7,066	
 	 	$	14,797	
 	 	$	(7,731	)	 	$	13,763	
 	 	$	24,914	
 	 	$	(11,151	)	
Ceded reinsurance premiums written	(4,290	)	 	(39,590	)	 	35,300	
 	 	(5,716	)	 	(39,867	)	 	34,151	
 	
Net premiums written	2,776	
 	 	(24,793	)	 	27,569	
 	 	8,047	
 	 	(14,953	)	 	23,000	
 	
Gross premiums earned	9,216	
 	 	53,184	
 	 	(43,968	)	 	17,163	
 	 	78,157	
 	 	(60,994	)	
Ceded reinsurance premiums earned	(4,740	)	 	(35,886	)	 	31,146	
 	 	(7,252	)	 	(42,367	)	 	35,115	
 	
Net premiums earned	$	4,476	
 	 	$	17,298	
 	 	$	(12,822	)	 	$	9,911	
 	 	$	35,790	
 	 	$	(25,879	)	
Because business in this segment is in run-off, our general expectation is for premiums associated with legacy business to decline in future periods. However, the actual amount in any particular year will be impacted by new acquisitions during the year, and the run-off of premiums from acquisitions completed in recent years.
Three and Six Months Ended June 30: Premiums written and earned in the three and six months ended June 30, 2016 and 2015 were primarily attributable to Sussex and Alpha's run-off business for the obligatory renewal of certain policies that we are in the process of placing into run-off. The premiums earned are generally offset by net incurred losses and LAE relating to the premiums.
Fees and Commission Income:
Three and Six Months Ended June 30: Our management companies in the Non-life Run-off segment earned fees and commission income of $0.9 million and $4.9 million for the three months ended June 30, 2016 and 2015, respectively, and $7.4 million and $9.7 million for the six months ended June 30, 2016 and 2015, respectively. While our consulting subsidiaries continue to provide management and consultancy services, claims inspection services and reinsurance collection services to third-party clients in limited circumstances, the core focus of these subsidiaries is providing in-house services to companies within the Enstar group.
Net Incurred Losses and LAE:
The following table shows the components of net incurred losses and LAE for the Non-life-Run-off segment for the three and six months ended June 30, 2016 and 2015:

 	Three Months Ended June 30,	
 	2016	 	2015	
 	Prior
Periods	 	Current
Period	 	Total	 	Prior
Periods	 	Current
Period	 	Total	
 	(in thousands of U.S. dollars)	
Net losses paid	$	140,998	
 	 	$	2,058	
 	 	$	143,056	
 	 	$	155,006	
 	 	$	9,434	
 	 	$	164,440	
 	
Net change in case and LAE reserves (1)	(74,832	)	 	272	
 	 	(74,560	)	 	(108,819	)	 	4,489	
 	 	(104,330	)	
Net change in IBNR reserves (1)	(101,240	)	 	(1,596	)	 	(102,836	)	 	(84,581	)	 	8,624	
 	 	(75,957	)	
Increase (reduction) in estimates of net ultimate losses	(35,074	)	 	734	
 	 	(34,340	)	 	(38,394	)	 	22,547	
 	 	(15,847	)	
Increase (reduction) in provisions for bad debt	(5,184	)	 	—	
 	 	(5,184	)	 	(625	)	 	—	
 	 	(625	)	
Increase (reduction) in provisions for unallocated LAE	(6,355	)	 	(216	)	 	(6,571	)	 	(7,711	)	 	—	
 	 	(7,711	)	
Amortization of fair value adjustments	21,405	
 	 	—	
 	 	21,405	
 	 	(4,687	)	 	—	
 	 	(4,687	)	
Net incurred losses and LAE	$	(25,208	)	 	$	518	
 	 	$	(24,690	)	 	$	(51,417	)	 	$	22,547	
 	 	$	(28,870	)	
(1) Net change in case and LAE reserves comprises the movement during the period in specific case reserve liabilities as a result of claims settlements or changes advised to us by our policyholders and attorneys, less changes in case reserves recoverable advised by us to our reinsurers as a result of the settlement or movement of assumed claims. Net change in IBNR represents the gross change in our actuarial estimates of IBNR, less amounts recoverable.

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 	Six Months Ended June 30,	
 	2016	 	2015	
 	Prior
Periods	 	Current
Period	 	Total	 	Prior
Periods	 	Current
Period	 	Total	
 	(in thousands of U.S. dollars)	
Net losses paid	$	271,321	
 	 	$	4,048	
 	 	$	275,369	
 	 	$	215,695	
 	 	$	14,005	
 	 	$	229,700	
 	
Net change in case and LAE reserves (1)	(183,801	)	 	456	
 	 	(183,345	)	 	(118,813	)	 	7,483	
 	 	$	(111,330	)	
Net change in IBNR reserves (1)	(141,753	)	 	1,854	
 	 	(139,899	)	 	(135,020	)	 	21,785	
 	 	$	(113,235	)	
Increase (reduction) in estimates of net ultimate losses	(54,233	)	 	6,358	
 	 	(47,875	)	 	(38,138	)	 	43,273	
 	 	5,135	
 	
Increase (reduction) in provisions for bad debt	(6,630	)	 	—	
 	 	(6,630	)	 	(20,439	)	 	—	
 	 	(20,439	)	
Increase (reduction) in provisions for unallocated LAE	(14,590	)	 	229	
 	 	(14,361	)	 	(21,686	)	 	—	
 	 	(21,686	)	
Amortization of fair value adjustments	20,622	
 	 	—	
 	 	20,622	
 	 	(4,980	)	 	—	
 	 	(4,980	)	
Net incurred losses and LAE	$	(54,831	)	 	$	6,587	
 	 	$	(48,244	)	 	$	(85,243	)	 	$	43,273	
 	 	$	(41,970	)	
(1) Net change in case and LAE reserves comprises the movement during the period in specific case reserve liabilities as a result of claims settlements or changes advised to us by our policyholders and attorneys, less changes in case reserves recoverable advised by us to our reinsurers as a result of the settlement or movement of assumed claims. Net change in IBNR represents the gross change in our actuarial estimates of IBNR, less amounts recoverable.
Three Months Ended June 30: The reduction in net incurred losses and LAE for the three months ended June 30, 2016 of $24.7 million included net incurred losses and LAE of $0.5 million related to current period net premiums earned of $0.5 million, primarily related to the run-off business acquired with Sussex. Excluding current period net incurred losses and LAE of $0.5 million, net incurred losses and LAE liabilities relating to prior periods were reduced by $25.2 million, which was attributable to a reduction in estimates of net ultimate losses of $35.1 million, a reduction in provisions for bad debt of $5.2 million and a reduction in provisions for unallocated LAE of $6.4 million, relating to 2016 run-off activity, partially offset by amortization of fair value adjustments over the estimated payout period relating to companies acquired amounting to $21.4 million. The reduction in provisions for bad debt of $5.2 million was a result of the collection of certain reinsurance recoverables against which provisions for bad debt had been provided in earlier periods.
The reduction in net incurred losses and LAE for the three months ended June 30, 2015 of $28.9 million included net incurred losses and LAE of $22.5 million related to current period net premiums earned of $17.2 million, primarily related to the run-off business acquired with Sussex. Excluding current period net incurred losses and LAE of $22.5 million, net incurred losses and LAE liabilities relating to prior periods were reduced by $51.4 million, which was attributable to a reduction in estimates of net ultimate losses of $38.4 million, a reduction in provisions for bad debt of $0.6 million, a reduction in provisions for unallocated LAE of $7.7 million, relating to 2015 run-off activity, and amortization of fair value adjustments over the estimated payout period relating to companies acquired amounting to $4.7 million.
Six Months Ended June 30: The reduction in net incurred losses and LAE for the six months ended June 30, 2016 of $48.2 million included net incurred losses and LAE of $6.6 million related to current period net premiums earned of $5.0 million, primarily related to the run-off business acquired with Sussex. Excluding current period net incurred losses and LAE of $6.6 million, net incurred losses and LAE liabilities relating to prior periods were reduced by $54.8 million, which was attributable to a reduction in estimates of net ultimate losses of $54.2 million, a reduction in provisions for bad debt of $6.6 million and a reduction in provisions for unallocated LAE of $14.6 million, relating to 2016 run-off activity, partially offset by amortization of fair value adjustments over the estimated payout period relating to companies acquired amounting to $20.6 million. The reduction in provisions for bad debt of $6.6 million was a result of the collection of certain reinsurance recoverables against which provisions for bad debt had been provided in earlier periods.
The reduction in net incurred losses and LAE for the six months ended June 30, 2015 of $42.0 million included net incurred losses and LAE of $43.3 million related to current period net earned premium of $35.8 million, primarily related to the run-off business acquired with Sussex. Excluding current period net incurred losses and LAE of $43.3 million, net incurred losses and LAE liabilities relating to prior periods were reduced by $85.2 million, which was attributable to a reduction in estimates of net ultimate losses of $38.1 million, reduction in provisions for bad debt of $20.4 million, a reduction in provisions for unallocated LAE liabilities of $21.7 million, relating to 2015 run-off activity, and amortization of fair value adjustments over the estimated payout period relating to companies acquired amounting to $5.0 million.

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Acquisition Costs:
Three and Six Months Ended June 30: Acquisition costs were $(0.1) million and $(5.9) million for the three months ended June 30, 2016 and 2015, respectively, and $1.9 million and $(7.6) million for the six months ended June 30, 2016 and 2015, respectively. Acquisition costs for the three and six months ended June 30, 2016 primarily related to net premiums earned on the Alpha Insurance business that was placed into run-off, whereas the recovery in the three and six months ended June 30, 2015 related to StarStone's legacy business that was placed into run-off.
General and Administrative Expenses:
Three and Six Months Ended June 30: General and administrative expenses were $61.4 million and $53.2 million for the three months ended June 30, 2016 and 2015, respectively, and $119.6 million and $108.2 million for the six months ended 2016 and 2015, respectively. The increase in general and administrative expenses was primarily related to our recent acquisitions resulting in both an increased employee headcount and certain non-recurring charges which were incurred in 2016.
Interest Expense:
Three and Six Months Ended June 30: Interest expense was $6.0 million and $2.8 million for the three months ended June 30, 2016 and 2015, respectively, and $11.5 million and $5.3 million for the six months ended 2016 and 2015, respectively. The increase in interest expense was primarily due to the increase in loans outstanding in 2016 as a result of drawdowns for acquisitions and significant new business during 2015.
Net Foreign Exchange Losses (Gains)
Three and Six Months Ended June 30: Net foreign exchange gains were $3.1 million and $4.5 million for the three months ended June 30, 2016 and 2015, respectively. We recorded net foreign exchange gains of $2.2 million compared with net foreign exchange losses of $0.6 million for the six months ended June 30, 2016 and 2015, respectively. Refer to Item 3. Quantitative and Qualitative Disclosures About Market Risk - Foreign Currency Risk" of this Quarterly Report for further information regarding our foreign currency exposures, how we manage them, and recent actions taken to hedge certain net exposures denominated in Euros, Canadian dollars and Australian dollars.
Noncontrolling Interest:
Three and Six Months Ended June 30: There was no significant change in noncontrolling interests. Noncontrolling interest in earnings of our Non-life Run-off segment was $2.4 million and $3.8 million for the three months ended June 30, 2016 and 2015, respectively, and $3.1 million and $3.4 million for the six months ended June 30, 2016 and 2015, respectively. During the year ended December 31, 2015, the number of subsidiaries in this segment with a noncontrolling interest decreased from 7 as at December 31, 2014 to 2 as at December 31, 2015 due primarily to the repurchases made during 2015 as described in "Item 1. Business - Other Transactions" in our Annual Report on Form 10-K for the year ended December 31, 2015.

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Atrium Segment
The Atrium segment includes Atrium 5 Ltd. ("Atrium 5"), AUL, Northshore Holdings Limited ("Holding Company"), and an allocation of financing costs up until December 31, 2015 ("Enstar Specific Expenses"). Atrium 5 results represent its proportionate share of the results of Syndicate 609 for which it provides 25% of the underwriting capacity and capital. AUL results largely represent fees charged to Syndicate 609 and a 20% profit commission on the results of the syndicate less general and administrative expenses incurred in managing the syndicate. AUL also includes other Atrium Group non-syndicate fee income and associated expenses. The Holding Company results include the amortization of intangible assets that were fair valued upon acquisition and Enstar Specific Expenses represent our acquisition financing costs.
The following is a discussion and analysis of the results of operations for our Atrium segment for the three and six months ended June 30, 2016 and 2015, which are summarized below.

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	(in thousands of U.S. dollars)	
INCOME	 	 	 	 	 	 	 	 	 	 	 	
Net premiums earned	$	31,758	
 	 	$	33,957	
 	 	$	(2,199	)	 	$	63,669	
 	 	$	67,829	
 	 	$	(4,160	)	
Fees and commission income	6,378	
 	 	7,457	
 	 	(1,079	)	 	10,210	
 	 	16,985	
 	 	(6,775	)	
Net investment income	635	
 	 	523	
 	 	112	
 	 	1,189	
 	 	1,030	
 	 	159	
 	
Net realized and unrealized gains	68	
 	 	38	
 	 	30	
 	 	108	
 	 	129	
 	 	(21	)	
Other income	65	
 	 	76	
 	 	(11	)	 	99	
 	 	154	
 	 	(55	)	
 	38,904	
 	 	42,051	
 	 	(3,147	)	 	75,275	
 	 	86,127	
 	 	(10,852	)	
EXPENSES	 	 	 	 	 	 	 	 	 	 	 	
Net incurred losses and LAE	17,133	
 	 	13,757	
 	 	3,376	
 	 	32,722	
 	 	20,777	
 	 	11,945	
 	
Acquisition costs	11,240	
 	 	12,301	
 	 	(1,061	)	 	22,327	
 	 	21,707	
 	 	620	
 	
General and administrative expenses	6,629	
 	 	6,670	
 	 	(41	)	 	13,037	
 	 	18,293	
 	 	(5,256	)	
Interest expense	—	
 	 	1,482	
 	 	(1,482	)	 	—	
 	 	2,965	
 	 	(2,965	)	
Net foreign exchange losses (gains)	256	
 	 	2,213	
 	 	(1,957	)	 	2,071	
 	 	(302	)	 	2,373	
 	
 	35,258	
 	 	36,423	
 	 	(1,165	)	 	70,157	
 	 	63,440	
 	 	6,717	
 	
EARNINGS BEFORE INCOME TAXES	3,646	
 	 	5,628	
 	 	(1,982	)	 	5,118	
 	 	22,687	
 	 	(17,569	)	
INCOME TAXES	(580	)	 	(2,252	)	 	1,672	
 	 	(1,258	)	 	(4,136	)	 	2,878	
 	
NET EARNINGS	3,066	
 	 	3,376	
 	 	(310	)	 	3,860	
 	 	18,551	
 	 	(14,691	)	
Less: Net earnings attributable to noncontrolling interest	(1,258	)	 	(1,982	)	 	724	
 	 	(1,584	)	 	(8,710	)	 	7,126	
 	
NET EARNINGS ATTRIBUTABLE TO ENSTAR GROUP LIMITED	$	1,808	
 	 	$	1,394	
 	 	$	414	
 	 	$	2,276	
 	 	$	9,841	
 	 	$	(7,565	)	
Overall Results
An analysis of the components of the segment's net earnings is shown below, after the attribution of net earnings to noncontrolling interest.

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 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	(in thousands of U.S. dollars)	
Atrium 5	$	415	
 	 	$	790	
 	 	$	(375	)	 	$	742	
 	 	$	9,580	
 	 	$	(8,838	)	
AUL	1,598	
 	 	3,494	
 	 	(1,896	)	 	2,129	
 	 	5,019	
 	 	(2,890	)	
Atrium Total	2,013	
 	 	4,284	
 	 	(2,271	)	 	2,871	
 	 	14,599	
 	 	(11,728	)	
Holding Company	(205	)	 	(1,408	)	 	1,203	
 	 	(595	)	 	(1,793	)	 	1,198	
 	
Enstar Specific Expenses	—	
 	 	(1,482	)	 	1,482	
 	 	—	
 	 	(2,965	)	 	2,965	
 	
NET EARNINGS ATTRIBUTABLE TO ENSTAR GROUP LIMITED	$	1,808	
 	 	$	1,394	
 	 	$	414	
 	 	$	2,276	
 	 	$	9,841	
 	 	$	(7,565	)	
Net earnings shown above excludes unrealized investment gains (losses) and foreign currency translation adjustments relating to Atrium's available-for-sale investments, which are recognized in accumulated other comprehensive income. After attribution to noncontrolling interests, these amounts were a loss of $(0.2) million and a gain of $3.0 million for the three and six months ended June 30, 2016, respectively, and a gain of $2.0 million and a loss of $(0.8) million for the three and six months ended June 30, 2015, respectively.
Underwriting Performance
In evaluating the underwriting performance of the Atrium segment, we consider the insurance ratios of Atrium 5, which is the active underwriting component of the segment and excludes AUL and the Holding Company. Atrium 5's insurance ratios are shown below.

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	(Favorable)
Unfavorable	 	2016	 	2015	 	(Favorable)
Unfavorable	
Loss ratio (1)	53.6	%	 	35.8	%	 	17.8	 %	 	51.2	%	 	28.3	%	 	22.9	 %	
Acquisition cost ratio (1)	34.4	%	 	36.2	%	 	(1.8	)%	 	34.6	%	 	32.0	%	 	2.6	 %	
Other operating expense ratio  (1)	12.1	%	 	17.1	%	 	(5.0	)%	 	11.5	%	 	16.0	%	 	(4.5	)%	
Combined ratio (1)	100.1	%	 	89.1	%	 	11.0	 %	 	97.3	%	 	76.3	%	 	21.0	 %	
(1) Refer to "Non-GAAP Financial Measures" for a description of how these ratios are calculated. The ratios are based upon the following amounts for Atrium 5, which exclude amounts for AUL and the Holding Company, for the three months ended June 30, 2016 and 2015, respectively: net premiums earned of $31,758 and $33,957, net incurred losses and LAE of $17,020 and $12,162, acquisition costs of $10,935 and $12,300, and other operating expenses of $3,830 and $5,797. The ratios are based upon the following amounts for Atrium 5, which exclude amounts for AUL and the Holding Company, for the six months ended June 30, 2016 and 2015, respectively: net premiums earned of $63,669 and $67,829, net incurred losses and LAE of $32,570 and $19,181, acquisition costs of $22,022 and $21,707, and other operating expenses of $7,295 and $10,835.
The higher combined ratio of Atrium 5 for the three and six months ended June 30, 2016 as compared to the three and six months ended June 30, 2015 was due to an increase in the net loss ratio, partially offset by a lower operating expense ratio. This was primarily attributable to lower favorable prior year loss development in the three and six months ended June 30, 2016 as compared to the three and six months ended June 30, 2015, and a series of large losses in 2016. The 2016 large losses included earthquakes in Taiwan, Ecuador and Japan; flooding in Europe; wildfires in Canada and hailstorms in the United States.

The decrease in the AUL result in the three and six months ended June 30, 2016 as compared to the three and six months ended June 30, 2015 reflects decreased profit commission earned from the results of Syndicate 609.
Holding Company Expenses and Enstar Specific Expenses are included below under "General and Administrative Expenses" and "Interest Expense", respectively.
Investment results are separately discussed below in "Investments."

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Gross Premiums Written:
The following table provides gross premiums written by line of business for the Atrium segment for the three and six months ended June 30, 2016 and 2015:

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	(in thousands of U.S. dollars)	
Marine	$	5,179	
 	 	$	4,481	
 	 	$	698	
 	 	$	9,347	
 	 	$	11,598	
 	 	$	(2,251	)	
Property and Casualty Binding Authorities	9,298	
 	 	7,909	
 	 	1,389	
 	 	18,976	
 	 	16,221	
 	 	2,755	
 	
Upstream Energy	3,613	
 	 	3,529	
 	 	84	
 	 	6,484	
 	 	8,440	
 	 	(1,956	)	
Reinsurance	3,642	
 	 	3,441	
 	 	201	
 	 	10,029	
 	 	11,653	
 	 	(1,624	)	
Accident and Health	3,335	
 	 	2,348	
 	 	987	
 	 	7,603	
 	 	7,244	
 	 	359	
 	
Non-Marine Direct and Facultative	4,653	
 	 	4,580	
 	 	73	
 	 	8,566	
 	 	8,412	
 	 	154	
 	
Liability	4,787	
 	 	5,092	
 	 	(305	)	 	10,055	
 	 	10,355	
 	 	(300	)	
Aviation	542	
 	 	1,538	
 	 	(996	)	 	3,221	
 	 	4,901	
 	 	(1,680	)	
War and Terrorism	2,732	
 	 	2,868	
 	 	(136	)	 	5,018	
 	 	5,875	
 	 	(857	)	
Total	$	37,781	
 	 	$	35,786	
 	 	$	1,995	
 	 	$	79,299	
 	 	$	84,699	
 	 	$	(5,400	)	
See below for a discussion of the drivers of the change in net premiums earned for the three and six months ended June 30, 2016 and 2015.
Net Premiums Earned:
The following table provides net premiums earned by line of business for the Atrium segment for the three and six months ended June 30, 2016 and 2015:

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	(in thousands of U.S. dollars)	
Marine	$	4,079	
 	 	$	4,847	
 	 	$	(768	)	 	$	7,979	
 	 	$	10,032	
 	 	$	(2,053	)	
Property and Casualty Binding Authorities	8,296	
 	 	7,336	
 	 	960	
 	 	16,807	
 	 	14,318	
 	 	2,489	
 	
Upstream Energy	2,573	
 	 	3,569	
 	 	(996	)	 	4,687	
 	 	7,312	
 	 	(2,625	)	
Reinsurance	3,174	
 	 	3,270	
 	 	(96	)	 	5,953	
 	 	6,382	
 	 	(429	)	
Accident and Health	3,313	
 	 	2,915	
 	 	398	
 	 	6,468	
 	 	6,130	
 	 	338	
 	
Non-Marine Direct and Facultative	3,106	
 	 	3,570	
 	 	(464	)	 	6,674	
 	 	7,196	
 	 	(522	)	
Liability	4,030	
 	 	4,970	
 	 	(940	)	 	8,948	
 	 	9,358	
 	 	(410	)	
Aviation	1,102	
 	 	1,494	
 	 	(392	)	 	2,393	
 	 	3,262	
 	 	(869	)	
War and Terrorism	2,085	
 	 	1,986	
 	 	99	
 	 	3,760	
 	 	3,839	
 	 	(79	)	
Total	$	31,758	
 	 	$	33,957	
 	 	$	(2,199	)	 	$	63,669	
 	 	$	67,829	
 	 	$	(4,160	)	
Three and Six Months Ended June 30: Net premiums earned for the Atrium segment were $31.8 million and $34.0 million for the three months ended June 30, 2016 and 2015, respectively. Net premiums earned for the Atrium segment were $63.7 million and $67.8 million for the six months ended June 30, 2016 and 2015, respectively. The decrease in net premiums earned was due to our underwriting discipline to non-renew certain business that no longer met our underwriting standards, particularly in the marine and upstream energy lines. We are seeing continued pressure on premium rates and terms and conditions due to overcapacity in many markets for insurable risks. We continue to focus on risk selection and underwriting for profitability. These premium decreases were partially offset by the increase in the property and casualty binding authority line, which reflects the continued success of AU Gold, Atrium's proprietary online underwriting platform.
Fees and Commission Income:
Three and Six Months Ended June 30: Fees and commission income were $6.4 million and $7.5 million for the three months ended June 30, 2016 and 2015, respectively, and $10.2 million and $17.0 million for the six months

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ended June 30, 2016 and 2015, respectively. The fees primarily represent profit commission fees earned by us in relation to AUL’s management of Syndicate 609 and other underwriting consortiums. The decrease was due primarily to less profit commission on lower syndicate profits in the three and six months ended June 30, 2016 as compared with the three and six months ended June 30, 2015.
Net Incurred Losses and LAE:
Three Months Ended June 30: Net incurred losses and LAE for the three months ended June 30, 2016 and 2015 were $17.1 million and $13.8 million, respectively. Net favorable prior year loss development for the three months ended June 30, 2016 and 2015 was $3.5 million and $4.2 million, respectively. Net favorable prior year loss development in the three months ended June 30, 2016 was spread across most lines of business. Net favorable prior year loss development in the three months ended June 30, 2015 primarily related to the professional indemnity, hull, upstream energy and non-marine direct and facultative lines of business. Excluding prior year loss development, net incurred losses and LAE for the three months ended June 30, 2016 and 2015 were $20.5 million and $18.0 million, respectively. The increase in net incurred losses and LAE, excluding prior year loss development, was due to the large losses in 2016, as discussed above in "Underwriting Performance", compared to a lower level of losses in 2015.
Six Months Ended June 30: Net incurred losses and LAE for the six months ended June 30, 2016 and 2015 were $32.7 million and $20.8 million, respectively. Net favorable prior year loss development for the six months ended June 30, 2016 and 2015 was $4.1 million and $13.2 million, respectively. Net favorable prior year loss development in the six months ended June 30, 2016 primarily related to the non-marine direct and facultative lines of business. Net favorable prior year loss development in the six months ended June 30, 2015 primarily related to the aviation, marine, upstream energy and non-marine direct and facultative lines of business. Excluding prior year loss development, net incurred losses and LAE for the six months ended June 30, 2016 and 2015 were $36.8 million and $34.0 million, respectively. The increase in net incurred losses and LAE, excluding prior year loss development, was due to the large losses in 2016 as described above, and other notable 2016 losses in the war and terrorism and aviation lines, compared to a lower level of losses in 2015.
Acquisition Costs:
Three and Six Months Ended June 30: Acquisition costs were $11.2 million and $12.3 million for the three months ended June 30, 2016 and 2015, respectively, and $22.3 million and $21.7 million for the six months ended June 30, 2016 and 2015, respectively. The Atrium 5 acquisition cost ratios for the three months ended June 30, 2016 and 2015 were 34.4% and 36.2%, respectively, a decrease of 2.2%. The Atrium 5 acquisition cost ratios for the six months ended June 30, 2016 and 2015 were 34.6% and 32.0%, respectively, an increase of 2.6%. The increase for the six months ended June 30, 2016 was due to higher profit commissions payable on certain underlying business that performed well.
General and Administrative Expenses:
Three and Six Months Ended June 30: General and administrative expenses for the Atrium segment were relatively consistent at $6.6 million and $6.7 million for the three months ended June 30, 2016 and 2015, respectively. General and administrative expenses for the Atrium segment were $13.0 million and $18.3 million for the six months ended June 30, 2016 and 2015, respectively. The decrease of $5.3 million was primarily due to lower bonus accruals resulting from lower net earnings in the six months ended June 30, 2016 as compared to the six months ended June 30, 2015, and more compensation costs allocated to Syndicate 609.
Interest Expense:
Three and Six Months Ended June 30: For the three and six months ended June 30, 2016, interest was no longer incurred by the Atrium segment. Interest expense was $1.5 million and $3.0 million for the three and six months ended June 30, 2015, respectively. The interest expense for the three and six months ended June 30, 2015 was in respect of borrowings under the Enstar revolving credit facility, which was an Enstar Specific Expense.
Noncontrolling Interest:
Three and Six Months Ended June 30: Noncontrolling interest in earnings of the Atrium segment was $1.3 million and $2.0 million for the three months ended June 30, 2016 and 2015, respectively. Noncontrolling interest in earnings of the Atrium segment was $1.6 million and $8.7 million for the six months ended June 30, 2016 and 2015, respectively. As of June 30, 2016 and 2015, Trident and Dowling had a combined 41.03% noncontrolling interest in the Atrium segment, although their share of net earnings for the three and six months ended June 30, 2015 was higher due primarily to the interest expense recorded in the segment, which was an Enstar specific expense.

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StarStone Segment
The results of our StarStone segment include the results of StarStone Insurance Bermuda Limited and its subsidiaries ("StarStone") and StarStone Specialty Holdings Limited ("Holding Company"), which was formerly known as Bayshore Holdings Limited. StarStone results represent its active underwriting operations. The Holding Company's results include the amortization of fair value adjustments such as for intangible assets that were fair valued upon acquisition, and other expenses incurred.
The following is a discussion and analysis of the results of operations for the StarStone segment for the three and six months ended June 30, 2016 and 2015, which are summarized below.

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	(in thousands of U.S. dollars)	
INCOME	 	 	 	 	 	 	 	 	 	 	 	
Net premiums earned	$	171,035	
 	 	$	137,696	
 	 	$	33,339	
 	 	$	325,117	
 	 	$	261,318	
 	 	$	63,799	
 	
Fee and commission income	—	
 	 	—	
 	 	—	
 	 	—	
 	 	14	
 	 	(14	)	
Net investment income	5,753	
 	 	4,058	
 	 	1,695	
 	 	11,033	
 	 	6,189	
 	 	4,844	
 	
Net realized and unrealized gains (losses)	8,021	
 	 	(3,355	)	 	11,376	
 	 	22,370	
 	 	1,347	
 	 	21,023	
 	
Other income	1,584	
 	 	1,303	
 	 	281	
 	 	1,595	
 	 	1,366	
 	 	229	
 	
 	186,393	
 	 	139,702	
 	 	46,691	
 	 	360,115	
 	 	270,234	
 	 	89,881	
 	
EXPENSES	 	 	 	 	 	 	 	 	 	 	 	
Net incurred losses and LAE	104,019	
 	 	81,013	
 	 	23,006	
 	 	195,202	
 	 	157,229	
 	 	37,973	
 	
Acquisition costs	32,518	
 	 	27,365	
 	 	5,153	
 	 	64,578	
 	 	51,508	
 	 	13,070	
 	
General and administrative expenses	31,311	
 	 	32,891	
 	 	(1,580	)	 	61,466	
 	 	63,104	
 	 	(1,638	)	
Net foreign exchange losses (gains)	1,027	
 	 	4,200	
 	 	(3,173	)	 	(272	)	 	(2,180	)	 	1,908	
 	
 	168,875	
 	 	145,469	
 	 	23,406	
 	 	320,974	
 	 	269,661	
 	 	51,313	
 	
EARNINGS (LOSSES) BEFORE INCOME TAXES	17,518	
 	 	(5,767	)	 	23,285	
 	 	39,141	
 	 	573	
 	 	38,568	
 	
INCOME TAXES	(3,970	)	 	694	
 	 	(4,664	)	 	(5,988	)	 	12	
 	 	(6,000	)	
NET EARNINGS	13,548	
 	 	(5,073	)	 	18,621	
 	 	33,153	
 	 	585	
 	 	32,568	
 	
Less: Net earnings (losses) attributable to noncontrolling interest	(5,559	)	 	2,081	
 	 	(7,640	)	 	(13,603	)	 	(240	)	 	(13,363	)	
NET EARNINGS (LOSSES) ATTRIBUTABLE TO ENSTAR GROUP LIMITED	$	7,989	
 	 	$	(2,992	)	 	$	10,981	
 	 	$	19,550	
 	 	$	345	
 	 	$	19,205	

Overall Results
An analysis of the components of the segment's net earnings is shown below, after the attribution of net earnings to noncontrolling interest.

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	(in thousands of U.S. dollars)	
StarStone(1)	$	7,712	
 	 	$	826	
 	 	$	6,886	
 	 	$18,975	 	$5,723	 	$13,252	
Holding Company	277	
 	 	(3,818	)	 	4,095	
 	 	575	
 	 	(5,378	)	 	5,953	
 	
NET EARNINGS (LOSSES) ATTRIBUTABLE TO ENSTAR GROUP LIMITED	$	7,989	
 	 	$	(2,992	)	 	$	10,981	
 	 	$19,550	 	$	345	
 	 	$19,205	
(1) StarStone's net earnings before noncontrolling interest were $13.1 million and $32.2 million for three and six months ended June 30, 2016, respectively, and $1.4 million and $9.7 million for the three and six months ended June 30, 2015, respectively.

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Three Months Ended June 30: Net earnings (losses) were $8.0 million and ($3.0) million for the three months ended June 30, 2016 and 2015, respectively, an increase of $11.0 million. This was primarily due to an increase of $11.4 million in net realized and unrealized gains (losses) in the three months ended June 30, 2016 as compared to the three months ended June 30, 2015. Investment results are separately discussed below in "Investments."

Six Months Ended June 30: Net earnings were $19.6 million and $0.3 million for the six months ended June 30, 2016 and 2015, respectively, an increase of $19.2 million. This was primarily due to an increase of $21.0 million in net realized and unrealized gains (losses) in the six months ended June 30, 2016 as compared to the six months ended June 30, 2015.

StarStone has not been significantly impacted by the catastrophe and weather events in the second quarter. We are maintaining our focus on disciplined underwriting, expense rationalization, improvements to operational infrastructure and delivering on our brand.

The Holding Company result comprises the amortization of definite-lived intangible assets and some general and administrative expenses.

Underwriting Performance
In evaluating the underwriting performance of the StarStone segment, we consider the insurance ratios of StarStone, which is the active underwriting component of the segment and excludes the Holding Company. StarStone's insurance ratios are shown below.

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	(Favorable)
Unfavorable	 	2016	 	2015	 	(Favorable)
Unfavorable	
Loss ratio (1)	60.9	%	 	59.0	%	 	1.9	 %	 	60.6	%	 	60.0	%	 	0.6	 %	
Acquisition cost ratio (1)	19.0	%	 	19.8	%	 	(0.8	)%	 	19.9	%	 	19.5	%	 	0.4	 %	
Other operating expense ratio  (1)	18.3	%	 	19.3	%	 	(1.0	)%	 	18.5	%	 	21.0	%	 	(2.5	)%	
Combined ratio (1)	98.2	%	 	98.1	%	 	0.1	 %	 	99.0	%	 	100.5	%	 	(1.5	)%	
 	 	
(1) 	Refer to "Non-GAAP Financial Measures" for a description of how these ratios are calculated. The ratios are based upon the following amounts for StarStone, which exclude Holding Company amounts, for the three months ended June 30, 2016 and 2015, respectively: net premiums earned of $171,172 and $138,064, net incurred losses and LAE of $104,232 and $81,507, acquisition costs of $32,518 and $27,365, and other operating expenses of $31,390 and $26,604.The ratios are based upon the following amounts for StarStone, which exclude Holding Company amounts, for the six months ended June 30, 2016 and 2015, respectively: net premiums earned of $324,669 and $263,737, net incurred losses and LAE of $196,660 and $158,265, acquisition costs of $64,578 and $51,508, and other operating expenses of $60,121 and $55,429.	
Three Months Ended June 30: The combined ratio was consistent for the three months ended June 30, 2016 as compared to the three months ended June 30, 2015, reflecting an overall increase of 0.1% comprised of an increase in the loss ratio offset by lower acquisition cost and operating expense ratios. The increase in the loss ratio was primarily due to writing a higher proportion of workers’ compensation business and utilizing higher planned loss ratios across most classes of business, which reflected continued pressure on premium rates and terms and conditions.
Six Months Ended June 30: The combined ratio improved by 1.5% for the six months ended June 30, 2016 as compared to the six months ended June 30, 2015, primarily due to a reduction in the other operating expense ratio of 2.5% as a result of an increase in net premiums earned whilst we maintained a relatively consistent expense base.

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Gross Premiums Written:
The following table provides gross premiums written by line of business for the StarStone segment for the three and six months ended June 30, 2016 and 2015:

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	(in thousands of U.S. dollars)	
Casualty	$	66,229	
 	 	$	61,934	
 	 	$	4,295	
 	 	$	133,541	
 	 	$	121,756	
 	 	$	11,785	
 	
Marine	42,987	
 	 	30,319	
 	 	12,668	
 	 	112,364	
 	 	87,956	
 	 	24,408	
 	
Property	61,980	
 	 	103,017	
 	 	(41,037	)	 	103,978	
 	 	139,295	
 	 	(35,317	)	
Aerospace	14,421	
 	 	26,093	
 	 	(11,672	)	 	25,876	
 	 	37,210	
 	 	(11,334	)	
Workers' Compensation	37,751	
 	 	19,694	
 	 	18,057	
 	 	64,652	
 	 	45,537	
 	 	19,115	
 	
Total	$	223,368	
 	 	$	241,057	
 	 	$	(17,689	)	 	$	440,411	
 	 	$	431,754	
 	 	$	8,657	
 	
Three Months Ended June 30: Gross premiums written were $223.4 million and $241.1 million for the three months ended June 30, 2016 and 2015, respectively, a decrease of $17.7 million. Premiums written in the property and aerospace lines decreased by $41.0 million and $11.7 million, respectively. Premiums written in the property line were higher in 2015 due to an initial assumption of in-force unearned premium of $31.0 million under quota share agreements with Sussex upon its acquisition. The decrease in aerospace was due to our decision in the third quarter of 2015 to cease writing space business. The casualty, marine and workers’ compensation lines of business continued to grow, increasing by $4.3 million, $12.7 million and $18.1 million, respectively, as we continued to selectively underwrite certain specialty products and expand our distribution in these lines of business.
Six Months Ended June 30: Gross premiums written were $440.4 million and $431.8 million for the six months ended June 30, 2016 and 2015, respectively, an increase of $8.7 million. Premiums written in the casualty, marine and workers' compensation lines increased by $11.8 million, $24.4 million and $19.1 million, respectively, as a result of selective growth in new business, partly due to new business underwritten by teams of underwriters we hired in late 2015. This was partially offset by the decreases in the property and aerospace lines of $35.3 million and $11.3 million, respectively, for the reasons noted in the three month discussion above.
Net Premiums Earned:
The following table provides net premiums earned by line of business for the StarStone segment for the three and six months ended June 30, 2016 and 2015: 

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	(in thousands of U.S. dollars)	
Casualty	$	60,341	
 	 	$	42,996	
 	 	$	17,345	
 	 	$	108,750	
 	 	$	83,141	
 	 	$	25,609	
 	
Marine	40,246	
 	 	28,240	
 	 	12,006	
 	 	74,235	
 	 	52,104	
 	 	22,131	
 	
Property	32,049	
 	 	30,066	
 	 	1,983	
 	 	66,140	
 	 	53,910	
 	 	12,230	
 	
Aerospace	16,207	
 	 	16,314	
 	 	(107	)	 	33,614	
 	 	35,636	
 	 	(2,022	)	
Workers' Compensation	22,192	
 	 	20,080	
 	 	2,112	
 	 	42,378	
 	 	36,527	
 	 	5,851	
 	
Total	$	171,035	
 	 	$	137,696	
 	 	$	33,339	
 	 	$	325,117	
 	 	$	261,318	
 	 	$	63,799	
 	
Three Months Ended June 30: Net premiums earned for the StarStone segment for the three months ended June 30, 2016 increased from 2015 by $33.3 million to $171.0 million. The lines of business driving the increase were casualty and marine, which is consistent with the increases in premiums written for these lines. The modest growth in workers’ compensation net premiums earned in comparison to the growth in gross premiums written is due to ceded reinsurance premium as we manage the amount of risk we retain on this business.

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Six Months Ended June 30: Net premiums earned for the StarStone segment for the six months ended June 30, 2016 increased from 2015 by $63.8 million to $325.1 million. The lines of business driving the increase were primarily casualty and marine.
Net Incurred Losses and LAE:
Three Months Ended June 30: Net incurred losses and LAE for the three months ended June 30, 2016 and 2015 were $104.0 million and $81.0 million, respectively, an increase of $23.0 million. The increase was primarily attributable to the increase in net premiums earned. Net favorable prior year loss development for the three months ended June 30, 2016 and 2015 was $1.5 million and $0.3 million, respectively. The loss ratio for the three months ended June 30, 2016 increased by 1.9% to 60.9%, driven by increases in the marine, property and workers’ compensation lines of business. 
Six Months Ended June 30: Net incurred losses and LAE for the six months ended June 30, 2016 and 2015 were $195.2 million and $157.2 million, respectively, an increase of $38.0 million. The increase was primarily attributable to the increase in net premiums earned. Net favorable prior year loss development for the six months ended June 30, 2016 and 2015 was $3.5 million and $1.5 million, respectively. The loss ratios for the six months ended June 30, 2016 and 2015 were relatively consistent at 60.6% and 60.0%, respectively; the increase of 0.6% was primarily in respect of the marine, property and workers’ compensation lines of business. 
Acquisition Costs: 
Three Months Ended June 30: Acquisition costs were $32.5 million and $27.4 million for the three months ended June 30, 2016 and 2015, respectively, an increase of $5.1 million. The increase was primarily attributable to the increase in net premiums earned. The acquisition cost ratios for the three months ended June 30, 2016 and 2015 were 19.0% and 19.8%, respectively, a decrease of 0.8% reflecting a change in the mix of business.
Six Months Ended June 30: Acquisition costs were $64.6 million and $51.5 million for the six months ended June 30, 2016 and 2015, respectively, an increase of $13.1 million. The increase was primarily attributable to the increase in net premiums earned. The acquisition cost ratios for the six months ended June 30, 2016 and 2015 were 19.9% and 19.5%, respectively, an increase of 0.4% reflecting a change in the mix of business.
General and Administrative Expenses:
Three and Six Months Ended June 30: General and administrative expenses for the three months ended June 30, 2016 and 2015 were $31.3 million and $32.9 million, respectively. General and administrative expenses for the six months ended June 30, 2016 and 2015 were $61.5 million and $63.1 million, respectively. The decrease of $1.6 million for the three and six months ended June 30, 2016 compared with 2015 was primarily related to lower professional and consulting fees, partially offset by higher accruals for long-term equity-based compensation awards due to an increase in the share price during the year.
Noncontrolling Interest:
Three Months Ended June 30: Noncontrolling interest in earnings (loss) of the StarStone segment was $5.6 million and ($2.1) million for the three months ended June 30, 2016 and 2015, respectively. The increase was due to higher net earnings before noncontrolling interest for the three months ended June 30, 2016 compared with a net loss before noncontrolling interest for the three months ended June 30, 2015.
Six Months Ended June 30: Noncontrolling interest in earnings of the StarStone segment was $13.6 million and $0.2 million for the six months ended June 30, 2016 and 2015, respectively. The increase was due to higher net earnings before noncontrolling interest for the six months ended June 30, 2016 compared with the six months ended June 30, 2015. As of June 30, 2016 and 2015, Trident and Dowling had a combined 41.03% noncontrolling interest in the StarStone segment.

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Life and Annuities Segment
For our Life and Annuities segment, our run-off strategy differs from the non-life run-off business, in particular because we have limited ability to shorten the duration of the liabilities in this business through either early claims settlement, commutations or policy buy-backs. Instead, we will hold the policies associated with the life and annuities business to their natural maturity or lapse and will pay claims as they fall due.
The following is a discussion and analysis of our results of operations for our Life and Annuities segment for the three and six months ended June 30, 2016 and 2015, which are summarized below.

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	(in thousands of U.S. dollars)	
INCOME	 	 	 	 	 	 	 	 	 	 	 	
Net premiums earned	$	19,659	
 	 	$	23,072	
 	 	$	(3,413	)	 	$	37,640	
 	 	$	45,992	
 	 	$	(8,352	)	
Net investment income	11,113	
 	 	11,577	
 	 	(464	)	 	29,534	
 	 	20,652	
 	 	8,882	
 	
Net realized and unrealized gains (losses)	3,737	
 	 	(3,624	)	 	7,361	
 	 	3,922	
 	 	(57	)	 	3,979	
 	
Other income	363	
 	 	584	
 	 	(221	)	 	931	
 	 	879	
 	 	52	
 	
 	34,872	
 	 	31,609	
 	 	3,263	
 	 	72,027	
 	 	67,466	
 	 	4,561	
 	
EXPENSES	 	 	 	 	 	 	 	 	 	 	 	
Life and annuity policy benefits	19,778	
 	 	28,090	
 	 	(8,312	)	 	40,758	
 	 	50,937	
 	 	(10,179	)	
Acquisition costs	2,804	
 	 	3,299	
 	 	(495	)	 	5,206	
 	 	6,005	
 	 	(799	)	
General and administrative expenses	6,467	
 	 	4,452	
 	 	2,015	
 	 	11,027	
 	 	7,122	
 	 	3,905	
 	
Interest expense	272	
 	 	640	
 	 	(368	)	 	610	
 	 	800	
 	 	(190	)	
Net foreign exchange losses (gains)	(43	)	 	582	
 	 	(625	)	 	333	
 	 	(732	)	 	1,065	
 	
 	29,278	
 	 	37,063	
 	 	(7,785	)	 	57,934	
 	 	64,132	
 	 	(6,198	)	
EARNINGS (LOSS) BEFORE INCOME TAXES	5,594	
 	 	(5,454	)	 	11,048	
 	 	14,093	
 	 	3,334	
 	 	10,759	
 	
INCOME TAXES	(437	)	 	1,846	
 	 	(2,283	)	 	(577	)	 	(1,225	)	 	648	
 	
NET EARNINGS (LOSS) ATTRIBUTABLE TO ENSTAR GROUP LIMITED	$	5,157	
 	 	$	(3,608	)	 	$	8,765	
 	 	$	13,516	
 	 	$	2,109	
 	 	$	11,407	
 	
Overall Results:
Three Months Ended June 30: Net earnings (loss) were $5.2 million and ($3.6) million for the three months ended June 30, 2016 and 2015, respectively, an increase of $8.8 million. The increase was primarily due to an increase of $7.4 million in net realized and unrealized gain (losses). Investment results are separately discussed below in "Investments." The remaining $1.4 million increase was due to lower policy benefits and income taxes, offset by less premium earned and higher general and administrative expenses.

Six Months Ended June 30: Net earnings were $13.5 million and $2.1 million for the six months ended June 30, 2016 and 2015, respectively, an increase of $11.4 million. The increase was primarily due to higher net investment income in the six months ended June 30, 2016, including $8.6 million of net earnings from the life settlements business, acquired by us from Wilton Re Limited in May 2015. Life settlements income was comprised of $10.0 million from policy maturity events, offset by expenses of $1.4 million.

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Net Premiums Earned:
A summary of our net premiums earned by type of major product is below. In general, net premiums earned are expected to reduce at approximately 15% to 20% per annum as we run-off this business.

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	(in thousands of U.S. dollars)	
Term life insurance	$	7,426	
 	 	$	6,491	
 	 	$	935	
 	 	$	15,050	
 	 	$	13,354	
 	 	$	1,696	
 	
Assumed life reinsurance	4,992	
 	 	5,511	
 	 	(519	)	 	8,863	
 	 	9,951	
 	 	(1,088	)	
Credit life and disability	7,241	
 	 	11,070	
 	 	(3,829	)	 	13,727	
 	 	22,687	
 	 	(8,960	)	
 	$	19,659	
 	 	$	23,072	
 	 	$	(3,413	)	 	$	37,640	
 	 	$	45,992	
 	 	$	(8,352	)	
Three Months Ended June 30: Net premiums earned were $19.7 million and $23.1 million for the three months ended June 30, 2016 and 2015, respectively. The decrease in credit life and disability premiums of $3.9 million included a decrease of $2.3 million related to our strategic decision to utilize the cancellation option on certain credit products in the third quarter of 2015. Net premiums earned in term life insurance included $1.1 million related to Alpha Insurance for the three months ended June 30, 2016. We acquired Alpha Insurance in November 2015.
Six Months Ended June 30: Net premiums earned were $37.6 million and $46.0 million for the six months ended June 30, 2016 and 2015, respectively. The decrease in credit life and disability premiums of $9.0 million included a decrease of $5.0 million in the six months ended June 30, 2016 related to our strategic decision to utilize the cancellation option on certain credit products in the third quarter of 2015. Net premiums earned in term life insurance included $2.3 million related to Alpha Insurance for the six months ended June 30, 2016, which was offset by reduced premium in other life businesses.
Life and Annuity Policy Benefits:

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	(in thousands of U.S. dollars)	
Annuity benefits paid	$	10,398	
 	 	$	10,516	
 	 	$	(118	)	 	$	20,954	
 	 	$	21,714	
 	 	$	(760	)	
Life and disability benefits paid	18,001	
 	 	22,118	
 	 	(4,117	)	 	38,460	
 	 	42,530	
 	 	(4,070	)	
Total benefits paid	28,399	
 	 	32,634	
 	 	(4,235	)	 	59,414	
 	 	64,244	
 	 	(4,830	)	
Change in annuity benefit reserves	(866	)	 	(3,333	)	 	2,467	
 	 	(4,927	)	 	(8,162	)	 	3,235	
 	
Change in life and disability reserves	(9,679	)	 	(3,884	)	 	(5,795	)	 	(17,388	)	 	(10,360	)	 	(7,028	)	
Amortization of fair value adjustments	1,924	
 	 	2,673	
 	 	(749	)	 	3,659	
 	 	5,215	
 	 	(1,556	)	
Total change in reserves	(8,621	)	 	(4,544	)	 	(4,077	)	 	(18,656	)	 	(13,307	)	 	(5,349	)	
Life and annuity policy benefits	$	19,778	
 	 	$	28,090	
 	 	$	(8,312	)	 	$	40,758	
 	 	$	50,937	
 	 	$	(10,179	)	
Three Months Ended June 30: Life and annuity policy benefits were $19.8 million and $28.1 million for the three months ended June 30, 2016 and 2015, respectively. The decrease of $8.3 million is consistent with the run-off of policyholders in both the annuity and life business, and was primarily comprised of a decrease in life and disability policy benefits of $9.9 million, partially offset by an increase in annuity policy benefits of $2.3 million.
Annuity policy benefits increased by $2.3 million for the three months ended June 30, 2016 as compared with the three months ended June 30, 2015. Annuity policy benefits during the three months ended June 30, 2016 were $9.5 million, comprised of benefits paid of $10.4 million partially offset by a reduction in reserves of $0.9 million. Annuity policy benefits during the three months ended June 30, 2015 were $7.2 million, comprised of benefits paid of $10.5 million partially offset by a reduction in reserves of $3.3 million.
Life and disability policy benefits decreased by $9.9 million for the three months ended June 30, 2016 as compared with the three months ended June 30, 2015. Life and disability policy benefits during the three months ended June 30, 2016 were $8.3 million, comprised of benefits paid of $18.0 million, partially offset by a reduction in reserves of $9.7 million. Life and disability policy benefits during the three months ended June 30, 2015 were $18.2 million, comprised

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of benefits paid of $22.1 million, partially offset by a reduction in reserves of $3.9 million. The decrease in life and disability policy benefits from 2015 to 2016 was primarily because of a decrease in premiums earned, as well as the cancellation of certain credit products, partially offset by claims relating to Alpha Insurance, which were not included in the comparative period.
Six Months Ended June 30: Life and annuity policy benefits were $40.8 million and $50.9 million for the six months ended June 30, 2016 and 2015, respectively. The decrease of $10.2 million is consistent with the run-off of policyholders in both the annuity and life business, and was primarily comprised of a decrease in life and disability policy benefits of $11.1 million, partially offset by an increase in annuity policy benefits of $2.5 million.
Annuity policy benefits decreased by $2.5 million for the six months ended June 30, 2016 as compared with the six months ended June 30, 2015. Annuity policy benefits during the six months ended June 30, 2016 were $16.0 million, comprised of benefits paid of $20.9 million, partially offset by a reduction in reserves of $4.9 million. Annuity policy benefits during the six months ended June 30, 2015 were $13.6 million, comprised of benefits paid of $21.7 million, partially offset by a reduction in reserves of $8.2 million.
Life and disability policy benefits decreased by $11.1 million for the six months ended June 30, 2016 as compared with the six months ended June 30, 2015. Life and disability policy benefits during the six months ended June 30, 2016 were $21.1 million, comprised of benefits paid of $38.5 million, partially offset by a reduction in reserves of $17.4 million. Life and disability policy benefits during the six months ended June 30, 2015 were $32.2 million, comprised of benefits paid of $42.5 million, partially offset by a reduction in reserves of $10.4 million. The decrease in life and disability policy benefits from 2015 to 2016 was primarily as a result of a decrease in premiums earned, as well as the cancellation of certain credit products, offset by claims relating to Alpha Insurance, which were not included in the comparative period.
Acquisition Costs:
Three Months Ended June 30: Acquisition costs for the three months ended June 30, 2016 and 2015 were $2.8 million and $3.3 million, respectively. In the three months ended June 30, 2016, the commissions on credit business were lower by $0.7 million, partially offset by $0.2 million of commissions on the Alpha Insurance business.
Six Months Ended June 30: Acquisition costs for the six months ended June 30, 2016 and 2015 were $5.2 million and $6.0 million, respectively. In the six months ended June 30, 2016, the commissions on credit business were lower by $1.2 million, partially offset by $0.3 million of commissions on the Alpha Insurance business.
General and Administrative Expenses:
Three Months Ended June 30: General and administrative expenses were $6.5 million and $4.5 million for the three months ended June 30, 2016 and 2015, respectively. The increase of $2.0 million for the three months ended June 30, 2016 primarily related to expenses of acquired companies that were not included in 2015 due to the date of acquisition; namely $1.1 million relating to Alpha Insurance and $0.7 million relating to the life settlements business.
Six Months Ended June 30: General and administrative expenses were $11.0 million and $7.1 million for the six months ended June 30, 2016 and 2015, respectively. The increase for the six months ended June 30, 2016 primarily related to the timing of acquisitions occurring in 2015 after June 30, 2015; namely $2.5 million relating to Alpha Insurance. In addition, the six months ended June 30, 2015 included the release of a previously accrued acquisition date liability of $1.8 million attributable to the finalization with the seller of the purchase price for the Pavonia business.

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Investments
We define invested assets as the sum of total investments, cash and cash equivalents and restricted cash and cash equivalents. Investments consist primarily of investment grade, liquid, fixed maturity securities of short-to-medium duration, equities and other investments. Cash and cash equivalents and restricted cash and cash equivalents are comprised mainly of cash, high-grade fixed deposits, and other highly liquid instruments such as commercial paper with maturities of less than three months at the time of acquisition and money market funds.
Invested assets, including cash and cash equivalents, were $8.6 billion and $8.8 billion as at June 30, 2016 and December 31, 2015, respectively. Invested assets were maintained at a consistent level reflecting cash used in operations offset by increased valuations and improved investment performance during the quarter.
A description of our investment strategies is included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Investments" in our Annual Report on Form 10-K for the year ended December 31, 2015.

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Composition of Investment Portfolio By Asset Class
The following table summarizes the fair value and composition of our investment portfolio by asset class as at June 30, 2016 and December 31, 2015:

 	June 30, 2016	 	December 31, 2015	
 	Fair Value	 	Fair Value	
 	Investment Grade  (1)	Non-Investment Grade  (2)	Total	%	 	Investment Grade  (1)	Non-Investment Grade  (2)	Total	%	
 	(in thousands of U.S. dollars)	
Fixed maturity and short-term investments, trading and available-for-sale	 	 	 	 	 	 	 	 	 	
U.S. government & agency	$	785,017	
 	$	—	
 	$	785,017	
 	10.6	%	 	$	775,798	
 	$	—	
 	$	775,798	
 	10.4	%	
Non-U.S. government	388,695	
 	11,306	
 	400,001	
 	5.4	%	 	415,995	
 	28,791	
 	444,786	
 	6.0	%	
Corporate	2,649,892	
 	149,080	
 	2,798,972	
 	37.8	%	 	2,673,311	
 	138,755	
 	2,812,066	
 	37.8	%	
Municipal	15,293	
 	—	
 	15,293	
 	0.2	%	 	28,174	
 	—	
 	28,174	
 	0.4	%	
Residential mortgage-backed	474,405	
 	1,039	
 	475,444	
 	6.4	%	 	390,809	
 	1,153	
 	391,962	
 	5.3	%	
Commercial mortgage-backed	238,498	
 	42,554	
 	281,052	
 	3.8	%	 	241,208	
 	43,367	
 	284,575	
 	3.8	%	
Asset-backed	586,664	
 	69,248	
 	655,912	
 	8.8	%	 	577,280	
 	65,804	
 	643,084	
 	8.7	%	
Total	5,138,464	
 	273,227	
 	5,411,691	
 	73.0	%	 	5,102,575	
 	277,870	
 	5,380,445	
 	72.4	%	
 	 	 	 	 	 	 	 	 	 	
Fixed maturity investments, held-to-maturity	 	 	 	 	 	 	 	 	 	
U.S. government & agency	20,869	
 	23	
 	20,892	
 	0.3	%	 	19,288	
 	33	
 	19,321	
 	0.3	%	
Non-U.S. government	34,426	
 	—	
 	34,426	
 	0.5	%	 	39,058	
 	—	
 	39,058	
 	0.5	%	
Corporate	752,765	
 	96	
 	752,861	
 	10.2	%	 	710,546	
 	146	
 	710,692	
 	9.6	%	
Total	808,060	
 	119	
 	808,179	
 	11.0	%	 	768,892	
 	179	
 	769,071	
 	10.4	%	
 	 	 	 	 	 	 	 	 	 	
Equities	 	 	 	 	 	 	 	 	 	
U.S.	 	 	109,903	
 	1.5	%	 	 	 	108,793	
 	1.5	%	
International	 	 	7,390	
 	0.1	%	 	 	 	7,148	
 	0.1	%	
Total	
 	
 	117,293	
 	1.6	%	 	
 	
 	115,941	
 	1.6	%	
 	 	 	 	 	 	 	 	 	 	
Other investments	 	 	 	 	 	 	 	 	 	
Private equity funds	 	 	229,756	
 	3.1	%	 	 	 	254,883	
 	3.4	%	
Fixed income funds	 	 	248,815	
 	3.4	%	 	 	 	291,736	
 	3.9	%	
Fixed income hedge funds	 	 	111,543	
 	1.5	%	 	 	 	109,400	
 	1.5	%	
Equity funds	 	 	163,050	
 	2.2	%	 	 	 	147,390	
 	2.0	%	
Multi-strategy hedge fund	 	 	98,416	
 	1.3	%	 	 	 	99,020	
 	1.3	%	
Real estate debt fund	 	 	—	
 	—	%	 	 	 	54,829	
 	0.7	%	
CLO equities	 	 	65,156	
 	0.9	%	 	 	 	61,702	
 	0.8	%	
CLO equity funds	 	 	13,513	
 	0.2	%	 	 	 	13,928	
 	0.2	%	
Call options on equities	 	 	4,850	
 	0.1	%	 	 	 	—	
 	—	%	
Other	 	 	1,059	
 	—	%	 	 	 	1,144	
 	—	%	
Total	
 	
 	936,158	
 	12.7	%	 	 	 	1,034,032	
 	13.8	%	
 	 	 	 	 	 	 	 	 	 	
Other investments	 	 	 	 	 	 	 	 	 	
Life settlements	 	 	126,442	
 	1.7	%	 	 	 	130,268	
 	1.8	%	
 	 	 	 	 	 	 	 	 	 	
Total investments	$	5,946,524	
 	$	273,346	
 	$	7,399,763	
 	100.0	%	 	$	5,871,467	
 	$	278,049	
 	$	7,429,757	
 	100.0	%	
 	 	
(1) 	Investment Grade are securities with a rating of BBB- or higher.	
 	 	
(2) 	Non-Investment Grade included non-rated securities with a fair value of $46.3 million and $44.1 million as at June 30, 2016 and December 31, 2015, respectively.	
A description of our investment valuation processes is included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" of our Annual Report on Form 10-K for the year ended December 31, 2015 and "Note 4 - Fair Value Measurements" included within Item 1 of this Quarterly Report on Form 10-Q.

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Composition of Invested Assets By Segment
Across all of our segments, we strive to structure our investments in a manner that recognizes our liquidity needs for future liabilities. In that regard, we attempt to correlate the maturity and duration of our investment portfolio to our general liability profile. If our liquidity needs or general liability profile unexpectedly change, we may adjust the structure of our investment portfolio to meet our revised expectations. The following tables summarize the composition of total invested assets by segment as at June 30, 2016 and December 31, 2015: 

 	 	Non-life
Run-off	 	Atrium	 	StarStone	 	Life and Annuities	 	Total	
 	 	(in thousands of U.S. dollars)	
June 30, 2016	 	 	 	 	 	 	 	 	 	
 	
Short-term investments, trading, at fair value	 	$	118,839	
 	 	$	—	
 	 	$	3,907	
 	 	$	—	
 	 	$	122,746	
 	
Short-term investments, available-for-sale, at fair value	 	—	
 	 	282	
 	 	—	
 	 	2,119	
 	 	2,401	
 	
Fixed maturities, trading, at fair value	 	3,372,711	
 	 	37,000	
 	 	1,233,050	
 	 	343,854	
 	 	4,986,615	
 	
Fixed maturities, held-to-maturity, at amortized cost	 	—	
 	 	—	
 	 	—	
 	 	770,655	
 	 	770,655	
 	
Fixed maturities, available-for-sale, at fair value	 	3,281	
 	 	165,738	
 	 	—	
 	 	130,910	
 	 	299,929	
 	
Equities, trading, at fair value	 	105,091	
 	 	—	
 	 	7,662	
 	 	4,540	
 	 	117,293	
 	
Other investments, at fair value	 	785,636	
 	 	—	
 	 	120,064	
 	 	30,458	
 	 	936,158	
 	
Other investments, at cost	 	—	
 	 	—	
 	 	—	
 	 	129,636	
 	 	129,636	
 	
Total investments	 	4,385,558	
 	 	203,020	
 	 	1,364,683	
 	 	1,412,172	
 	 	7,365,433	
 	
Cash and cash equivalents	 	895,779	
 	 	73,937	
 	 	208,354	
 	 	69,069	
 	 	1,247,139	
 	
Total invested assets	 	$	5,281,337	
 	 	$	276,957	
 	 	$	1,573,037	
 	 	$	1,481,241	
 	 	$	8,612,572	
 	
Duration	 	1.79	
 	 	1.24	
 	 	2.12	
 	 	6.56	
 	 	2.56	
 	
Average Credit Rating	 	A+	
 	 	AA-	
 	 	AA-	
 	 	A	
 	 	A+	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Non-life
Run-off	 	Atrium	 	StarStone	 	Life and Annuities	 	Total	
 	 	(in thousands of U.S. dollars)	
December 31, 2015	 	 	 	 	 	 	 	 	 	 	
Short-term investments, trading, at fair value	 	$	72,163	
 	 	$	—	
 	 	$	12,941	
 	 	$	2,246	
 	 	$	87,350	
 	
Short-term investments, available-for-sale, at fair value	 	—	
 	 	1,848	
 	 	—	
 	 	6,774	
 	 	8,622	
 	
Fixed maturities, trading, at fair value	 	3,444,752	
 	 	37,000	
 	 	1,204,376	
 	 	304,666	
 	 	4,990,794	
 	
Fixed maturities, held-to-maturity, at amortized cost	 	—	
 	 	—	
 	 	—	
 	 	790,866	
 	 	790,866	
 	
Fixed maturities, available-for-sale, at fair value	 	6,464	
 	 	181,027	
 	 	—	
 	 	106,188	
 	 	293,679	
 	
Equities, trading, at fair value	 	102,412	
 	 	—	
 	 	9,083	
 	 	4,446	
 	 	115,941	
 	
Other investments, at fair value	 	856,555	
 	 	—	
 	 	123,735	
 	 	53,742	
 	 	1,034,032	
 	
Other investments, at cost	 	—	
 	 	—	
 	 	—	
 	 	133,071	
 	 	133,071	
 	
Total investments	 	4,482,346	
 	 	219,875	
 	 	1,350,135	
 	 	1,401,999	
 	 	7,454,355	
 	
Cash and cash equivalents	 	1,007,889	
 	 	52,735	
 	 	199,597	
 	 	73,043	
 	 	1,333,264	
 	
Total invested assets	 	$	5,490,235	
 	 	$	272,610	
 	 	$	1,549,732	
 	 	$	1,475,042	
 	 	$	8,787,619	
 	
Duration	 	1.69	
 	 	1.80	
 	 	2.09	
 	 	5.95	
 	 	2.39	
 	
Average Credit Rating	 	A+	
 	 	AA-	
 	 	AA-	
 	 	A+	
 	 	A+	
 	
Credit Quality and Maturity Profiles
As at June 30, 2016 and December 31, 2015, our investment portfolio had an average credit quality rating of A+. At June 30, 2016 and December 31, 2015, our fixed maturity investments rated lower than BBB- comprised 3.1% and 3.1% of our total investment portfolio, respectively. A detailed schedule of average credit ratings by asset class as at June 30, 2016 is included in "Note 3 - Investments - Credit Ratings" of our unaudited condensed consolidated financial statements within Item 1 of this Quarterly Report on Form 10-Q.
Schedules of maturities for our fixed maturity securities are included in "Note 3 - Investments" of our unaudited condensed consolidated financial statements included within Item 1 of this Quarterly Report on Form 10-Q.

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Eurozone Exposure
As at June 30, 2016 and December 31, 2015 we owned $17.7 million and $17.3 million, respectively, of investments in fixed maturity securities issued by the sovereign governments of Italy, Ireland and Spain. These investments are held by Alpha Insurance, which we acquired during 2015.
Investment Results - Consolidated
Note on comparability with prior period disclosures: In our consolidated statement of earnings we have added a new line captioned "other income," and for the three and six months ended June 30, 2015 we have reclassified $11.8 and $15.3 million, respectively, from net investment income to other income. These reclassifications were primarily related to income from recoveries on acquired insolvent debts and had no impact on net earnings. Comparability between periods is also impacted by our acquisitions and significant new business as described in Notes 3 and 4 of our consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2015 and "Note 2 - Significant New Business" of our unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q. In addition, we record interest on funds held, such as for the Allianz transaction, in net investment income. For the purposes of the below analysis of our annualized investment book yield and financial statement portfolio return, we have excluded interest on funds held because funds held is not included in our definition of invested assets.
The following table summarizes our investment results for the three and six months ended June 30, 2016 and 2015.

 	 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	 	(in thousands of U.S. dollars)	 	(in thousands of U.S. dollars)	
Net investment income	 	$	54,223	
 	 	$	34,655	
 	 	$	19,568	
 	 	$	114,286	
 	 	$	65,072	
 	 	$	49,214	
 	
Interest on funds held	 	(7,633	)	 	184	
 	 	(7,817	)	 	(15,237	)	 	10	
 	 	(15,247	)	
Net investment income (excluding funds held)	 	46,590	
 	 	34,839	
 	 	11,751	
 	 	99,049	
 	 	65,082	
 	 	33,967	
 	
Net realized and unrealized gains (losses)	 	37,987	
 	 	(11,249	)	 	49,236	
 	 	75,951	
 	 	31,771	
 	 	44,180	

Annualized Investment Book Yield	 	 	 	 	 	 	 	 	 	 	 	 	
Annualized net investment income (excluding funds held)	 	186,360	
 	 	139,356	
 	 	47,004	
 	 	198,098	
 	 	130,164	
 	 	67,934	
 	
Average aggregate invested assets, at cost (1)	 	8,681,398	
 	 	8,819,707	
 	 	(138,309	)	 	8,747,768	
 	 	8,315,162	
 	 	432,606	
 	
Annualized investment book yield	 	2.15	%	 	1.58	%	 	0.57	%	 	2.26	%	 	1.57	%	 	0.69	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Financial Statement Portfolio Return	 	 	 	 	 	 	 	 	 	 	 	 	
Total financial statement return(2)	 	84,577	
 	 	23,590	
 	 	60,987	
 	 	175,000	
 	 	96,853	
 	 	78,147	
 	
Average aggregate invested assets, at fair value (1)	 	8,697,787	
 	 	8,798,382	
 	 	(100,595	)	 	8,726,717	
 	 	8,317,505	
 	 	409,212	
 	
Financial statement portfolio return	 	0.97	%	 	0.27	%	 	0.70	%	 	2.01	%	 	1.16	%	 	0.85	%	
(1) These amounts are an average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements.
(2) This is the sum of net investment income (excluding interest on funds held) and net realized and unrealized gains (losses) from our U.S. GAAP consolidated financial statements.
Three Months Ended June 30: Net investment income, excluding the increase in interest on funds held of $7.8 million, increased by $11.8 million during the three months ended June 30, 2016 compared to the three months ended June 30, 2015 due to an increase of 57 basis points in the book yield we obtained on our assets. The increase in yield was primarily due to the changing mix in asset allocation as we executed on our investment strategies.
The increase of $49.2 million in net realized and unrealized gains (losses) was comprised of net unrealized gains of $35.8 million in 2016 compared to net unrealized losses of $18.3 million in 2015, offset by a decrease in net realized gains of $4.9 million. The increase in net unrealized gains in the three months ended June 30, 2016 was due to the increase in valuations of fixed maturity securities as treasury yields moved lower and credit spreads tightened during the three months ended June 30, 2016.

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Six Months Ended June 30: Net investment income, excluding the increase in interest on funds held of $15.2 million, increased by $34.0 million during the six months ended June 30, 2016 due to an increase of $432.6 million in our average invested assets and an increase of 69 basis points in the book yield we obtained on those assets. The increase in yield was primarily due to the changing mix in asset allocation as we executed on our investment strategies. This included an increase of $8.0 million in income on life settlements during the six months ended June 30, 2016 compared to 2015.
The increase of $44.2 million in net realized and unrealized gains (losses) was comprised of net unrealized gains of $75.2 million in 2016 compared to net unrealized gains of $12.0 million in 2015, offset by a decrease in net realized gains of $19.0 million. The increase in net unrealized gains in the six months ended June 30, 2016 was due to the increase in valuations of fixed maturity securities as treasury yields moved lower and credit spreads tightened during the six months ended June 30, 2016. The realized gains in 2015 related to sales of equity securities.
Investment Results - By Segment
The following tables summarize our investment results by segment for the three and six months ended June 30, 2016, and 2015. These tables have been prepared on a basis consistent with the consolidated table above.
Non-life Run-off

 	 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	 	(in thousands of U.S. dollars)	
Net investment income	 	$	37,581	
 	 	$	18,569	
 	 	$	19,012	
 	 	$	73,811	
 	 	$	37,433	
 	 	$	36,378	
 	
Interest on funds held	 	(7,633	)	 	184	
 	 	(7,817	)	 	(15,237	)	 	10	
 	 	(15,247	)	
Net investment income (excluding funds held)	 	29,948	
 	 	18,753	
 	 	11,195	
 	 	58,574	
 	 	37,443	
 	 	21,131	
 	
Net realized and unrealized gains (losses)	 	26,161	
 	 	(4,308	)	 	30,469	
 	 	49,551	
 	 	30,352	
 	 	19,199	

Annualized Investment Book Yield	 	 	 	 	 	 	 	 	 	 	 	 	
Annualized net investment income (excluding funds held)	 	119,792	
 	 	75,012	
 	 	44,780	
 	 	117,148	
 	 	74,886	
 	 	42,262	
 	
Average aggregate invested assets, at cost	 	5,339,460	
 	 	5,718,040	
 	 	(378,580	)	 	5,406,405	
 	 	5,226,082	
 	 	180,323	
 	
Annualized investment book yield	 	2.24	%	 	1.31	%	 	0.93	%	 	2.17	%	 	1.43	%	 	0.74	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Financial Statement Portfolio Return	 	 	 	 	 	 	 	 	 	 	 	 	
Total financial statement return	 	56,109	
 	 	14,445	
 	 	41,664	
 	 	108,125	
 	 	67,795	
 	 	40,330	
 	
Average aggregate invested assets, at fair value	 	5,342,906	
 	 	5,705,579	
 	 	(362,673	)	 	5,395,129	
 	 	5,188,212	
 	 	206,917	
 	
Financial statement portfolio return	 	1.05	%	 	0.25	%	 	0.80	%	 	2.00	%	 	1.31	%	 	0.69	%	
Three Months Ended June 30: Net investment income, excluding the increase in interest on funds held of $7.8 million, increased by $11.2 million during the three months ended June 30, 2016 due to an increase of 93 basis points in the book yield we obtained on our assets. The increase in yield was primarily due to the changing mix in asset allocation as we executed on our investment strategies.
The increase of $30.5 million in net realized and unrealized gains (losses) was comprised of net unrealized gains of $23.8 million in 2016 compared to net unrealized losses of $12.4 million in 2015, offset by a decrease in net realized gains of $5.7 million. The increase in net unrealized gains in the three months ended June 30, 2016 was due to the increase in valuations of fixed maturity securities as treasury yields moved lower and credit spreads tightened during the three months ended June 30, 2016.
Six Months Ended June 30: Net investment income, excluding the increase in interest on funds held of $15.2 million, increased by $21.1 million during the six months ended June 30, 2016 due to an increase of $180.3 million in our average invested assets and an increase of 74 basis points in the book yield we obtained on those assets. The increase in yield was primarily due to the changing mix in asset allocation as we executed on our investment strategies.

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The increase of $19.2 million in net realized and unrealized gains (losses) was comprised of net unrealized gains of $49.0 million in 2016 compared to net unrealized gains of $11.3 million in 2015, offset by a decrease in net realized gains of $18.5 million. The increase in net unrealized gains in the six months ended June 30, 2016 was due to the increase in valuations of fixed maturity securities as treasury yields moved lower and credit spreads tightened during the six months ended June 30, 2016. The realized gains in 2015 related to sales of equity securities.
Atrium

 	 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	 	(in thousands of U.S. dollars)	
Net investment income	 	$	635	
 	 	$	523	
 	 	$	112	
 	 	$	1,189	
 	 	1,030	
 	 	$	159	
 	
Net realized and unrealized gains (losses)	 	68	
 	 	38	
 	 	30	
 	 	108	
 	 	129	
 	 	(21	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Annualized Investment Book Yield	 	 	 	 	 	 	 	 	 	 	 	 	
Annualized net investment income	 	2,540	
 	 	2,092	
 	 	448	
 	 	2,378	
 	 	2,060	
 	 	318	
 	
Average aggregate invested assets, at cost	 	291,811	
 	 	309,995	
 	 	(18,184	)	 	291,801	
 	 	317,508	
 	 	(25,707	)	
Annualized investment book yield	 	0.87	%	 	0.67	%	 	0.20	%	 	0.81	%	 	0.65	%	 	0.16	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Financial Statement Portfolio Return	 	 	 	 	 	 	 	 	 	 	 	 	
Total financial statement return	 	703	
 	 	561	
 	 	142	
 	 	1,297	
 	 	1,159	
 	 	138	
 	
Average aggregate invested assets, at fair value	 	288,992	
 	 	303,621	
 	 	(14,629	)	 	287,906	
 	 	297,775	
 	 	(9,869	)	
Financial statement portfolio return	 	0.24	%	 	0.18	%	 	0.06	%	 	0.45	%	 	0.39	%	 	0.06	%	
Three and Six Months Ended June 30: There was no significant change to Atrium's investment results for the three and six months ended June 30, 2016 compared to the three and six months ended June 30, 2015. Despite average invested assets being lower than last year, the same investment results were achieved through improved book yield due to our asset allocation.
StarStone

 	 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	 	(in thousands of U.S. dollars)	
Net investment income	 	$	5,753	
 	 	$	4,058	
 	 	$	1,695	
 	 	$	11,033	
 	 	$	6,189	
 	 	$	4,844	
 	
Net realized and unrealized gains (losses)	 	8,021	
 	 	(3,355	)	 	11,376	
 	 	22,370	
 	 	1,347	
 	 	21,023	

Annualized Investment Book Yield	 	 	 	 	 	 	 	 	 	 	 	 	
Annualized net investment income	 	23,012	
 	 	16,232	
 	 	6,780	
 	 	22,066	
 	 	12,378	
 	 	9,688	
 	
Average aggregate invested assets, at cost	 	1,574,362	
 	 	1,464,375	
 	 	109,987	
 	 	1,572,657	
 	 	1,464,174	
 	 	108,483	
 	
Annualized investment book yield	 	1.46	%	 	1.11	%	 	0.35%	
 	 	1.40	%	 	0.85	%	 	0.55%	

Financial Statement Portfolio Return	 	 	 	 	 	 	 	 	 	 	 	 	
Total financial statement return	 	13,774	
 	 	703	
 	 	13,071	
 	 	33,403	
 	 	7,536	
 	 	25,867	
 	
Average aggregate invested assets, at fair value	 	1,563,526	
 	 	1,463,309	
 	 	100,217	
 	 	1,557,699	
 	 	1,502,861	
 	 	54,838	
 	
Financial statement portfolio return	 	0.88	%	 	0.05	%	 	0.83	%	 	2.14	%	 	0.50	%	 	1.64	%	
Three Months Ended June 30: Net investment income increased by $1.7 million during the three months ended June 30, 2016, as compared to the three months ended June 30, 2015, primarily due to an increase of $110.0 million in our average invested assets and an increase of 35 basis points in the book yield we obtained on those assets. The increase in yield was primarily due to our asset allocation.

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Net realized and unrealized gains (losses) increased by $11.4 million during the three months ended June 30, 2016, primarily due to the increase in valuations of fixed maturity securities as treasury yields moved lower and credit spreads tightened during the three months ended June 30, 2016.
Six Months Ended June 30: Net investment income increased by $4.8 million during the six months ended June 30, 2016, as compared to the six months ended June 30, 2015, primarily due to an increase of $108.5 million in our average invested assets and an increase of 55 basis points in the book yield we obtained on those assets. The increase in yield was primarily due to our asset allocation.
Net realized and unrealized gains (losses) increased by $21.0 million during the six months ended June 30, 2016, primarily due to the increase in valuations of fixed maturity securities as treasury yields moved lower and credit spreads tightened during the six months ended June 30, 2016.
Life and Annuities

 	 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	 	2016	 	2015	 	Increase (decrease)	 	2016	 	2015	 	Increase (decrease)	
 	 	(in thousands of U.S. dollars)	
Net investment income	 	$	11,113	
 	 	$	11,577	
 	 	$	(464	)	 	$	29,534	
 	 	$	20,652	
 	 	$	8,882	
 	
Net realized and unrealized gains (losses)	 	3,737	
 	 	(3,624	)	 	7,361	
 	 	3,922	
 	 	(57	)	 	3,979	

Annualized Investment Book Yield	 	 	 	 	 	 	 	 	 	 	 	 	
Annualized net investment income	 	44,452	
 	 	46,308	
 	 	(1,856	)	 	59,068	
 	 	41,304	
 	 	17,764	
 	
Average aggregate invested assets, at cost	 	1,475,765	
 	 	1,327,297	
 	 	148,468	
 	 	1,476,905	
 	 	1,307,398	
 	 	169,507	
 	
Annualized investment book yield	 	3.01	%	 	3.49	%	 	(0.48	)%	 	4.00	%	 	3.16	%	 	0.84	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Financial Statement Portfolio Return	 	 	 	 	 	 	 	 	 	 	 	 	
Total financial statement return	 	14,850	
 	 	7,953	
 	 	6,897	
 	 	33,456	
 	 	20,595	
 	 	12,861	
 	
Average aggregate invested assets, at fair value	 	1,502,363	
 	 	1,325,873	
 	 	176,490	
 	 	1,485,983	
 	 	1,328,657	
 	 	157,326	
 	
Financial statement portfolio return	 	0.99	%	 	0.60	%	 	0.39	 %	 	2.25	%	 	1.55	%	 	0.70	%	
Three Months Ended June 30: Net investment income decreased by $0.5 million during the three months ended June 30, 2016, as compared to the three months ended June 30, 2015, primarily due to a decrease in income from life settlements of $0.9 million.
Net realized and unrealized gains (losses) increased by $7.4 million during the three months ended June 30, 2016, primarily due to the increase in valuations of fixed maturity securities as treasury yields moved lower and credit spreads tightened during the three months ended June 30, 2016 compared with 2015.
Six Months Ended June 30: Net investment income increased by $8.9 million during the six months ended June 30, 2016, as compared to the six months ended June 30, 2015, primarily due to an increase in income from life settlements of $8.0 million and an increase of $169.5 million in our average invested assets, partially offset by a decrease in book yield. Excluding the income from life settlements, annualized investment book yield for the six months ended June 30, 2015 was 2.65%, a decrease of 51 basis points from the comparable amount for the six months ended June 30, 2015. In addition, net realized and unrealized gains (losses) increased by $4.0 million.

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Liquidity and Capital Resources
Overview
Enstar aims to generate cash flows from our insurance operations and investments, preserve sufficient capital for future acquisitions, and develop relationships with lenders who provide borrowing capacity at competitive rates.
Our capital resources as at June 30, 2016 included shareholders' equity of $2.6 billion, redeemable noncontrolling interest of $0.4 billion classified as temporary equity, and loans payable of $0.6 billion. The redeemable noncontrolling interest may be settled in the future in cash or Enstar ordinary shares, at our option. Based on our current loss reserves position, our portfolios of in-force insurance and reinsurance business, and our investment positions, we believe we are well capitalized.
Enstar has not historically declared a dividend. We retain earnings and utilize distributions from our subsidiaries to invest in our business strategies. We do not currently expect to pay any dividends on our ordinary shares. Any payment of dividends must be approved by our Board of Directors. Our ability to pay dividends is subject to certain restrictions, as described in "Note 20 - Dividend Restrictions and Statutory Requirements" in the notes to our consolidated financial statements included within Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2015.
Cash and Cash Equivalents
As at June 30, 2016 and December 31, 2015, we had total cash and cash equivalents, and restricted cash and cash equivalents of approximately $1.2 billion and $1.3 billion, respectively. We expect our cash flows, together with our existing capital base and cash and investments acquired on the purchase of insurance and reinsurance subsidiaries, to be sufficient to meet cash requirements and to operate our business. For a description of our sources and uses of cash in our holding company and operating companies, refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation - Liquidity and Capital Resources" in our Annual Report on Form 10-K for the year ended December 31, 2015. Our cash and cash equivalents are comprised mainly of cash, high graded fixed deposits, commercial paper with maturities of less than three months and money market funds.
As of June 30, 2016, we had $800.8 million million of cash and cash equivalents, excluding restricted cash that supports insurance operations, and included in this amount was $525.5 million held by foreign subsidiaries outside of Bermuda. Based on our group's current corporate structure with a Bermuda domiciled parent company and the jurisdictions in which we operate, if the cash and cash equivalents held by our foreign subsidiaries were to be distributed to us, as dividends or otherwise, such amounts would not be subject to incremental income taxes, however in certain circumstances withholding taxes may be imposed by some jurisdictions, including the United States. Based on existing tax laws, regulations and our current intentions, there was no accrual as of June 30, 2016 for any material withholding taxes on dividends or other distributions, as described in "Note 16 - Taxation" in the notes to our consolidated financial statements included within Item 1 of this Quarterly Report on Form 10-Q.
The following table summarizes our consolidated cash flows provided by (used in) operating, investing and financing activities for the six months ended June 30, 2016 and 2015:

 	 	Six Months Ended June 30,	
Cash provided by (used in):	 	2016	 	2015	 	Increase (decrease)	
 	 	(in thousands of U.S. dollars)	
Operating activities	 	$	(216,332	)	 	$	(478,045	)	 	$	261,713	
 	
Investing activities	 	181,324	
 	 	260,153	
 	 	(78,829	)	
Financing activities	 	13,548	
 	 	337,675	
 	 	(324,127	)	
Effect of exchange rate changes on cash	 	381	
 	 	(6,226	)	 	6,607	
 	
Net increase (decrease) in cash and cash equivalents	 	(21,079	)	 	113,557	
 	 	(134,636	)	
Cash and cash equivalents, beginning of period	 	821,925	
 	 	963,402	
 	 	(141,477	)	
Cash and cash equivalents, end of period	 	$	800,846	
 	 	$	1,076,959	
 	 	$	(276,113	)	
Details of our consolidated cash flows are included in "Item 1. Financial Statements - Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015 (unaudited)."

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2016 versus 2015: Cash from operating activities included net sales (purchases) of trading securities of $51.5 million and ($630.1) million for the six months ended June 30, 2016 and 2015, respectively. Excluding the activity on trading securities, cash (used in) provided by operating activities was ($267.8) million and $152.1 million for the six months ended June 30, 2016 and 2015, respectively. Cash used in operating activities is largely a result of the timing of loss payments across all of our segments. In addition, our StarStone segment had improved results and operating cash flows in the six months ended June 30, 2016 as compared with 2015, which partially offset the decrease in cash from operating activities, excluding trading securities activity.
Cash provided by investing activities for the six months ended June 30, 2016 primarily related to the cash inflow from redemptions of other investments of $125.1 million and a change in restricted cash contributing $65.1 million. The net cash inflow from investing activities was utilized in operating activities during the period. Cash provided by investing activities for the six months ended June 30, 2015 primarily related to a change in restricted cash of $242.4 million for the transaction with Voya, described in "Note 4 - Significant New Business" in our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2015.
Cash provided by financing activities for the six months ended June 30, 2016 was not significantly changed, as net drawdowns of $44.1 million under the Enstar Group Limited ("EGL") Revolving Credit Facility were substantially offset by repayments of $30.5 million related to the Sussex term loan (the "Sussex Facility"). During the six months ended June 30, 2015, we fully drew down $109.0 million on the Sussex Facility to fund 50% of the consideration payable for the acquisition of Sussex, and repaid $5.0 million of the outstanding principal on the Sussex Facility. In the same period there were also net drawdowns under the EGL Revolving Credit Facility of $224.7 million primarily related to our acquisition of certain subsidiaries from Wilton Re Limited and to fund trusts for the Voya transaction. These transactions are described in "Note 3 - Acquisitions" and "Note 4 - Significant New Business", respectively, in the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2015.
Investments
As at June 30, 2016 and December 31, 2015, we had total investments of approximately $7.4 billion and $7.5 billion, respectively.
For information regarding our investments, refer to "Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Investments."
Reinsurance Balances Recoverable
As at June 30, 2016 and December 31, 2015, we had reinsurance balances recoverable of approximately $1.3 billion and $1.5 billion, respectively.
Our insurance and reinsurance run-off subsidiaries, prior to acquisition, used retrocessional agreements to reduce their exposure to the risk of insurance and reinsurance assumed. On an annual basis, both Atrium and StarStone purchase a tailored outwards reinsurance program designed to manage their risk profiles. The majority of Atrium’s and StarStone's third-party reinsurance cover is with highly rated reinsurers or is collateralized by letters of credit.
We remain liable to the extent that retrocessionaires do not meet their obligations under these agreements, and therefore, we evaluate and monitor concentration of credit risk among our reinsurers. Provisions are made for amounts considered potentially uncollectible.
For further information regarding our reinsurance balances recoverable, refer to "Note 6 - Reinsurance Balances Recoverable" in the notes to our unaudited condensed consolidated financial statements included within Item 1 of this Quarterly Report on Form 10-Q. 
Funds Held by Reinsured Companies
As at June 30, 2016 and December 31, 2015, we had funds held by ceding companies of approximately $1.2 billion and $0.1 billion, respectively. The increase was due to the completion on March 31, 2016 of our transaction with Allianz to reinsure portfolios of Allianz's run-off business. In accordance with this transaction, which had an effective date of January 1, 2016, there are $1.1 billion of funds held by Allianz and we are receiving a fixed rate of investment income in accordance with the contract. For information regarding credit risk, refer to "Item 3. Quantitative and Qualitative Disclosures About Market Risk - Credit Risk - Funds Held by Reinsured Companies" of this Quarterly Report on Form 10-Q.

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Loan Facilities
We utilize loan facilities primarily for acquisitions and, from time to time, for general corporate purposes. For information regarding our loan facilities, including our loan covenants, refer to "Note 11 - Loans Payable" in the notes to our consolidated financial statements included within Item 1 of this Quarterly Report on Form 10-Q. Under our facilities, loans payable as of June 30, 2016 and December 31, 2015 were $614.0 million and $600.3 million, respectively.
Our main facility is the EGL Revolving Credit Facility, originated on September 16, 2014 for a five-year term, and amended on February 27, 2015, February 15, 2016 and most recently on August 5, 2016. This facility is among the Company and certain of its subsidiaries, as borrowers and as guarantors, and various financial institutions. We are permitted to borrow up to an aggregate of $665.0 million, and as of August 5, 2016 we have an option to obtain additional commitments of up to $166.25 million. The individual outstanding loans under the facility are unsecured short-term floating rate loans with an interest rate of LIBOR plus an applicable margin. As at June 30, 2016, $115.2 million of the $665.0 million total capacity was available for use under the EGL Revolving Credit Facility. During the six months ended June 30, 2016 we borrowed Euros to hedge the foreign currency exposure on our net investment in certain of our subsidiaries whose functional currency is denominated in Euros.
We also have the Sussex Facility, a four-year term loan, that was originated on December 24, 2014 with two financial institutions. We repaid $30.5 million under this facility during the six months ended June 30, 2016. As at June 30, 2016 the outstanding principal under this facility was $63.5 million.
Contractual Obligations
The following table summarizes, as of June 30, 2016, our future payments under contractual obligations and estimated payments for losses and LAE and policy benefits by expected payment date and updates the table on page 79 of our Annual Report on Form 10-K for the year ended December 31, 2015. The table excludes short-term liabilities and includes only obligations that are expected to be settled in cash.  

  	Total	 	Less than
1 Year	 	1 - 3
years	 	3 - 5
years	 	More than
5 Years	
 	(in millions of U.S. dollars)	
Operating Activities	 	 	 	 	 	 	 	 	 	
Estimated gross reserves for losses and LAE  (1)	$	6,571.3	
 	 	$	1,324.5	
 	 	$	1,999.1	
 	 	$	931.6	
 	 	$	2,316.1	
 	
Policy benefits for life and annuity contracts  (2)	2,139.0	
 	 	74.5	
 	 	149.8	
 	 	142.2	
 	 	1,772.5	
 	
Operating lease obligations	44.9	
 	 	10.3	
 	 	18.0	
 	 	9.1	
 	 	7.5	
 	
Investing Activities	 	 	 	 	 	 	 	 	 	
Investment commitments	138.4	
 	 	55.6	
 	 	57.8	
 	 	25.0	
 	 	—	
 	
Financing Activities	 	 	 	 	 	 	 	 	 	
Loan repayments (including estimated interest payments)	673.7	
 	 	15.0	
 	 	658.7	
 	 	—	
 	 	—	
 	
Total	$	9,567.3	
 	 	$	1,479.9	
 	 	$	2,883.4	
 	 	$	1,107.9	
 	 	$	4,096.1	

(1) 	The reserves for losses and LAE represent management’s estimate of the ultimate cost of settling losses. The estimation of losses is based on various complex and subjective judgments. Actual losses paid may differ, perhaps significantly, from the reserve estimates reflected in our financial statements. Similarly, the timing of payment of our estimated losses is not fixed and there may be significant changes in actual payment activity. The assumptions used in estimating the likely payments due by period are based on our historical claims payment experience and industry payment patterns, but due to the inherent uncertainty in the process of estimating the timing of such payments, there is a risk that the amounts paid in any such period can be significantly different from the amounts disclosed above. The amounts in the above table represent our estimates of known liabilities as of June 30, 2016 and do not take into account corresponding reinsurance recoverable amounts that would be due to us. Furthermore, certain of the reserves included in the unaudited condensed consolidated financial statements as of June 30, 2016 were acquired by us and initially recorded at fair value with subsequent amortization, whereas the expected payments by period in the table above are the estimated payments at a future time and do not reflect the fair value adjustment in the amount payable.	
 	 	
(2) 	Policy benefits for life and annuity contracts recorded in our unaudited condensed consolidated balance sheet as at June 30, 2016 of $1,286.3 million are computed on a discounted basis, whereas the expected payments by period in the table above are the estimated payments at a future time and do not reflect a discount of the amount payable.	

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For additional information relating to our commitments and contingencies, see "Note 18 - Commitments and Contingencies" in the notes to our unaudited condensed consolidated financial statements included within Item 1 of this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
At June 30, 2016, we did not have any off-balance sheet arrangements, as defined by Item 303(a)(4) of Regulation S-K.
Critical Accounting Policies
Our critical accounting policies are discussed in Management's Discussion and Analysis of Results of Operations and Financial Condition contained in our Annual Report on Form 10-K for the year ended December 31, 2015 and have not materially changed.

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Cautionary Statement Regarding Forward-Looking Statements
This quarterly report and the documents incorporated by reference contain statements that constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, with respect to our financial condition, results of operations, business strategies, operating efficiencies, competitive positions, growth opportunities, plans and objectives of our management, as well as the markets for our ordinary shares and the insurance and reinsurance sectors in general. Statements that include words such as "estimate," "project," "plan," "intend," "expect," "anticipate," "believe," "would," "should," "could," "seek," "may" and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the federal securities laws or otherwise. All forward-looking statements are necessarily estimates or expectations, and not statements of historical fact, reflecting the best judgment of our management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward looking statements should, therefore, be considered in light of various important factors, including those set forth in this quarterly report and in our Annual Report on Form 10-K for the year ended December 31, 2015. These factors include:
 	 	
•	risks associated with implementing our business strategies and initiatives;	
 	 	
•	risks that we may require additional capital in the future, which may not be available or may be available only on unfavorable terms;	
 	 	
•	the adequacy of our loss reserves and the need to adjust such reserves as claims develop over time;	
 	 	
•	risks relating to the availability and collectability of our reinsurance;	
 	 	
•	changes and uncertainty in economic conditions, including interest rates, inflation, currency exchange rates, equity markets and credit conditions, which could affect our investment portfolio, our ability to finance future acquisitions and our profitability;	
 	 	
•	the risk that ongoing or future industry regulatory developments will disrupt our business, affect the ability of our subsidiaries to operate in the ordinary course or to make distributions to us, or mandate changes in industry practices in ways that increase our costs, decrease our revenues or require us to alter aspects of the way we do business;	
 	 	
•	losses due to foreign currency exchange rate fluctuations;	
 	 	
•	increased competitive pressures, including the consolidation and increased globalization of reinsurance providers;	
 	 	
•	emerging claim and coverage issues;	
 	 	
•	lengthy and unpredictable litigation affecting assessment of losses and/or coverage issues;	
 	 	
•	loss of key personnel;	
 	 	
•	the ability of our subsidiaries to distribute funds to us and the resulting impact on our liquidity;	
 	 	
•	our ability to comply with covenants in our debt agreements;	
 	 	
•	changes in our plans, strategies, objectives, expectations or intentions, which may happen at any time at management’s discretion;	
 	 	
•	operational risks, including system, data security or human failures and external hazards;	
 	 	
•	risks relating to our acquisitions, including our ability to continue to grow, successfully price acquisitions, evaluate opportunities, address operational challenges, support our planned growth and assimilate acquired companies into our internal control system in order to maintain effective internal controls, provide reliable financial reports and prevent fraud;	
 	 	
•	risks relating to our ability to obtain regulatory approvals, including the timing, terms and conditions of any such approvals, and to satisfy other closing conditions in connection with our acquisition agreements, which could affect our ability to complete acquisitions;	

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•	risks relating to our active underwriting businesses, including unpredictability and severity of catastrophic and other major loss events, failure of risk management and loss limitation methods, the risk of a ratings downgrade or withdrawal, cyclicality of demand and pricing in the insurance and reinsurance markets;	
 	 	
•	our ability to implement our strategies relating to our active underwriting businesses;	
 	 	
•	risks relating to our life and annuities business, including mortality and morbidity rates, lapse rates, the performance of assets to support the insured liabilities, and the risk of catastrophic events;	
 	 	
•	risks relating to our investments in life settlements contracts, including that actual experience may differ from our assumptions regarding longevity, cost projections, and risk of non-payment from the insurance carrier;	
 	 	
•	risks relating to the performance of our investment portfolio and our ability to structure our investments in a manner that recognizes our liquidity needs;	
 	 	
•	tax, regulatory or legal restrictions or limitations applicable to us or the insurance and reinsurance business generally;	
 	 	
•	changes in tax laws or regulations applicable to us or our subsidiaries, or the risk that we or one of our non-U.S. subsidiaries become subject to significant, or significantly increased, income taxes in the United States or elsewhere;	
 	 	
•	changes in Bermuda law or regulation or the political stability of Bermuda; and	
 	 	
•	changes in accounting policies or practices.	
The factors listed above should be not construed as exhaustive and should be read in conjunction with the other cautionary statements and Risk Factors that are included in this quarterly report and in our Annual Report on Form 10-K for the year ended December 31, 2015. We undertake no obligation to publicly update or review any forward looking statement, whether to reflect any change in our expectations with regard thereto, or as a result of new information, future developments or otherwise, except as required by law.

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ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following risk management discussion and the estimated amounts generated from sensitivity analysis presented are forward-looking statements of market risk assuming certain market conditions occur. Future results may differ materially from these estimated results due to, among other things, actual developments in the global financial markets, changes in the composition of our investment portfolio, or changes in our business strategies. The results of analysis we use to assess and mitigate risk are not projections of future events or losses. See "Cautionary Statement Regarding Forward-Looking Statements" for additional information regarding our forward-looking statements.
We are principally exposed to four types of market risk: interest rate risk, credit risk, equity price risk and foreign currency risk. Our policies to address these risks in 2016 were not materially different than those used in 2015, and, based on our current knowledge and expectations, we do not currently anticipate significant changes in our market risk exposures or in how we will manage those exposures in future reporting periods.
Interest Rate Risk
Interest rate risk is the price sensitivity of a security to changes in interest rates. Our investment portfolio includes fixed maturity and short-term investments, whose fair values will fluctuate with changes in interest rates. We attempt to maintain adequate liquidity in our fixed maturity investments portfolio with a strategy designed to emphasize the preservation of our invested assets and provide sufficient liquidity for the prompt payment of claims and contract liabilities, as well as for settlement of commutation payments. We also monitor the duration and structure of our investment portfolio.
The following table summarizes the aggregate hypothetical change in fair value from an immediate parallel shift in the treasury yield curve, assuming credit spreads remain constant, in our fixed maturity and short-term investments portfolio classified as trading and available-for-sale as at June 30, 2016 and December 31, 2015:

 	 	Interest Rate Shift in Basis Points	
As at June 30, 2016	 	-100	 	-50	 	—	 	+50	 	+100	
 	 	(in millions of U.S. dollars)	
Total Market Value	 	$	5,584	
 	 	$	5,521	
 	 	$	5,412	
 	 	$	5,364	
 	 	$	5,295	
 	
Market Value Change from Base	 	3.2	%	 	2.0	%	 	—	
 	 	(0.9	)%	 	(2.2	)%	
Change in Unrealized Value	 	$	172	
 	 	$	109	
 	 	$	—	
 	 	$	(48	)	 	$	(117	)	
 	 	 	 	 	 	 	 	 	 	 	
As at December 31, 2015	 	-100	 	-50	 	—	 	+50	 	+100	
Total Market Value	 	$	5,544	
 	 	$	5,478	
 	 	$	5,381	
 	 	$	5,351	
 	 	$	5,292	
 	
Market Value Change from Base	 	3.0	%	 	1.8	%	 	—	
 	 	(0.6	)%	 	(1.7	)%	
Change in Unrealized Value	 	$	163	
 	 	$	97	
 	 	$	—	
 	 	$	(30	)	 	$	(89	)	
Actual shifts in interest rates may not change by the same magnitude across the maturity spectrum or on an individual security and, as a result, the impact on the fair value of our fixed maturity securities and short-term investments portfolio may be materially different from the resulting change in realized value indicated in the table above.
Credit Risk
Credit risk relates to the uncertainty of a counterparty’s ability to make timely payments in accordance with contractual terms of the instrument or contract. We are exposed to direct credit risk primarily within our portfolios of fixed maturity and short-term investments, and through customers, brokers and reinsurers in the form of premiums receivable, reinsurance recoverables, and funds held by reinsured companies, as discussed below.
Fixed Maturity and Short-Term Investments
As a holder of fixed maturity and short-term investments, we also have exposure to credit risk as a result of investment ratings downgrades or issuer defaults. In an effort to mitigate this risk, our investment portfolio consists primarily of investment grade-rated, liquid, fixed maturity investments of short-to-medium duration. A table of credit ratings for our fixed maturity and short-term investments is in "Note 3 - Investments" in the notes to our unaudited condensed consolidated financial statements included within Part I, Item 1 of this Quarterly Report on Form 10-Q. As at June 30, 2016, approximately 46.5% of our fixed maturity and short-term investment portfolio was rated AA or higher by a major rating agency (December 31, 2015: 47.0%) with 4.4% rated lower than BBB- (December 31, 2015: 3.1%). The portfolio as a whole had an average credit quality rating of A+ as at June 30, 2016 (December 31, 2015: A+). In addition, we manage our portfolio pursuant to guidelines that follow what we believe are prudent standards of

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diversification. The guidelines limit the allowable holdings of a single issue and issuers and, as a result, we do not believe we have significant concentrations of credit risk.
Reinsurance
We have exposure to credit risk as it relates to our reinsurance balances recoverable. Our insurance subsidiaries remain liable to the extent that retrocessionaires do not meet their contractual obligations and, therefore, we evaluate and monitor concentration of credit risk among our reinsurers. These amounts are discussed in "Note 6 - Reinsurance Balances Recoverable" in the notes to our unaudited condensed consolidated financial statements included within Item 1 of this Quarterly Report.
Funds Held by Reinsured Companies
Under funds held arrangements, the reinsured company has retained funds that would otherwise have been remitted to our reinsurance subsidiaries. The funds balance is credited with investment income and losses payable are deducted. We are subject to credit risk if the reinsured company is unable to honor the value of the funds held balances, such as in the event of insolvency. However, we generally have the contractual ability to offset any shortfall in the payment of the funds held balances with amounts owed by us to the reinsured for losses payable and other amounts contractually due. We routinely monitor the creditworthiness of reinsured companies with whom we have funds held arrangements. We have a significant concentration of $1.1 billion to one reinsured company which has financial strength credit ratings of A+ from A.M. Best and AA from Standard & Poor's.
Equity Price Risk
Our portfolio of equity investments, including the equity funds and call options on equities included in other investments (collectively, "equities at risk"), has exposure to equity price risk, which is the risk of potential loss in fair value resulting from adverse changes in stock prices. Our global equity portfolio is correlated with a blend of the S&P 500 and MSCI World indices, and changes in this blend of indices would approximate the impact on our portfolio. The fair value of our equities at risk at June 30, 2016 was approximately $285.2 million (December 31, 2015: $263.3 million). At June 30, 2016, the impact of a 10% decline in the overall market prices of our equities at risk would be approximately $28.5 million (December 31, 2015: $26.3 million), on a pre-tax basis.
Foreign Currency Risk
Our foreign currency policy is to broadly manage, where possible, our foreign currency risk by seeking to match our liabilities under insurance and reinsurance policies that are payable in foreign currencies with assets that are denominated in such currencies, subject to regulatory constraints. In addition, we may selectively utilize foreign currency forward contracts to mitigate foreign currency risk. To the extent our foreign currency exposure is not matched or hedged, we may experience foreign exchange losses or gains, which would be reflected in our results of operations and financial condition.
Through our subsidiaries located in various foreign countries, we conduct our insurance and reinsurance operations in a variety of non-U.S. currencies. As the functional currency for the majority of our subsidiaries is the U.S. dollar, fluctuations in foreign currency exchange rates related to these subsidiaries will have a direct impact on the valuation of our assets and liabilities denominated in local currencies. All changes in foreign exchange rates, with the exception of non-U.S. dollar denominated investments classified as available-for-sale, are recognized in foreign exchange gains (losses) in our consolidated statements of earnings. Changes in foreign exchange rates relating to non-U.S. dollar denominated investments classified as available-for-sale are recorded in unrealized gains (losses) on investments, which is a component of accumulated other comprehensive income (loss) in shareholders’ equity.
We have exposure to foreign currency risk through our ownership of European, British, Canadian, and Australian subsidiaries whose functional currencies are the Euro, British pound, Canadian dollar, and Australian dollar, respectively. The foreign exchange gain or loss resulting from the translation of their financial statements from functional currency into U.S. dollars is recorded in the currency translation adjustment account, which is a component of accumulated other comprehensive income (loss) in shareholders’ equity. During the three months ended June 30, 2016, we borrowed Euros under the EGL Revolving Credit Facility to hedge the foreign currency exposure on our net investment in certain of our subsidiaries whose functional currency is denominated in Euros. Subsequent to June 30, 2016, we entered into forward exchange contracts to hedge the foreign currency exposure on our net investment in certain of our subsidiaries whose functional currencies are denominated in Canadian and Australian dollars. The loan and the forward contracts are discussed in "Note 11 - Loans Payable" and "Note 5 - Derivative Instruments", respectively, in the notes to our unaudited condensed consolidated financial statements included within Item 1 of this Quarterly

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Report. We utilize hedge accounting to record the foreign exchange gain or loss on these instruments in the currency translation account.
Our total net foreign currency exposure as of June 30, 2016 and December 31, 2015 was $178.1 million and $291.8 million, respectively. The impact of a 10% movement in the U.S. dollar would result in a change in value of $17.8 million and $29.2 million, respectively, portions of which would be reflected in earnings, the currency translation adjustment component of shareholder’s equity or redeemable noncontrolling interest. Our net foreign currency exposure included $64.9 million and $99.4 million, respectively, related to our subsidiaries whose functional currency is U.S. dollars.
Effects of Inflation
We do not believe that inflation has had or will have a material effect on our consolidated results of operations, although inflation may affect the value of our assets, as well as our liabilities including losses and LAE (by causing the cost of claims to rise in the future). Although loss reserves are established to reflect likely loss settlements at the date payment is made, we would be subject to the risk that inflation could cause these costs to increase above established reserves.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of June 30, 2016. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that we maintained effective disclosure controls and procedures to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and timely reported as specified in the rules and forms of the U.S. Securities and Exchange Commission and is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the three months ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a discussion of legal proceedings, see Note 18 - "Commitments and Contingencies" in the notes to our unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
ITEM 1A. RISK FACTORS
Our results of operations and financial condition are subject to numerous risks and uncertainties described in “Risk Factors” included in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015. The risk factors identified therein have not materially changed, except as set forth below.
The United Kingdom’s referendum vote to leave the European Union could adversely affect our business.
In an advisory referendum held on June 23, 2016, the United Kingdom (U.K.) voted to leave the European Union (E.U.) (commonly referred to as “Brexit”). The timing and nature of the U.K.’s withdrawal from the E.U. is yet to be determined, and the form of the U.K.’s future relationship with the E.U. may not be clear for some time.
We have significant operations and employees in the United Kingdom, including our Lloyd’s businesses. Brexit’s impact on our U.K. businesses will depend on the U.K. and Lloyd’s abilities to retain access to the E.U. markets, and our U.K. businesses could be adversely affected if adequate access to these markets is not obtained. Brexit may also lead to legal uncertainty and differences in national laws and regulations as the U.K. determines which E.U. laws to replace or replicate, and these issues could impact our structure and operations.
The Brexit vote had an immediate adverse effect on global financial and foreign exchange markets, and instability and uncertainty in the European economy and in global financial markets may continue for some time. Any of these effects of Brexit, and others we cannot anticipate, could adversely affect our business, results of operations, and financial condition.

ITEM 6. EXHIBITS
The information required by this item is set forth on the exhibit index that follows the signature page of this report.

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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, thereunto duly authorized on August 5, 2016.

 	ENSTAR GROUP LIMITED	
 	 	
By:	/S/ MARK SMITH	
 	Mark Smith
Chief Financial Officer, Authorized Signatory and Principal Financial Officer	
 	 	
By:	/S/ GUY BOWKER	
 	Guy Bowker
Chief Accounting Officer and Principal Accounting Officer	

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Exhibit Index

Exhibit
No.	  	Description	
3.1	  	Memorandum of Association of Enstar Group Limited (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-K/A filed on May 2, 2011).	
3.2	  	Fourth Amended and Restated Bye-Laws of Enstar Group Limited (incorporated by reference to Exhibit 3.2(b) of the Company’s Form 10-Q filed on August 11, 2014).	
3.3	  	Certificate of Designations of Series C Participating Non-Voting Perpetual Preferred Stock (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed on June 17, 2016).	
10.1+*	 	Form of Restricted Stock Award Agreement under the Enstar Group Limited 2016 Equity Incentive Plan.	
10.2+*	 	Form of Stock Appreciation Right Award Agreement under the Enstar Group Limited 2016 Equity Incentive Plan.	
10.3+	 	Enstar Group Limited 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K filed on June 17, 2016).	
31.1*	  	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted under Section 302 of the Sarbanes-Oxley Act of 2002.	
31.2*	  	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted under Section 302 of the Sarbanes-Oxley Act of 2002.	
32.1**	  	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
32.2**	  	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
101*	  	Interactive Data Files.	
________________________________
*     filed herewith
** furnished herewith
+     denotes management contract or compensatory arrangement

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Exhibit 10.1

Restricted Stock Award Agreement
Under the Enstar Group Limited 2016 Equity Incentive Plan

This Restricted Stock Award Agreement (this “Agreement”) is entered into as of the Grant Date (as defined below), by and between the Grantee (as defined below) and Enstar Group Limited (the “Company”). Except as otherwise defined herein, capitalized terms used in this Agreement have the respective meanings set forth in the Plan (as defined below).
WITNESSETH THAT:

WHEREAS, the Company maintains the Enstar Group Limited 2016 Equity Incentive Plan (the “Plan”), which is incorporated into and forms a part of this Agreement; and

WHEREAS, the Grantee has been selected by the committee administering the Plan (the “Committee”) to receive a Restricted Stock award under the Plan.

NOW, THEREFORE, IT IS AGREED, by and between the Company and the Grantee as follows:

1.    Terms of Award.

(a)    The “Grantee” is _______________.

(b)    The “Grant Date” is _______________.

(c)    The number of ordinary shares of the Company (“Common Shares”) granted under this Agreement is _______ (the “Restricted Stock”).

2.    Award. Subject to the terms of this Agreement and the Plan, the Grantee is hereby granted the Restricted Stock as described in paragraph 1.

3.    Vesting Schedule. Notwithstanding anything in the terms of the Plan to the contrary, the Grantee shall become vested in the Restricted Stock according to the following schedule:

 	 	
INSTALLMENT	VESTING DATE	

 	 	

The Restricted Stock shall not become vested on the Vesting Date: (i) if the Grantee’s Termination of Service occurs on or before the Vesting Date; or (ii) if, on or before the Vesting Date, the Grantee has provided notice of his or her intention to effect a Termination of Service (even if the date of the Termination of Service occurs after the Vesting Date). Notwithstanding the foregoing provisions, the Restricted Stock shall vest as follows:
 	 	
(y)	The Grantee shall become fully vested in the Restricted Stock as of the Grantee’s Termination of Service if the Grantee’s Termination of Service occurs by reason of the Grantee’s death or disability.	

(z)	In accordance with Subsection 13(d) and Section 14 of the Plan, the Grantee shall become fully vested in the Restricted Stock upon a Change in Control (unless the surviving or successor corporation assumes this Restricted Stock award or substitutes a new award of Restricted Stock).	

Except as otherwise provided in this paragraph 3, the Grantee will forfeit any unvested Restricted Stock if the Grantee experiences a Termination of Service.

1

4.    Legend on Stock Certificates. The Company may require that certificates for shares distributed to the Grantee pursuant to this Agreement bear any legend that counsel to the Company believes is necessary or desirable to facilitate compliance with applicable securities laws. The Company shall not be obligated to transfer any stock to the Grantee free of the restrictive legend described in this Section 4 or of any other restrictive legend, if such transfer, in the opinion of counsel for the Company, would violate any applicable law or any applicable regulation or requirement of any securities exchange or similar entity.

5.    Transferability. The Grantee shall not transfer or assign, in whole or in part, Restricted Stock subject to this Agreement in which the Grantee is not vested, other than (a) by will or by the laws of descent and distribution, or (b) by designation, in a manner established by the Company, of a beneficiary or beneficiaries to exercise the rights of the Grantee and to receive any property distributable with respect to this Agreement upon the death of the Grantee upon satisfaction of the vesting conditions described in paragraph 3 above.

6.    Withholding. Any tax consequences arising from the grant of this Award shall be borne solely by the Grantee. The Company and/or its Related Corporations shall withhold taxes according to the requirements under the applicable laws, rules and regulations including withholding taxes at source. The Grantee will not be entitled to receive from the Company any Common Shares hereunder prior to the full payment of the Grantee’s tax liabilities relating to this Award. The Committee may, in its discretion, permit the Grantee to elect, subject to such conditions as the Committee shall impose, (a) to have Common Shares otherwise issuable under the Plan withheld by the Company or (b) to deliver to the Company previously acquired Common Shares (through actual tender or attestation), in either case for the greatest number of whole shares having a Fair Market Value on the date immediately preceding the date of vesting not in excess of the amount required to satisfy the withholding tax obligations.

7.    Compliance with Applicable Law. Notwithstanding any other provision of this Agreement, the Company shall have no obligation to issue any shares of Restricted Stock under this Agreement if such issuance would violate any applicable law or any applicable regulation or requirement of any securities exchange or similar entity.

8.    Administration. The authority to manage and control the operation and administration of this Agreement shall be vested in the Committee, and the Committee shall have all powers with respect to this Agreement as it has with respect to the Plan. Any interpretation of the Agreement by the Committee and any decision made by it with respect to the Agreement is final and binding on all parties. Any inconsistency between this Agreement and the Plan shall be resolved in favor of the Plan.

9.    Not an Employment Contract. This Award will not confer on the Grantee any right with respect to the continuance of employment or other service to the Company or any Related Corporation, nor will it interfere in any way with any right the Company or any Related Corporation would otherwise have to terminate or modify the terms of such Grantee’s employment or other service at any time.
10.    Notices. Any written notices provided for in this Agreement or the Plan shall be in writing and shall be deemed sufficiently given if either hand delivered or if sent by fax or overnight courier, or by postage paid first class mail. Notices sent by mail shall be deemed received three business days after mailing but in no event later the date of actual receipt. Notices shall be directed, if to the Grantee, at the Grantee’s address indicated by the Company’s records, or if to the Company, at the Company’s principal executive office.
11.    Amendment. This Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement of the Grantee and the Company without the consent of any other person.
12.    Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.
13.    Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Company and the Grantee and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the transfer restrictions set forth in this Agreement and the Plan.

2

14.    Applicable Law. This Agreement shall be construed in accordance with the laws of Bermuda (without reference to principles of conflict of laws).
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Restricted Stock Award Agreement on ___________________, ____.

ENSTAR GROUP LIMITED

By:________________________________
Name:    
Title:    

                            

____________________________________
Grantee

Address:                    

3

Exhibit 10.2

SAR Award Agreement
Under the Enstar Group Limited 2016 Equity Incentive Plan

This SAR Award Agreement (this “Agreement”) is entered into as of the Grant Date (as defined below), by and between the Grantee (as defined below) and Enstar Group Limited (the “Company”). Except as otherwise defined herein, capitalized terms used in this Agreement have their respective meanings set forth in the Plan (as defined below).
WITNESSETH THAT:

WHEREAS, the Company maintains the Enstar Group Limited 2016 Equity Incentive Plan (the “Plan”), which is incorporated into and forms a part of this Agreement; and

WHEREAS, the Grantee has been selected by the committee administering the Plan (the “Committee”) to receive a Stock Appreciation Right (“SAR”) award under the Plan.

NOW, THEREFORE, IT IS AGREED, by and between the Company and the Grantee as follows:

1.    Terms of Award.

(a)    The “Grantee” is _______________.

(b)    The “Grant Date” is _____________.

(c)    The number of ordinary shares of the Company (“Common Shares”) covered by the SAR awarded under this Agreement is _______.

(d)    The Fair Market Value of a Common Share on the Grant Date is US$_____.

(e)    The term of the SAR commences on the Grant Date and expires upon the earliest of (i) the tenth anniversary of the Grant Date; (ii) the date on which the Grantee occurs a Termination of Service due to Cause; (iii) one year after the Grantee incurs a Termination of Service due to death, disability, or Approved Retirement; or (iv) [ ] after the Grantee incurs a Termination of Service for any other reason other than for Cause, Approved Retirement, death or disability.

2.    Award. Subject to the terms of this Agreement and the Plan, the Grantee is hereby granted the SAR as described in paragraph 1.

3.    Vesting Schedule. Notwithstanding anything in the terms of the Plan to the contrary, the Grantee shall become vested in the SAR according to the following schedule:

 	 	
INSTALLMENT	VESTING DATE	

 	 	

The SAR shall not become vested on the Vesting Date: (i) if the Grantee’s Termination of Service occurs on or before the Vesting Date; or (ii) if, on or before the Vesting Date, the Grantee has provided notice of his or her intention to effect a Termination of Service (even if the date of the Termination of Service occurs after the Vesting Date). In accordance with Subsection 13(d) and Section 14 of the Plan, the Grantee shall become fully vested in the SAR upon a Change in Control (unless the surviving or successor corporation assumes this SAR award or substitutes a new award of SARs). Except as otherwise provided in this Paragraph 3, the Grantee will forfeit any unvested portion of the SAR if the Grantee experiences a Termination of Service.

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4.    Exercise and Settlement of SAR. The vested portion of the SAR is exercisable by delivery of a written exercise notice, signed by the Grantee (or other proper person) at such location and in such form as the Committee shall designate, which notice shall state the election to exercise the SAR, the number of Common Shares in respect of which the SAR is being exercised, and such other information as may be required by the Committee. The SAR shall be deemed exercised upon receipt by the Committee of the exercise notice. The SAR may not be exercised for a fraction of a Common Share. The SAR may not be exercised after expiration of its term. Settlement of the exercised SAR will occur as promptly as possible. Settlement will be accomplished by the payment to the Grantee of cash having a value equal to the (i) excess, if any, of (A) the Fair Market Value of a Common Share on the date of exercise over (B) the Fair Market Value of a Common Share on the Grant Date, multiplied by (ii) the number of Common Shares with respect to which the SAR has been exercised.

5.    Transferability. The Grantee shall not transfer or assign, in whole or in part, the SAR subject to this Agreement, other than (a) by will or by the laws of descent and distribution, or (b) by designation, in a manner established by the Company, of a beneficiary or beneficiaries to exercise the rights of the Grantee and to receive any property distributable with respect to this Agreement upon the death of the Grantee upon satisfaction of the vesting conditions described in paragraph 3 above.

6.    Withholding. Any tax consequences arising from the grant of this Award shall be borne solely by the Grantee. The Company and/or its Related Corporations shall withhold taxes according to the requirements under the applicable laws, rules and regulations including withholding taxes at source. The Grantee will not be entitled to receive from the Company any cash payout hereunder prior to the full payment of the Grantee’s tax liabilities relating to this Award.

7.    No Common Shares. The Company shall have no obligation to issue any Common Shares in settlement of the SAR awarded under this Agreement.

8.    Administration. The authority to manage and control the operation and administration of this Agreement shall be vested in the Committee, and the Committee shall have all powers with respect to this Agreement as it has with respect to the Plan. Any interpretation of the Agreement by the Committee and any decision made by it with respect to the Agreement is final and binding on all parties. Any inconsistency between this Agreement and the Plan shall be resolved in favor of the Plan.

9.    Not an Employment Contract. This Award will not confer on the Grantee any right with respect to the continuance of employment or other service to the Company or any Related Corporation, nor will it interfere in any way with any right the Company or any Related Corporation would otherwise have to terminate or modify the terms of such Grantee’s employment or other service at any time.
10.    Notices. Any written notices provided for in this Agreement or the Plan shall be in writing and shall be deemed sufficiently given if either hand delivered or if sent by fax or overnight courier, or by postage paid first class mail. Notices sent by mail shall be deemed received three business days after mailing but in no event later the date of actual receipt. Notices shall be directed, if to the Grantee, at the Grantee’s address indicated by the Company’s records, or if to the Company or the Committee, at the Company’s principal executive office.
11.    Amendment. This Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement of the Grantee and the Company without the consent of any other person.
12.    Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.
13.    Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Company and the Grantee and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the transfer restrictions set forth in this Agreement and the Plan.
14.    Entire Agreement. This Agreement and the Plan contain the entire agreement and understanding of the parties hereto with respect to the subject matter contained herein and therein and supersede all prior communications, representations and negotiations in respect thereto.

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15.    Applicable Law. This Agreement shall be construed in accordance with the laws of Bermuda (without reference to principles of conflict of laws).
IN WITNESS WHEREOF, the parties hereto have executed and delivered this SAR Award Agreement on ________________ ___, ____.

ENSTAR GROUP LIMITED

By:________________________________
Name:    
Title:    

                            

____________________________________
Grantee

Address:                    

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Exhibit 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Dominic F. Silvester, certify that:
 	 	
1.	I have reviewed this Quarterly Report on Form 10-Q of Enstar Group Limited;	
 	 	
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 	 	
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 	 	
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 	 	
a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 	 	
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 	 	
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 	 	
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
 	 	
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
 	 	
a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 	 	
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	
 
Dated: August 5, 2016

 	
/S/ DOMINIC F. SILVESTER	
Dominic F. Silvester	
Chief Executive Officer	

Exhibit 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Mark Smith, certify that:
 	 	
1.	I have reviewed this Quarterly Report on Form 10-Q of Enstar Group Limited;	
 	 	
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 	 	
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 	 	
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 	 	
a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 	 	
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 	 	
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 	 	
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
 	 	
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
 	 	
a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 	 	
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

Dated: August 5, 2016

 	
/S/ MARK SMITH	
Mark Smith	
Chief Financial Officer	

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Enstar Group Limited (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dominic F. Silvester, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
 	 	
(1)	 The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	
 
Dated: August 5, 2016

 	
/S/ DOMINIC F. SILVESTER	
Dominic F. Silvester	
Chief Executive Officer	

Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Enstar Group Limited (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark Smith, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
 	 	
(1)	 The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	
 
Dated: August 5, 2016

 	
/S/ MARK SMITH	
Mark Smith	
Chief Financial Officer