Enstar Group Limited (Nasdaq: ESGR) filed its annual report on Form
10-K with the SEC earlier today. An audio presentation reviewing
the fourth quarter and full year 2022 results with expanded
commentary is available on Enstar's investor relations website at
investor.enstargroup.com.
Fourth Quarter 2022
Highlights:
-
Net earnings of $227 million, or $13.26 per diluted ordinary share,
compared to $120 million, or $6.66 per diluted ordinary share, for
the three months ended December 31, 2021.
-
Return on equity ("ROE") of 5.9% and Adjusted ROE* of 4.2% for the
quarter compared to 2.1% and 2.5%, respectively, in the fourth
quarter of 2021. Net investment income of $153 million and
favorable prior period development of $280 million contributed to
both ROE and Adjusted ROE*.
-
Our Group regulatory solvency, or economic balance sheet,
strengthened during the fourth quarter due to:
-
the impact of a higher discount rate on our reserves; and
-
our core fixed income securities being shorter in duration than our
insurance liabilities.
-
Run-off liability earnings ("RLE") of $280 million were driven by
reductions in the value of certain portfolios that are held at fair
value and results from our annual loss reserve reviews where we
recorded favorable development on our workers' compensation and
marine, aviation and transit lines of business, and the recognition
of a gain on commutation of Enhanzed Re’s catastrophe reinsurance
business. RLE was impacted by adverse development on our general
casualty and motor lines of business.
-
Annualized total investment return (“TIR”) of 3.5% and Annualized
Adjusted TIR* of 1.9%, compared to 1.0% and 2.0%, respectively, for
the three months ended December 31, 2021. Recognized investment
results benefited from an increase in net investment income of $72
million.
-
Completed a LPT agreement with a wholly-owned subsidiary of Argo
Group International Holdings, Ltd. (“Argo”).
* Non-GAAP measure; refer to "Non-GAAP Financial
Measures" further below for explanatory notes and a reconciliation
to the most directly comparable GAAP measure.
Dominic Silvester, Enstar CEO,
said:
“We are pleased to report strong fourth quarter
results as we grew book value by 8.4% providing us with a positive
end to a challenging 2022. While our annual performance was
impacted by headwinds in the investment markets, our claims
management function continues to outperform the industry driving
prior period reserve savings of $756 million for the year.
2022 was another record M&A year as we
acquired $2.7 billion of incremental reserves, including completing
and integrating one of our largest-ever loss portfolio transfers
with Aspen. That activity has continued into 2023, as we just
announced a $1.9 billion ground up LPT with QBE, and a second
AUD$360 million transaction with Royal Automobile Club of
Queensland. We remain well-positioned to capitalize on our robust
pipeline so long as opportunities align with our risk parameters
and return hurdles.
We expect to continue as the dominant player in
the legacy market in 2023. Our balance sheet remains strong, and
our scale, operational capabilities, and highly differentiated
claims expertise will support accretive opportunities with new and
long-standing partners while driving long-term value to our
shareholders.”
Year ended December 31, 2022
Highlights:
-
Net loss of $906 million, or $52.65 per diluted ordinary share,
compared to net earnings of $502 million, or $24.94 per diluted
ordinary share, for the year ended December 31, 2021.
-
ROE of (15.6)% and Adjusted ROE* of (1.1)%, compared to 7.9% and
10.1%, respectively, for the year ended December 31, 2021. ROE was
impacted by unrealized losses arising from interest rate increases
on fixed maturity portfolios that are classified as trading
combined with unrealized losses in Enstar's non-core
portfolios.
-
RLE of 6.3% and Adjusted RLE* of 3.9%, compared to 3.9% and 3.6%,
respectively, for the year ended December 31, 2021. RLE benefited
from reductions in the value of certain portfolios that are held at
fair value, favorable development on our workers’ compensation,
marine, aviation and transit lines of business, and favorable
results on Enstar's inactive catastrophe programs held by Enhanzed
Re, including the recognition of a gain on commutation of the
reserves. RLE was impacted by adverse development on our general
casualty and motor lines of business.
-
TIR of (9.0)% and Adjusted TIR* of (0.2)%, compared to 2.0% and
3.6%, respectively, for the year ended December 31, 2021.
Recognized investment results were impacted by the combination of
interest rate increases, widening credit spreads and equity market
declines.
-
Completed LPT agreements with Aspen Insurance Holdings Limited and
Argo totaling $2.7 billion of incremental acquired reserves.
-
Completed commutation of Enhanzed Re’s catastrophe book and novated
Enhanzed Re’s portfolio of deferred annuities and whole life
policies.
* Non-GAAP measure; refer to "Non-GAAP Financial
Measures" further below for explanatory notes and a reconciliation
to the most directly comparable GAAP measure.
Key Financial and Operating
Metrics
We use the following GAAP and Non-GAAP measures
to monitor the performance of and manage the company:
|
|
Year Ended |
|
|
December 31, 2022 |
|
December 31, 2021 |
|
$ / pp / bp Change |
December 31, 2020 |
|
$ / pp / bp Change |
|
(in millions of U.S. dollars, except per share
data) |
Key Earnings
Metrics |
|
|
|
|
|
|
|
|
|
Net (loss) earnings attributable to Enstar ordinary
shareholders |
|
$ |
(906 |
) |
|
$ |
502 |
|
|
$ |
(1,408 |
) |
|
$ |
1,723 |
|
|
$ |
(1,221 |
) |
|
Adjusted operating (loss) income attributable to Enstar ordinary
shareholders* |
|
$ |
(61 |
) |
|
$ |
565 |
|
|
$ |
(626 |
) |
|
$ |
1,580 |
|
|
$ |
(1,015 |
) |
|
ROE |
|
|
(15.6 |
)% |
|
|
7.9 |
% |
|
|
(23.5 |
) |
pp |
|
38.4 |
% |
|
|
(30.5 |
) |
pp |
Adjusted ROE* |
|
|
(1.1 |
)% |
|
|
10.1 |
% |
|
|
(11.2 |
) |
pp |
|
41.9 |
% |
|
|
(31.8 |
) |
pp |
|
|
|
|
|
|
|
|
|
|
Key Run-off
Metrics |
|
|
|
|
|
|
|
|
|
Prior period development |
|
$ |
756 |
|
|
$ |
403 |
|
|
$ |
353 |
|
|
$ |
32 |
|
|
$ |
371 |
|
|
Adjusted prior period development* |
|
$ |
489 |
|
|
$ |
381 |
|
|
$ |
108 |
|
|
$ |
287 |
|
|
$ |
94 |
|
|
RLE |
|
|
6.3 |
% |
|
|
3.9 |
% |
|
|
2.4 |
|
pp |
|
0.4 |
% |
|
|
3.5 |
|
pp |
Adjusted RLE* |
|
|
3.9 |
% |
|
|
3.6 |
% |
|
|
0.3 |
|
pp |
|
3.5 |
% |
|
|
0.1 |
|
pp |
|
|
|
|
|
|
|
|
|
|
Key Investment Return
Metrics |
|
|
|
|
|
|
|
|
|
Total investable assets |
|
$ |
19,540 |
|
|
$ |
21,708 |
|
|
$ |
(2,168 |
) |
|
$ |
17,266 |
|
|
$ |
4,442 |
|
|
Adjusted total investable assets* |
|
$ |
21,367 |
|
|
$ |
21,619 |
|
|
$ |
(252 |
) |
|
$ |
16,706 |
|
|
$ |
4,913 |
|
|
Investment book yield |
|
|
2.47 |
% |
|
|
1.84 |
% |
|
|
63 |
|
bp |
|
2.53 |
% |
|
|
(69 |
) |
bp |
TIR |
|
|
(9.0 |
)% |
|
|
2.0 |
% |
|
|
(11.0 |
) |
pp |
|
14.6 |
% |
|
|
(12.6 |
) |
pp |
Adjusted TIR* |
|
|
(0.2 |
)% |
|
|
3.6 |
% |
|
|
(3.8 |
) |
pp |
|
12.4 |
% |
|
|
(8.8 |
) |
pp |
|
|
|
|
|
|
|
|
|
|
Key Shareholder
Metrics |
|
|
|
|
|
|
|
|
|
Book value per ordinary share |
|
$ |
246.20 |
|
|
$ |
329.20 |
|
|
$ |
(83.00 |
) |
|
$ |
293.97 |
|
|
$ |
35.23 |
|
|
Adjusted book value per ordinary share* |
|
$ |
243.09 |
|
|
$ |
323.43 |
|
|
$ |
(80.34 |
) |
|
$ |
288.56 |
|
|
$ |
34.87 |
|
|
pp - Percentage point(s)bp - Basis point(s)*Non-GAAP measure;
refer to "Non-GAAP Financial Measures" further below for
explanatory notes and a reconciliation to the most directly
comparable GAAP measure.
Results of Operations By Segment - For
the Years Ended December 31, 2022, 2021 and 2020
Run-off Segment
The following is a discussion and analysis of
the results of operations for our Run-off segment.
|
|
2022 |
|
|
|
2021 |
|
|
Change |
|
|
2020 |
|
|
Change |
INCOME |
(in millions of U.S. dollars) |
Net premiums earned |
$ |
40 |
|
|
$ |
182 |
|
|
$ |
(142 |
) |
|
$ |
59 |
|
|
$ |
123 |
|
Other income: |
|
|
|
|
|
|
|
|
|
Reduction in estimates of net ultimate defendant A&E
liabilities - prior periods |
|
2 |
|
|
|
38 |
|
|
|
(36 |
) |
|
|
103 |
|
|
|
(65 |
) |
Reduction in estimated future defendant A&E expenses |
|
1 |
|
|
|
5 |
|
|
|
(4 |
) |
|
|
9 |
|
|
|
(4 |
) |
All other income |
|
19 |
|
|
|
30 |
|
|
|
(11 |
) |
|
|
20 |
|
|
|
10 |
|
Total other income |
|
22 |
|
|
|
73 |
|
|
|
(51 |
) |
|
|
132 |
|
|
|
(59 |
) |
Total income |
|
62 |
|
|
|
255 |
|
|
|
(193 |
) |
|
|
191 |
|
|
|
64 |
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
Net incurred losses and
LAE: |
|
|
|
|
|
|
|
|
|
Current period |
|
44 |
|
|
|
144 |
|
|
|
(100 |
) |
|
|
30 |
|
|
|
114 |
|
Prior period |
|
(486 |
) |
|
|
(338 |
) |
|
|
(148 |
) |
|
|
(175 |
) |
|
|
(163 |
) |
Total net incurred losses and
LAE |
|
(442 |
) |
|
|
(194 |
) |
|
|
(248 |
) |
|
|
(145 |
) |
|
|
(49 |
) |
Acquisition costs |
|
22 |
|
|
|
44 |
|
|
|
(22 |
) |
|
|
20 |
|
|
|
24 |
|
General and administrative
expenses |
|
143 |
|
|
|
188 |
|
|
|
(45 |
) |
|
|
173 |
|
|
|
15 |
|
Total expenses |
|
(277 |
) |
|
|
38 |
|
|
|
(315 |
) |
|
|
48 |
|
|
|
(10 |
) |
SEGMENT NET EARNINGS |
$ |
339 |
|
|
$ |
217 |
|
|
$ |
122 |
|
|
$ |
143 |
|
|
$ |
74 |
|
2022 versus
2021: Net earnings from our
Run-off segment increased by $122 million, primarily due to:
-
A $148 million increase in favorable PPD, driven by a $78 million
increase in the reduction in estimates of net ultimate losses.
-
Results for the year ended December 31, 2022 were driven by
favorable development of $318 million on our workers’
compensation line of business as a result of favorable claim
settlements, most notably in the 2017 to 2021 acquisition years. We
also had favorable development of $56 million on our marine,
aviation and transit lines of business relating to the 2014, 2018
and 2019 acquisition years as a result of favorable experience
across a variety of claim types; partially offset by
-
Adverse development on our general casualty and motor lines of
business of $57 million and $74 million, respectively,
most notably impacting the 2020 acquisition year, as a result of
worse than expected claims experience, adverse development on
claims and higher than expected claims severity.
-
Results for the year ended December 31, 2021 were primarily related
to favorable development on our workers’ compensation, property and
marine, aviation and transit lines of business as a result of
better than expected claims experience and favorable results from
actuarial reviews, partially offset by adverse development on our
general casualty line of business due to an increase in opioid
exposure and increased expectations of latent claims and a
lengthening of the payment pattern related to our 2019 acquisition
year.
-
A decrease in general and administrative expenses of $45 million,
primarily driven by a continued decrease in salaries and benefits
and other costs following our exit of our StarStone business
beginning in 2020 and a reduction in IT costs as a result of
reduced project activity; partially offset by
-
A reduction in other income of $51 million, primarily driven by
lower favorable prior period development related to our defendant
A&E liabilities; and
-
Reductions in net premiums earned that were greater than the
reductions in current period net incurred losses and LAE and
acquisition costs, following our exit of our StarStone
International business beginning in 2020.
2021 versus
2020: Net earnings from our Run-off segment
increased by $74 million, primarily due to:
-
Net premiums earned increased by $123 million from StarStone
International business and new business transactions executed in
recent periods. Net premiums earned of $182 million included
$106 million of premiums from StarStone International, which
was transferred into the Run-off Segment on January 1, 2021,
whereas net premiums earned in 2020 were primarily related to
AmTrust RITC transactions assumed in 2019.
-
Net incurred losses and LAE decreased by $49 million due to a $163
million increase in favorable PPD partially offset by an increase
in current period losses of $114 million due to the transfer of the
StarStone International business from the Legacy Underwriting
segment on January 1, 2021.
-
The $163 million increase in favorable PPD primarily consists of:
-
$51 million increase in favorable development on the workers’
compensation line of business in 2021 as a result of reduced claims
activity, favorable settlements on open claims and the completion
of commutations;
-
$105 million reduction in adverse development on the motor line of
business compared to 2020. 2020 was impacted by higher than
expected severity in respect of a recently assumed LPT;
-
$41 million increase in favorable development on the construction
defect line of business in 2021; and
-
$82 million increase in favorable development on the property and
other lines of business in 2021.
This favorable prior period developments were
partially offset by;
-
$142 million increases in prior period estimates of net ultimate
losses in our general casualty line of business due to an increase
in opioid exposure and greater than expected adverse
development.
In addition:
-
Other income decreased by $59 million primarily driven by lower
favorable prior period development related to our defendant A&E
liabilities; and
- Acquisition costs
increased by $24 million primarily due to the transfer of StarStone
International from the Legacy Underwriting segment on January 1,
2021.
Investments Segment
The following is a discussion and analysis of
the results of operations for our Investments segment.
|
|
2022 |
|
|
|
2021 |
|
|
Change |
|
|
2020 |
|
|
Change |
INCOME |
(in millions of U.S. dollars) |
Net investment income: |
|
|
|
|
|
|
|
|
|
Fixed income securities |
$ |
380 |
|
|
$ |
273 |
|
|
$ |
107 |
|
|
$ |
243 |
|
|
$ |
30 |
|
Cash and restricted cash |
|
8 |
|
|
|
— |
|
|
|
8 |
|
|
|
2 |
|
|
|
(2 |
) |
Other investments, including equities |
|
82 |
|
|
|
73 |
|
|
|
9 |
|
|
|
39 |
|
|
|
34 |
|
Less: Investment expenses |
|
(25 |
) |
|
|
(37 |
) |
|
|
12 |
|
|
|
(14 |
) |
|
|
(23 |
) |
Total net investment
income |
|
445 |
|
|
|
309 |
|
|
|
136 |
|
|
|
270 |
|
|
|
39 |
|
Net realized (losses)
gains: |
|
|
|
|
|
|
|
|
|
Fixed income securities |
|
(111 |
) |
|
|
(4 |
) |
|
|
(107 |
) |
|
|
16 |
|
|
|
(20 |
) |
Other investments, including equities |
|
(24 |
) |
|
|
(57 |
) |
|
|
33 |
|
|
|
1 |
|
|
|
(58 |
) |
Total net realized (losses)
gains |
|
(135 |
) |
|
|
(61 |
) |
|
|
(74 |
) |
|
|
17 |
|
|
|
(78 |
) |
Net unrealized (losses)
gains: |
|
|
|
|
|
|
|
|
|
Fixed income securities, trading |
|
(1,060 |
) |
|
|
(203 |
) |
|
|
(857 |
) |
|
|
284 |
|
|
|
(487 |
) |
Other investments, including equities |
|
(409 |
) |
|
|
384 |
|
|
|
(793 |
) |
|
|
1,327 |
|
|
|
(943 |
) |
Total net unrealized (losses)
gains |
|
(1,469 |
) |
|
|
181 |
|
|
|
(1,650 |
) |
|
|
1,611 |
|
|
|
(1,430 |
) |
Total income |
|
(1,159 |
) |
|
|
429 |
|
|
|
(1,588 |
) |
|
|
1,898 |
|
|
|
(1,469 |
) |
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
General and administrative
expenses |
|
37 |
|
|
|
37 |
|
|
|
— |
|
|
|
35 |
|
|
|
2 |
|
Total expenses |
|
37 |
|
|
|
37 |
|
|
|
— |
|
|
|
35 |
|
|
|
2 |
|
(Losses) earnings from equity
method investments |
|
(74 |
) |
|
|
93 |
|
|
|
(167 |
) |
|
|
239 |
|
|
|
(146 |
) |
SEGMENT NET (LOSS)
EARNINGS |
$ |
(1,270 |
) |
|
$ |
485 |
|
|
$ |
(1,755 |
) |
|
$ |
2,102 |
|
|
$ |
(1,617 |
) |
Overall Results
2022 versus
2021: Net loss from our
Investments segment was $1.3 billion compared to net earnings of
$485 million in 2021. The unfavorable movement of $1.8 billion was
primarily due to:
-
An increase in net realized and unrealized losses on our fixed
income securities of $964 million, driven by rising interest rates
and widening of investment grade credit spreads;
-
Net realized and unrealized losses on our other investments,
including equities, of $433 million, in comparison to gains of $327
million in 2021. The unfavorable variance of $760 million was
primarily driven by negative performance from our public equities,
CLO equities and hedge funds as a result of significant volatility
in global equity markets and widening high yield credit spreads;
and
-
Losses from equity method investments of $74 million, in comparison
to earnings of $93 million in 2021, primarily due to the
recognition of an other-than-temporary impairment to the carrying
value of one of our equity method investments and our acquisition
of the controlling interest in Enhanzed Re, effective September 1,
2021. Prior to that date, the results of Enhanzed Re were recorded
in earnings from equity method investments. Our consolidated net
loss from Enhanzed Re for the year ended December 31, 2022 was
$235 million which compared to $82 million from Enhanzed Re
that was included in equity method investment earnings in 2021;
partially offset by
-
An increase in our net investment income of $136 million,
which is primarily due to the investment of new premium and
reinvestment of fixed income securities at higher yields and the
impact of rising interest rates on the $2.9 billion of our
fixed income securities that are subject to floating interest
rates. Our floating rate investments generated increased net
investment income of $59 million, which equates to an increase
of 195 basis points on those investments in comparison to
2021.
Total investment losses on the fixed income
securities that support our Enhanzed Re life reinsurance business
for the years ended December 31, 2022 and 2021 were $304 million
and $17 million, respectively.
2021 versus
2020: Net earnings from our
Investments segment decreased by $1.6 billion primarily as a result
of decreases in net realized and unrealized gains of $1.5 billion.
The decrease is largely a result of 2021 net realized and
unrealized losses of $58 million related to the InRe Fund, in
comparison to net unrealized gains of $1.2 billion in 2020,
and 2021 net realized and unrealized losses on our fixed income
securities of $207 million, in comparison to net realized and
unrealized gains of $300 million in 2020.
Income and (Loss) Earnings by Segment -
For the Years Ended December 31, 2022, 2021 and 2020
|
Year Ended |
|
December 31, 2022 |
|
December 31, 2021 |
|
$ Change |
|
December 31, 2020 |
|
$ Change |
|
(in millions of U.S. dollars) |
INCOME |
|
|
|
|
|
|
|
|
|
Run-off |
$ |
62 |
|
|
$ |
255 |
|
|
$ |
(193 |
) |
|
$ |
191 |
|
|
$ |
64 |
|
Assumed Life |
|
17 |
|
|
|
5 |
|
|
|
12 |
|
|
|
— |
|
|
|
5 |
|
Investments |
|
(1,159 |
) |
|
|
429 |
|
|
|
(1,588 |
) |
|
|
1,898 |
|
|
|
(1,469 |
) |
Legacy Underwriting |
|
10 |
|
|
|
43 |
|
|
|
(33 |
) |
|
|
587 |
|
|
|
(544 |
) |
Subtotal |
|
(1,070 |
) |
|
|
732 |
|
|
|
(1,802 |
) |
|
|
2,676 |
|
|
|
(1,944 |
) |
Corporate and other |
|
12 |
|
|
|
57 |
|
|
|
(45 |
) |
|
$ |
(16 |
) |
|
|
73 |
|
Total income |
$ |
(1,058 |
) |
|
$ |
789 |
|
|
$ |
(1,847 |
) |
|
$ |
2,660 |
|
|
$ |
(1,871 |
) |
|
|
|
|
|
|
|
|
|
|
SEGMENT NET (LOSS)
EARNINGS |
|
|
|
|
|
|
|
|
|
Run-off |
$ |
339 |
|
|
$ |
217 |
|
|
$ |
122 |
|
|
$ |
143 |
|
|
$ |
74 |
|
Assumed Life |
|
40 |
|
|
|
6 |
|
|
|
34 |
|
|
|
— |
|
|
|
6 |
|
Investments |
|
(1,270 |
) |
|
|
485 |
|
|
|
(1,755 |
) |
|
|
2,102 |
|
|
|
(1,617 |
) |
Legacy Underwriting |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(93 |
) |
|
|
93 |
|
Total segment net (loss)
earnings |
|
(891 |
) |
|
|
708 |
|
|
|
(1,599 |
) |
|
|
2,152 |
|
|
|
(1,444 |
) |
Corporate and other (1) |
|
(15 |
) |
|
|
(206 |
) |
|
|
191 |
|
|
|
(429 |
) |
|
|
223 |
|
NET (LOSS) EARNINGS
ATTRIBUTABLE TO ENSTAR ORDINARY SHAREHOLDERS |
$ |
(906 |
) |
|
$ |
502 |
|
|
$ |
(1,408 |
) |
|
$ |
1,723 |
|
|
$ |
(1,221 |
) |
|
|
|
|
|
|
|
|
|
|
(1) Other income (expense) for corporate and
other activities includes the amortization of fair value
adjustments associated with the acquisition of DCo LLC and Morse
TEC LLC.
For additional detail on the Assumed Life
segment, the Legacy Underwriting segment and Corporate and other
activities, please refer to our Annual Report on Form 10-K for the
year ended December 31, 2022.
Cautionary Statement
This press release contains certain
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements include
statements regarding the intent, belief or current expectations of
Enstar and its management team. Investors can identify these
statements by the fact that they do not relate strictly to
historical or current facts. They use words such as ‘aim’,
‘ambition’, ‘anticipate’, ‘estimate’, ‘expect’, ‘intend’, ‘will’,
‘project’, ‘plan’, ‘believe’, ‘target’ and other words and terms of
similar meaning in connection with any discussion of future events
or performance. Investors are cautioned that any such
forward-looking statements speak only as of the date they are made,
are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements as a result of
various factors. Important risk factors regarding Enstar can be
found under the heading "Risk Factors" in our Form 10-K for the
year ended December 31, 2022 and are incorporated herein by
reference. Furthermore, Enstar undertakes no obligation to update
any written or oral forward-looking statements or publicly announce
any updates or revisions to any of the forward-looking statements
contained herein, to reflect any change in its expectations with
regard thereto or any change in events, conditions, circumstances
or assumptions underlying such statements, except as required by
law.
About Enstar
Enstar is a NASDAQ-listed leading global
(re)insurance group that offers capital release solutions through
its network of group companies in Bermuda, the United States, the
United Kingdom, Continental Europe, Australia, and other
international locations. A market leader in completing legacy
acquisitions, Enstar has acquired over 110 companies and portfolios
since its formation in 2001. For further information about Enstar,
see www.enstargroup.com.
Contacts
For Investors: Matthew Kirk
(investor.relations@enstargroup.com)
For Media: Jenna Kerr
(communications@enstargroup.com)
ENSTAR GROUP LIMITED
CONSOLIDATED STATEMENTS OF
EARNINGS
For the Three Months Ended December 31,
2022 and 2021 and the Years Ended December 31, 2022, 2021, and
2020
|
Three Months EndedDecember
31, |
|
Year Ended December 31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2020 |
|
|
(expressed in millions of U.S. dollars, except share and
per share data) |
INCOME |
|
|
|
|
|
|
|
|
|
Net premiums earned |
$ |
14 |
|
|
$ |
41 |
|
|
$ |
66 |
|
|
$ |
245 |
|
|
$ |
572 |
|
Net investment income |
|
153 |
|
|
|
81 |
|
|
|
455 |
|
|
|
312 |
|
|
|
303 |
|
Net realized (losses)
gains |
|
(24 |
) |
|
|
(62 |
) |
|
|
(135 |
) |
|
|
(61 |
) |
|
|
19 |
|
Net unrealized (losses)
gains |
|
39 |
|
|
|
68 |
|
|
|
(1,479 |
) |
|
|
178 |
|
|
|
1,623 |
|
Other income |
|
2 |
|
|
|
15 |
|
|
|
35 |
|
|
|
42 |
|
|
|
140 |
|
Net gain on purchase and sales
of subsidiaries |
|
— |
|
|
|
11 |
|
|
|
— |
|
|
|
73 |
|
|
|
3 |
|
Total income |
|
184 |
|
|
|
154 |
|
|
|
(1,058 |
) |
|
|
789 |
|
|
|
2,660 |
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
Net incurred losses and loss adjustment expenses |
|
|
|
|
|
|
|
|
|
Current Period |
|
9 |
|
|
|
26 |
|
|
|
48 |
|
|
|
172 |
|
|
|
405 |
|
Prior Period |
|
(280 |
) |
|
|
(159 |
) |
|
|
(756 |
) |
|
|
(403 |
) |
|
|
(32 |
) |
Total net incurred losses and loss adjustment expenses |
|
(271 |
) |
|
|
(133 |
) |
|
|
(708 |
) |
|
|
(231 |
) |
|
|
373 |
|
Policyholder benefit expenses |
|
— |
|
|
|
(3 |
) |
|
|
25 |
|
|
|
(3 |
) |
|
|
— |
|
Amortization of net deferred charge assets |
|
20 |
|
|
|
17 |
|
|
|
80 |
|
|
|
55 |
|
|
|
39 |
|
Acquisition costs |
|
3 |
|
|
|
7 |
|
|
|
23 |
|
|
|
57 |
|
|
|
171 |
|
General and administrative expenses |
|
97 |
|
|
|
98 |
|
|
|
331 |
|
|
|
367 |
|
|
|
502 |
|
Interest expense |
|
18 |
|
|
|
18 |
|
|
|
89 |
|
|
|
69 |
|
|
|
59 |
|
Net foreign exchange (gains) losses |
|
12 |
|
|
|
(3 |
) |
|
|
(15 |
) |
|
|
(12 |
) |
|
|
16 |
|
Total expenses |
|
(121 |
) |
|
|
1 |
|
|
|
(175 |
) |
|
|
302 |
|
|
|
1,160 |
|
|
|
|
|
|
|
|
|
|
|
(LOSS) EARNINGS BEFORE INCOME
TAXES |
|
305 |
|
|
|
153 |
|
|
|
(883 |
) |
|
|
487 |
|
|
|
1,500 |
|
Income tax benefit
(expense) |
|
16 |
|
|
|
(14 |
) |
|
|
12 |
|
|
|
(27 |
) |
|
|
(24 |
) |
(Losses) earnings from equity
method investments |
|
(86 |
) |
|
|
(8 |
) |
|
|
(74 |
) |
|
|
93 |
|
|
|
239 |
|
NET (LOSS) EARNINGS FROM
CONTINUING OPERATIONS |
|
235 |
|
|
|
131 |
|
|
|
(945 |
) |
|
|
553 |
|
|
|
1,715 |
|
Net earnings from discontinued
operations, net of income taxes |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16 |
|
NET (LOSS) EARNINGS |
|
235 |
|
|
|
131 |
|
|
|
(945 |
) |
|
|
553 |
|
|
|
1,731 |
|
Net loss (earnings)
attributable to noncontrolling interest |
|
1 |
|
|
|
(2 |
) |
|
|
75 |
|
|
|
(15 |
) |
|
|
28 |
|
NET (LOSS) EARNINGS
ATTRIBUTABLE TO ENSTAR |
|
236 |
|
|
|
129 |
|
|
|
(870 |
) |
|
|
538 |
|
|
|
1,759 |
|
Dividends on preferred
shares |
|
(9 |
) |
|
|
(9 |
) |
|
|
(36 |
) |
|
|
(36 |
) |
|
|
(36 |
) |
NET (LOSS) EARNINGS
ATTRIBUTABLE TO ENSTAR ORDINARY SHAREHOLDERS |
$ |
227 |
|
|
$ |
120 |
|
|
$ |
(906 |
) |
|
$ |
502 |
|
|
$ |
1,723 |
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings
per ordinary share attributable to Enstar: |
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
Net (loss) earnings from continuing operations |
$ |
13.34 |
|
|
$ |
6.74 |
|
|
$ |
(52.65 |
) |
|
$ |
25.33 |
|
|
$ |
79.60 |
|
Net earnings from discontinued operations |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.35 |
|
Net (loss) earnings per ordinary share |
$ |
13.34 |
|
|
$ |
6.74 |
|
|
$ |
(52.65 |
) |
|
$ |
25.33 |
|
|
$ |
79.95 |
|
Diluted |
|
|
|
|
|
|
|
|
|
Net (loss) earnings from continuing operations |
$ |
13.26 |
|
|
$ |
6.66 |
|
|
$ |
(52.65 |
) |
|
$ |
24.94 |
|
|
$ |
78.62 |
|
Net earnings from discontinued operations |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.35 |
|
Net (loss) earnings per ordinary share |
$ |
13.26 |
|
|
$ |
6.66 |
|
|
$ |
(52.65 |
) |
|
$ |
24.94 |
|
|
$ |
78.97 |
|
Weighted average ordinary
shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
17,021,348 |
|
|
|
17,798,994 |
|
|
|
17,207,229 |
|
|
|
19,821,259 |
|
|
|
21,551,408 |
|
Diluted |
|
17,121,606 |
|
|
|
18,013,284 |
|
|
|
17,323,130 |
|
|
|
20,127,131 |
|
|
|
21,818,294 |
|
ENSTAR GROUP LIMITED
CONSOLIDATED BALANCE SHEETS
As of December 31, 2022 and December 31,
2021
|
December 31, 2022 |
|
December 31, 2021 |
|
(in millions of U.S. dollars, except share
data) |
ASSETS |
|
|
|
Short-term investments, trading, at fair value |
$ |
14 |
|
|
$ |
6 |
|
Short-term investments,
available-for-sale, at fair value (amortized cost: 2022 — $37;
2021 — $34) |
|
38 |
|
|
|
34 |
|
Fixed maturities, trading, at
fair value |
|
2,370 |
|
|
|
3,756 |
|
Fixed maturities,
available-for-sale, at fair value (amortized cost: 2022 —
$5,871; 2021 — $5,689; net of allowance: 2022 — $33; 2021 —
$10) |
|
5,223 |
|
|
|
5,652 |
|
Funds held - directly managed,
at fair value |
|
2,040 |
|
|
|
3,007 |
|
Equities, at fair value (cost:
2022 — $1,357; 2021 — $1,831) |
|
1,250 |
|
|
|
1,995 |
|
Other investments, at fair
value (includes $3 in 2022 of consolidated variable interest
entities) |
|
3,296 |
|
|
|
2,333 |
|
Equity method investments |
|
397 |
|
|
|
493 |
|
Total investments |
|
14,628 |
|
|
|
17,276 |
|
Cash and cash equivalents |
|
822 |
|
|
|
1,646 |
|
Restricted cash and cash
equivalents |
|
508 |
|
|
|
446 |
|
Reinsurance balances
recoverable on paid and unpaid losses (net of allowance: 2022 —
$131; 2021 — $136) |
|
856 |
|
|
|
1,085 |
|
Reinsurance balances
recoverable on paid and unpaid losses, at fair value |
|
275 |
|
|
|
432 |
|
Insurance balances recoverable
(net of allowance: 2022 and 2021 — $5) |
|
177 |
|
|
|
213 |
|
Funds held by reinsured
companies |
|
3,582 |
|
|
|
2,340 |
|
Net deferred charge
assets |
|
658 |
|
|
|
598 |
|
Other assets |
|
648 |
|
|
|
620 |
|
TOTAL ASSETS |
$ |
22,154 |
|
|
$ |
24,656 |
|
LIABILITIES |
|
|
|
Losses and loss adjustment
expenses |
$ |
11,721 |
|
|
$ |
11,269 |
|
Losses and loss adjustment
expenses, at fair value |
|
1,286 |
|
|
|
1,989 |
|
Future policyholder
benefits |
|
1,184 |
|
|
|
1,502 |
|
Defendant asbestos and
environmental liabilities |
|
607 |
|
|
|
638 |
|
Insurance and reinsurance
balances payable |
|
100 |
|
|
|
254 |
|
Debt obligations |
|
1,829 |
|
|
|
1,691 |
|
Other liabilities |
|
462 |
|
|
|
581 |
|
TOTAL LIABILITIES |
|
17,189 |
|
|
|
17,924 |
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
|
|
|
REDEEMABLE
NONCONTROLLING INTERESTS |
|
168 |
|
|
|
179 |
|
|
|
|
|
SHAREHOLDERS’
EQUITY |
|
|
|
Ordinary Shares (par value $1
each, issued and outstanding 2022: 17,588,050; 2021:
18,223,574): |
|
|
|
Voting Ordinary Shares (issued and outstanding 2022: 15,990,338;
2021: 16,625,862) |
|
16 |
|
|
|
17 |
|
Non-voting convertible ordinary Series C Shares (issued and
outstanding 2022 and 2021: 1,192,941) |
|
1 |
|
|
|
1 |
|
Non-voting convertible ordinary Series E Shares (issued and
outstanding 2022 and 2021: 404,771) |
|
— |
|
|
|
— |
|
Preferred Shares: |
|
|
|
Series C Preferred Shares (issued and held in treasury 2022 and
2021: 388,571) |
|
— |
|
|
|
— |
|
Series D Preferred Shares (issued and outstanding 2022 and 2021:
16,000; liquidation preference $400) |
|
400 |
|
|
|
400 |
|
Series E Preferred Shares (issued and outstanding 2022 and 2021:
4,400; liquidation preference $110) |
|
110 |
|
|
|
110 |
|
Treasury shares, at cost
(Series C Preferred Shares 2022 and 2021: 388,571) |
|
(422 |
) |
|
|
(422 |
) |
Joint Share Ownership Plan
(voting ordinary shares, held in trust 2022 and 2021: 565,630) |
|
(1 |
) |
|
|
(1 |
) |
Additional paid-in
capital |
|
766 |
|
|
|
922 |
|
Accumulated other
comprehensive loss |
|
(575 |
) |
|
|
(16 |
) |
Retained earnings |
|
4,406 |
|
|
|
5,312 |
|
Total Enstar Shareholders’
Equity |
|
4,701 |
|
|
|
6,323 |
|
Noncontrolling interests |
|
96 |
|
|
|
230 |
|
TOTAL SHAREHOLDERS’
EQUITY |
|
4,797 |
|
|
|
6,553 |
|
TOTAL LIABILITIES, REDEEMABLE
NONCONTROLLING INTERESTS AND SHAREHOLDERS’ EQUITY |
$ |
22,154 |
|
|
$ |
24,656 |
|
Non-GAAP Financial Measures
In addition to our key financial measures presented in
accordance with GAAP, we present other non-GAAP financial measures
that we use to manage our business, compare our performance against
prior periods and against our peers, and as performance measures in
our incentive compensation program.
These non-GAAP financial measures provide an
additional view of our operational performance over the long-term
and provide the opportunity to analyze our results in a way that is
more aligned with the manner in which our management measures our
underlying performance.
The presentation of these non-GAAP financial
measures, which may be defined and calculated differently by other
companies, is used to enhance the understanding of certain aspects
of our financial performance. It is not meant to be considered in
isolation, superior to, or as a substitute for the directly
comparable financial measures prepared in accordance with GAAP.
Some of the adjustments reflected in our
non-GAAP measures are recurring items, such as the exclusion of
adjustments to net realized and unrealized (gains)/losses on fixed
income securities recognized in our income statement, the fair
value of certain of our loss reserve liabilities for which we have
elected the fair value option, and the amortization of fair value
adjustments.
Management makes these adjustments in assessing
our performance so that the changes in fair value due to interest
rate movements, which are applied to some but not all of our assets
and liabilities as a result of preexisting accounting elections, do
not impair comparability across reporting periods.
It is important for the readers of our periodic
filings to understand that these items will recur from period to
period.
However, we exclude these items for the purpose
of presenting a comparable view across reporting periods of the
impact of our underlying claims management and investment without
the effect of interest rate fluctuations on assets that we
anticipate to hold to maturity and non-cash changes to the fair
value of our reserves.
Similarly, our non-GAAP measures reflect the
exclusion of certain items that we deem to be nonrecurring, unusual
or infrequent when the nature of the charge or gain is such that it
is not reasonably likely that such item may recur within two years,
nor was there a similar charge or gain in the preceding two years.
This includes adjustments related to bargain purchase gains on
acquisitions of businesses, net gains or losses on sales of
subsidiaries, net assets of held for sale or disposed subsidiaries
classified as discontinued operations, and other items that we
separately disclose.
We have changed our non-GAAP measures in 2022 as
follows:
-
The opening GAAP balances of our 2021 and 2020 Adjusted BVPS*,
Adjusted ROE* and Adjusted RLE* measures have been retrospectively
adjusted for a change in accounting principle.
-
We no longer remove ULAE from our Adjusted RLE and RLE %
calculations as our estimate of future claims handling costs is
connected to our claims settlement strategies and outcomes and the
RLE measures now reflect the direct and indirect performance of the
management of our liabilities.
We have presented the results and GAAP
reconciliations for these measures further below. The following
tables present more information on each non-GAAP measure.
Non-GAAP Measure |
|
Definition |
|
Purpose of Non-GAAP Measure over GAAP Measure |
Adjusted book value per ordinary share |
|
Total Enstar ordinary shareholders' equityDivided byNumber of
ordinary shares outstanding, adjusted for:-the ultimate effect of
any dilutive securities on the number of ordinary shares
outstanding |
|
Increases the number of ordinary shares to reflect the exercise of
equity awards granted but not yet vested as, over the long term,
this presents both management and investors with a more
economically accurate measure of the realizable value of
shareholder returns by factoring in the impact of share dilution.We
use this non-GAAP measure in our incentive compensation
program. |
Adjusted return on equity (%) |
|
Adjusted operating income (loss) attributable to Enstar ordinary
shareholders divided by adjusted opening Enstar ordinary
shareholder's equity |
|
Calculating the operating income (loss) as a percentage of our
adjusted opening Enstar ordinary shareholders' equity provides a
more consistent measure of the performance of our business by
enabling comparison between the financial periods presented.We
eliminate the impact of net realized and unrealized (gains) losses
on fixed maturity investments and funds-held directly managed and
the change in fair value of insurance contracts for which we have
elected the fair value option, as:
- we typically hold most of our fixed income securities until the
earlier of maturity or the time that they are used to fund any
settlement of related liabilities which are generally recorded at
cost; and
- removing the fair value option improves comparability since
there are limited acquisition years for which we elected the fair
value option.
Therefore, we believe that excluding their impact on our earnings
improves comparability of our core operational performance across
periods.We include fair value adjustments as non-GAAP adjustments
to the adjusted operating income (loss) attributable to Enstar
ordinary shareholders as they are non-cash charges that are not
reflective of the impact of our claims management strategies on our
loss portfolios. We eliminate the net gain (loss) on the
purchase and sales of subsidiaries and net earnings from
discontinued operations, as these items are not indicative of our
ongoing operations. We use this non-GAAP measure in our
incentive compensation program. |
Adjusted operating income
(loss) attributable to Enstar ordinary
shareholders(numerator) |
|
Net earnings (loss) attributable
to Enstar ordinary shareholders, adjusted for:-net realized and
unrealized (gains) losses on fixed maturity investments and funds
held-directly managed,-change in fair value of insurance contracts
for which we have elected the fair value option (1),-amortization
of fair value adjustments,-net gain/loss on purchase and sales of
subsidiaries (if any),-net earnings from discontinued operations
(if any),-tax effects of adjustments, and-adjustments attributable
to noncontrolling interests |
|
Adjusted opening Enstar ordinary shareholders' equity
(denominator) |
|
Opening Enstar ordinary shareholders' equity, less:-net unrealized
gains (losses) on fixed maturity investments and funds
held-directly managed,-fair value of insurance contracts for which
we have elected the fair value option (1),-fair value adjustments,
and-net assets of held for sale or disposed subsidiaries classified
as discontinued operations (if any) |
|
Adjusted total investment return (%) |
|
Adjusted total investment return (dollars) recognized in earnings
for the applicable period divided by period average adjusted total
investable assets. |
|
Provides a
key measure of the return generated on the capital held in the
business and is reflective of our investment strategy.Provides a
consistent measure of investment returns as a percentage of all
assets generating investment returns.We adjust our investment
returns to eliminate the impact of the change in fair value of
fixed income securities (both credit spreads and interest rates),
as we typically hold most of these investments until the earlier of
maturity or used to fund any settlement of related liabilities
which are generally recorded at cost. |
Adjusted total investment
return ($)
(numerator) |
|
Total investment return
(dollars), adjusted for:-net realized and unrealized (gains) losses
on fixed maturity investments and funds held-directly managed;
and-unrealized (gains) losses on AFS investments included within
OCI, net of reclassification adjustments and excluding foreign
exchange. |
|
Adjusted average aggregate total investable assets
(denominator) |
|
Total average investable assets, adjusted for: -net unrealized
(gains) losses on fixed maturities, AFS investments included within
AOCI-net unrealized (gains) losses on fixed maturities, trading
instruments |
|
Adjusted run-off liability earnings (%) |
|
Adjusted PPD divided by average adjusted net loss reserves |
|
Calculating the RLE as a percentage of our adjusted average net
loss reserves provides a more meaningful and comparable measurement
of the impact of our claims management strategies on our loss
portfolios across acquisition years and also to our overall
financial periods. We use this measure to evaluate
the impact of our claims management strategies because it provides
visibility into our ability to settle our claims obligations for
amounts less than our initial estimate at the point of acquiring
the obligations. The
following components of periodic recurring net incurred losses and
LAE and net loss reserves are not considered key components of our
claims management performance for the following reasons:
- The results of our Legacy Underwriting segment have been
economically transferred to a third party primarily through use of
reinsurance and a Capacity Lease Agreement(2); as such, the results
are not a relevant contribution to Adjusted RLE, which is designed
to analyze the impact of our claims management
strategies;
- The results of our Assumed Life segment relate only to our
exposure to active property catastrophe business; as this business
is not in run-off, the results are not a relevant contribution to
Adjusted RLE;
- The change in fair value of insurance contracts for which we
have elected the fair value option(1) has been removed to support
comparability between the two acquisition years for which we
elected the fair value option in reserves assumed and the
acquisition years for which we did not make this election
(specifically, this election was only made in the 2017 and 2018
acquisition years and the election of such option is irrevocable);
and
- The amortization of fair value adjustments are non-cash charges
that obscure our trends on a consistent basis.
We include our performance in managing claims and estimated future
expenses on our defendant A&E liabilities because such
performance is relevant to assessing our claims management
strategies even though such liabilities are not included within the
loss reserves.We use this measure to assess the performance of our
claim strategies and part of the performance assessment of our past
acquisitions. |
Adjusted prior period
development(numerator) |
|
Prior period net incurred losses
and LAE, adjusted to: Remove(3): -Legacy Underwriting and Assumed
Life operations -amortization of fair value adjustments, -change in
fair value of insurance contracts for which we have elected the
fair value option (1), and Add: -the
reduction/(increase) in estimates of net ultimate liabilities and
reduction in estimated future expenses of our defendant A&E
liabilities. |
|
Adjusted net loss reserves
(denominator) |
|
Net losses and LAE, adjusted to:Remove(3):-Legacy Underwriting and
Assumed Life net loss reserves-current period net loss reserves-net
fair value adjustments associated with the acquisition of
companies,-the fair value adjustments for contracts for which we
have elected the fair value option (1) andAdd:-net nominal
defendant A&E liability exposures and estimated future
expenses |
|
(1) |
Comprises the discount rate and risk margin components. |
(2) |
As described in Note 5 to our consolidated financial statements in
our Annual Report on Form 10-K for the year ended December 31,
2022. |
(3) |
Effective for 2022, we are no longer excluding ULAE as it relates
to our losses and LAE liabilities and are now including estimated
future expenses as it relates to our defendant A&E liabilities
in the calculation of Adjusted RLE*, as these provisions are
related to our insurance liabilities and contribute to our claims
management performance. The comparative periods in 2021 and 2020
have been adjusted accordingly. |
*Non-GAAP measure.
Reconciliation of GAAP to Non-GAAP
Measures
The table below presents a reconciliation of
BVPS to Adjusted BVPS*:
|
December 31, 2022 |
|
December 31, 2021 |
|
December 31, 2020 |
|
Equity (1) |
|
Ordinary Shares |
|
Per Share Amount |
|
Equity (1) |
|
Ordinary Shares |
|
Per Share Amount |
|
Equity (1) |
|
Ordinary Shares |
|
Per Share Amount |
|
(in millions of U.S. dollars, except share and per share
data) |
Book value per ordinary share |
$ |
4,191 |
|
17,022,420 |
|
$ |
246.20 |
|
$ |
5,813 |
|
17,657,944 |
|
$ |
329.20 |
|
$ |
6,326 |
|
21,519,602 |
|
$ |
293.97 |
Non-GAAP adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation plans |
|
|
218,171 |
|
|
|
|
|
315,205 |
|
|
|
|
|
298,095 |
|
|
Warrants |
|
— |
|
— |
|
|
|
|
— |
|
— |
|
|
|
|
20 |
|
175,901 |
|
|
Adjusted book value
per ordinary share* |
$ |
4,191 |
|
17,240,591 |
|
$ |
243.09 |
|
$ |
5,813 |
|
17,973,149 |
|
$ |
323.43 |
|
$ |
6,346 |
|
21,993,598 |
|
$ |
288.56 |
(1) |
Equity comprises Enstar ordinary shareholders' equity, which is
calculated as Enstar shareholders' equity less preferred shares
($510 million) prior to any non-GAAP adjustments. |
*Non-GAAP measure.
The tables below present a reconciliation of ROE
to Adjusted ROE*:
|
Three Months Ended |
|
December 31, 2022 |
December 31, 2021 |
|
Net (loss) earnings (1) |
|
Opening equity (1) |
|
(Adj) ROE |
|
Net (loss) earnings (1) |
|
Opening equity (1) |
|
(Adj) ROE |
|
(in millions of U.S. dollars) |
Net (loss) earnings/Opening
equity/ROE(1) |
$ |
227 |
|
|
$ |
3,866 |
|
|
5.9 |
% |
|
$ |
120 |
|
|
$ |
5,749 |
|
|
2.1 |
% |
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Remove: |
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized losses (gains) on fixed maturity
investments and funds held - directly managed / Net unrealized
losses (gains) on fixed maturity investments and funds held -
directly managed (2) |
|
20 |
|
|
|
1,926 |
|
|
|
|
|
27 |
|
|
|
(176 |
) |
|
|
Change in fair value of insurance contracts for which we have
elected the fair value option / Fair value of insurance contracts
for which we have elected the fair value option (3) |
|
28 |
|
|
|
(305 |
) |
|
|
|
|
(6 |
) |
|
|
(100 |
) |
|
|
Amortization of fair value adjustments / Fair value
adjustments |
|
(29 |
) |
|
|
(95 |
) |
|
|
|
|
3 |
|
|
|
(109 |
) |
|
|
Net gain on purchase and sales of subsidiaries |
|
— |
|
|
|
— |
|
|
|
|
|
(11 |
) |
|
|
— |
|
|
|
Tax effects of adjustments (4) |
|
(1 |
) |
|
|
— |
|
|
|
|
|
(3 |
) |
|
|
— |
|
|
|
Adjustments attributable to noncontrolling interests (5) |
|
(21 |
) |
|
|
— |
|
|
|
|
|
2 |
|
|
|
— |
|
|
|
Adjusted operating
(loss) income/Adjusted opening equity/Adjusted ROE* |
$ |
224 |
|
|
$ |
5,392 |
|
|
4.2 |
% |
|
$ |
132 |
|
|
$ |
5,364 |
|
|
2.5 |
% |
(1) |
Net (loss) earnings comprises net (loss) earnings attributable to
Enstar ordinary shareholders, prior to any non-GAAP adjustments.
Opening equity comprises Enstar ordinary shareholders' equity,
which is calculated as opening Enstar shareholders' equity less
preferred shares ($510 million), prior to any non-GAAP
adjustments. |
(2) |
Represents the net realized and unrealized losses (gains) related
to fixed maturity securities. Our fixed maturity securities are
held directly on our balance sheet and also within the "Funds held
- directly managed" balance. |
(3) |
Comprises the discount rate and risk margin components. |
(4) |
Represents an aggregation of the tax expense or benefit associated
with the specific country to which the pre-tax adjustment relates,
calculated at the applicable jurisdictional tax rate. |
(5) |
Represents the impact of the adjustments on the net earnings (loss)
attributable to noncontrolling interests associated with the
specific subsidiaries to which the adjustments relate. |
*Non-GAAP measure.
|
Year Ended |
|
December 31, 2022 |
|
December 31, 2021 |
|
December 31, 2020 |
|
Net (loss) earnings (1) |
|
Opening equity (1) |
|
(Adj) ROE |
|
Net (loss) earnings (1) |
|
Opening equity (1) |
|
(Adj) ROE |
|
Net (loss) earnings (1) |
|
Opening equity (1) |
|
(Adj) ROE |
|
(in millions of U.S. dollars) |
Net (loss) earnings/Opening equity/ROE
(1) |
$ |
(906 |
) |
|
$ |
5,813 |
|
|
(15.6)% |
|
$ |
502 |
|
|
$ |
6,326 |
|
|
7.9 |
% |
|
$ |
1,723 |
|
|
$ |
4,490 |
|
|
38.4 |
% |
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized losses on fixed maturity investments
and funds held - directly managed / Net unrealized gains on fixed
maturity investments and funds held - directly managed (2) |
|
1,181 |
|
|
|
(89 |
) |
|
|
|
|
210 |
|
|
|
(560 |
) |
|
|
|
|
(306 |
) |
|
|
(277 |
) |
|
|
Change in fair value of insurance contracts for which we have
elected the fair value option / Fair value of insurance contracts
for which we have elected the fair value option (3) |
|
(200 |
) |
|
|
(107 |
) |
|
|
|
|
(75 |
) |
|
|
(33 |
) |
|
|
|
|
119 |
|
|
|
(130 |
) |
|
|
Amortization of fair value adjustments / Fair value
adjustments |
|
(18 |
) |
|
|
(106 |
) |
|
|
|
|
16 |
|
|
|
(128 |
) |
|
|
|
|
27 |
|
|
|
(152 |
) |
|
|
Net gain on purchase and sales of subsidiaries |
|
— |
|
|
|
— |
|
|
|
|
|
(73 |
) |
|
|
— |
|
|
|
|
|
(3 |
) |
|
|
— |
|
|
|
Net earnings from discontinued operations / Net assets of entities
classified as held for sale and discontinued operations |
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
(16 |
) |
|
|
(266 |
) |
|
|
Tax effects of adjustments (4) |
|
(7 |
) |
|
|
— |
|
|
|
|
|
(21 |
) |
|
|
— |
|
|
|
|
|
23 |
|
|
|
— |
|
|
|
Adjustments attributable to noncontrolling interests (5) |
|
(111 |
) |
|
|
— |
|
|
|
|
|
6 |
|
|
|
— |
|
|
|
|
|
13 |
|
|
|
109 |
|
|
|
Adjusted operating
(loss) income/Adjusted opening equity/Adjusted ROE* |
$ |
(61 |
) |
|
$ |
5,511 |
|
|
(1.1)% |
|
$ |
565 |
|
|
$ |
5,605 |
|
|
10.1 |
% |
|
$ |
1,580 |
|
|
$ |
3,774 |
|
|
41.9 |
% |
(1) |
Net (loss) earnings comprises net (loss) earnings attributable to
Enstar ordinary shareholders, prior to any non-GAAP adjustments.
Opening equity comprises Enstar ordinary shareholders' equity,
which is calculated as opening Enstar shareholders' equity less
preferred shares ($510 million), prior to any non-GAAP
adjustments. |
(2) |
Represents the net realized and unrealized losses (gains) related
to fixed maturity securities. Our fixed maturity securities are
held directly on our balance sheet and also within the "Funds held
- directly managed" balance. |
(3) |
Comprises the discount rate and risk margin components. |
(4) |
Represents an aggregation of the tax expense or benefit associated
with the specific country to which the pre-tax adjustment relates,
calculated at the applicable jurisdictional tax rate. |
(5) |
Represents the impact of the adjustments on the net earnings (loss)
attributable to noncontrolling interests associated with the
specific subsidiaries to which the adjustments relate. |
*Non-GAAP measure.
The tables below present a reconciliation of PPD to Adjusted
PPD* and RLE to Adjusted RLE*:
|
|
Year Ended |
|
As of |
|
Year Ended |
|
|
December 31, 2022 |
|
December 31, 2022 |
|
December 31, 2021 |
|
December 31, 2022 |
|
December 31, 2022 |
|
|
PPD |
|
Net loss reserves |
|
Net loss reserves |
|
Average net loss reserves |
|
RLE % |
|
|
(in millions of U.S. dollars) |
PPD/net loss reserves/RLE |
|
$ |
756 |
|
|
$ |
12,011 |
|
|
$ |
11,926 |
|
|
$ |
11,969 |
|
|
6.3 |
% |
Non-GAAP Adjustments: |
|
|
|
|
|
|
|
|
|
|
Assumed Life |
|
|
(55 |
) |
|
|
— |
|
|
|
(181 |
) |
|
|
(91 |
) |
|
|
Legacy Underwriting |
|
|
3 |
|
|
|
(135 |
) |
|
|
(153 |
) |
|
|
(144 |
) |
|
|
Net loss reserves - current period |
|
|
— |
|
|
|
(45 |
) |
|
|
— |
|
|
|
(23 |
) |
|
|
Amortization of fair value adjustments / Net fair value adjustments
associated with the acquisition of companies |
|
|
(18 |
) |
|
|
124 |
|
|
|
106 |
|
|
|
115 |
|
|
|
Changes in fair value - fair value option / Net fair value
adjustments for contracts for which we have elected the fair value
option (1) |
|
|
(200 |
) |
|
|
294 |
|
|
|
107 |
|
|
|
201 |
|
|
|
Change in estimate of net ultimate liabilities - defendant A&E
/ Net nominal defendant A&E liabilities |
|
|
2 |
|
|
|
572 |
|
|
|
573 |
|
|
|
573 |
|
|
|
Increase (reduction) in estimated future expenses - Defendant
A&E |
|
|
1 |
|
|
|
35 |
|
|
|
37 |
|
|
|
36 |
|
|
|
Adjusted PPD/Adjusted
net loss reserves/Adjusted RLE* |
|
$ |
489 |
|
|
$ |
12,856 |
|
|
$ |
12,415 |
|
|
$ |
12,636 |
|
|
3.9 |
% |
|
|
Year Ended |
|
As of |
|
Year Ended |
|
|
December 31, 2021 |
|
December 31, 2021 |
|
December 31, 2020 |
|
December 31, 2021 |
|
December 31, 2021 |
|
|
PPD |
|
Net loss reserves |
|
Net loss reserves |
|
Average net loss reserves |
|
RLE % |
|
|
(in millions of U.S. dollars) |
PPD/net loss reserves/RLE |
|
$ |
403 |
|
|
$ |
11,926 |
|
|
$ |
8,763 |
|
|
$ |
10,344 |
|
|
3.9 |
% |
Non-GAAP Adjustments: |
|
|
|
|
|
|
|
|
|
|
Assumed Life |
|
|
— |
|
|
|
(179 |
) |
|
|
— |
|
|
|
(90 |
) |
|
|
Legacy Underwriting |
|
|
(6 |
) |
|
|
(140 |
) |
|
|
(955 |
) |
|
|
(548 |
) |
|
|
Net loss reserves - current period |
|
|
— |
|
|
|
(143 |
) |
|
|
— |
|
|
|
(72 |
) |
|
|
Amortization of fair value adjustments / Net fair value adjustments
associated with the acquisition of companies |
|
|
16 |
|
|
|
106 |
|
|
|
128 |
|
|
|
117 |
|
|
|
Changes in fair value - fair value option / Net fair value
adjustments for contracts for which we have elected the fair value
option (1) |
|
|
(75 |
) |
|
|
107 |
|
|
|
33 |
|
|
|
70 |
|
|
|
Change in estimate of net ultimate liabilities - defendant A&E
/ Net nominal defendant A&E liabilities |
|
|
38 |
|
|
|
573 |
|
|
|
615 |
|
|
|
594 |
|
|
|
Increase (reduction) in estimated future expenses - Defendant
A&E |
|
|
5 |
|
|
|
37 |
|
|
|
43 |
|
|
|
40 |
|
|
|
Adjusted PPD/Adjusted
net loss reserves/Adjusted RLE* |
|
$ |
381 |
|
|
$ |
12,287 |
|
|
$ |
8,627 |
|
|
$ |
10,455 |
|
|
3.6 |
% |
|
|
Year Ended |
|
As of |
|
Year Ended |
|
|
December 31, 2020 |
|
December 31, 2020 |
|
December 31, 2019 |
|
December 31, 2020 |
|
December 31, 2020 |
|
|
PPD |
|
Net loss reserves |
|
Net loss reserves |
|
Average net loss reserves |
|
RLE % |
|
|
(in millions of U.S. dollars) |
PPD/net loss reserves/RLE |
|
$ |
32 |
|
|
$ |
8,763 |
|
|
$ |
7,941 |
|
|
$ |
8,352 |
|
|
0.4 |
% |
Non-GAAP Adjustments: |
|
|
|
|
|
|
|
|
|
|
Legacy Underwriting |
|
|
(4 |
) |
|
|
(702 |
) |
|
|
(1,184 |
) |
|
|
(943 |
) |
|
|
Net loss reserves - current period |
|
|
— |
|
|
|
(273 |
) |
|
|
— |
|
|
|
(137 |
) |
|
|
Amortization of fair value adjustments / Net fair value adjustments
associated with the acquisition of companies |
|
|
28 |
|
|
|
128 |
|
|
|
152 |
|
|
|
140 |
|
|
|
Changes in fair value - fair value option / Net fair value
adjustments for contracts for which we have elected the fair value
option (1) |
|
|
119 |
|
|
|
33 |
|
|
|
130 |
|
|
|
82 |
|
|
|
Change in estimate of net ultimate liabilities - defendant A&E
/ Net nominal defendant A&E liabilities |
|
|
103 |
|
|
|
615 |
|
|
|
561 |
|
|
|
588 |
|
|
|
Increase (reduction) in estimated future expenses - Defendant
A&E |
|
|
9 |
|
|
|
43 |
|
|
|
52 |
|
|
|
48 |
|
|
|
Adjusted PPD/Adjusted
net loss reserves/Adjusted RLE* |
|
$ |
287 |
|
|
$ |
8,607 |
|
|
$ |
7,652 |
|
|
$ |
8,129 |
|
|
3.5 |
% |
(1) |
Comprises the discount rate and risk margin components. |
*Non-GAAP measure.
The tables below present a reconciliation of our TIR to our
Adjusted TIR*:
|
For the Three Months Ended December 31, |
|
For the Year EndedDecember
31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2020 |
|
Investment
results |
|
|
|
|
|
|
|
|
|
Net investment income |
$ |
153 |
|
|
$ |
81 |
|
|
$ |
455 |
|
|
$ |
312 |
|
|
$ |
303 |
|
Net realized (losses)
gains |
|
(24 |
) |
|
|
(62 |
) |
|
|
(135 |
) |
|
|
(61 |
) |
|
|
19 |
|
Net unrealized (losses)
gains |
|
39 |
|
|
|
68 |
|
|
|
(1,479 |
) |
|
|
178 |
|
|
|
1,623 |
|
Earnings (losses) from equity
method investments |
|
(86 |
) |
|
|
(8 |
) |
|
|
(74 |
) |
|
|
93 |
|
|
|
239 |
|
Other comprehensive
income: |
|
|
|
|
|
|
|
|
|
Unrealized (losses) gains on
fixed income securities, AFS, net of reclassification adjustments
excluding foreign exchange |
|
87 |
|
|
|
(26 |
) |
|
|
(570 |
) |
|
|
(100 |
) |
|
|
70 |
|
TIR ($) |
$ |
169 |
|
|
$ |
53 |
|
|
$ |
(1,803 |
) |
|
$ |
422 |
|
|
$ |
2,254 |
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
Net realized and unrealized
losses (gains) on fixed maturity investments and funds
held-directly managed |
|
20 |
|
|
|
27 |
|
|
|
1,181 |
|
|
|
210 |
|
|
|
(306 |
) |
Unrealized (losses) gains on
fixed income securities, AFS, net of reclassification adjustments
excluding foreign exchange |
|
(87 |
) |
|
|
26 |
|
|
|
570 |
|
|
|
100 |
|
|
|
(70 |
) |
|
|
|
|
|
|
|
|
|
|
Adjusted TIR
($)* |
$ |
102 |
|
|
$ |
106 |
|
|
$ |
(52 |
) |
|
$ |
732 |
|
|
$ |
1,878 |
|
|
|
|
|
|
|
|
|
|
|
Total
investments |
|
14,628 |
|
|
|
17,276 |
|
|
|
14,628 |
|
|
|
17,276 |
|
|
|
15,257 |
|
Cash and cash equivalents,
including restricted cash and cash equivalents |
|
1,330 |
|
|
|
2,092 |
|
|
|
1,330 |
|
|
|
2,092 |
|
|
|
1,373 |
|
Funds held by reinsured
companies |
|
3,582 |
|
|
|
2,340 |
|
|
|
3,582 |
|
|
|
2,340 |
|
|
|
636 |
|
Total investable
assets |
$ |
19,540 |
|
|
$ |
21,708 |
|
|
$ |
19,540 |
|
|
$ |
21,708 |
|
|
$ |
17,266 |
|
|
|
|
|
|
|
|
|
|
|
Average aggregate invested
assets, at fair value (1) |
$ |
19,503 |
|
|
$ |
21,569 |
|
|
$ |
20,079 |
|
|
$ |
20,840 |
|
|
$ |
15,443 |
|
Annualized TIR
% (2) |
|
3.5 |
% |
|
|
1.0 |
% |
|
|
(9.0 |
)% |
|
|
2.0 |
% |
|
|
14.6 |
% |
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustment: |
|
|
|
|
|
|
|
|
|
Net unrealized losses (gains)
on fixed maturities, AFS investments included within AOCI and net
unrealized losses (gains) on fixed maturities, trading
instruments |
|
1,827 |
|
|
|
(89 |
) |
|
|
1,827 |
|
|
|
(89 |
) |
|
|
(560 |
) |
Adjusted investable
assets* |
$ |
21,367 |
|
|
$ |
21,619 |
|
|
$ |
21,367 |
|
|
$ |
21,619 |
|
|
$ |
16,706 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted average aggregate
invested assets, at fair value (3) |
$ |
21,380 |
|
|
$ |
21,438 |
|
|
$ |
21,165 |
|
|
$ |
20,561 |
|
|
$ |
15,153 |
|
Annualized adjusted
TIR %* (4) |
|
1.9 |
% |
|
|
2.0 |
% |
|
|
(0.2 |
)% |
|
|
3.6 |
% |
|
|
12.4 |
% |
(1) |
This amount is a two period average of the total investable assets
for the three months ended December 31, 2022 and 2021,
respectively, and a five period average for the years ended
December 31, 2022, 2021 and 2020, respectively, as presented above,
and is comprised of amounts disclosed in our quarterly and annual
U.S. GAAP consolidated financial statements. |
(2) |
Annualized TIR % is calculated by dividing the annualized TIR ($)
by average aggregate invested assets, at fair value. |
(3) |
This amount is a two period average of the total investable assets
for the three months ended December 31, 2022 and 2021,
respectively, and a five period average for the years ended
December 31, 2022, 2021 and 2020, respectively, as presented
above. |
(4) |
Annualized adjusted TIR %* is calculated by dividing annualized
adjusted TIR* ($) by adjusted average aggregate invested assets, at
fair value*. |
*Non-GAAP measure.
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