Enstar Group Limited Reports First Quarter Results

Rhea-AI Summary

Enstar Group Limited (Nasdaq: ESGR) reported a consolidated net earnings of $183.2 million for the three months ended March 31, 2021, translating to $8.38 per fully diluted share, a significant recovery from a net loss of $516.8 million during the same period in 2020. The results were bolstered by a $55.5 million reduction in net incurred losses and $118.0 million earnings from equity method investments. Non-GAAP operating income rose to $283.7 million or $12.98 per share, compared to a loss of $337.8 million the prior year. Shareholders' equity increased to $6.3 billion.

Positive

• Net earnings improved to $183.2 million from a loss of $516.8 million year-over-year.
• Non-GAAP operating income rose to $283.7 million, a turnaround from a loss of $337.8 million.
• Earnings from equity method investments reached $118.0 million.
• Fully diluted book value per share increased to $284.72.

Negative

• Current period losses of $54.1 million in the StarStone International business.

• Net Earnings of $183.2 million for the Three Months Ended March 31, 2021
  
• Non-GAAP Operating Income of $283.7 million for the Three Months Ended March 31, 2021
• Increase in fully diluted book value per share to $284.72 for the Three Months Ended March 31, 2021

HAMILTON, Bermuda, May 07, 2021 (GLOBE NEWSWIRE) -- Enstar Group Limited (Nasdaq: ESGR) filed its quarterly report on Form 10-Q with the SEC earlier today, reporting its earnings and financial position for the three months ended March 31, 2021.

Enstar reported consolidated net earnings of $183.2 million (or earnings of $8.38 per fully diluted ordinary share) for the three months ended March 31, 2021, compared to a consolidated net loss of $516.8 million (or loss of $23.98 per fully diluted ordinary share) for the three months ended March 31, 2020.

The key drivers of net earnings for the three months ended March 31, 2021 were:

• A reduction in net incurred losses and loss adjustment expenses of $55.5 million, which comprised favorable development on prior periods of $109.6 million, partially offset by current period losses of $54.1 million, primarily in respect of the StarStone International business that was placed into run-off in June 2020, for which there is current period earned premium. The favorable development on prior periods was primarily driven by a decrease of $75.5 million in the fair value of insurance contracts for which we have elected the fair value option. The decrease in the fair value was driven by an increase in corporate bond yields; and
• Earnings from equity method investments of $118.0 million.

Non-GAAP operating income¹ was $283.7 million (or income of $12.98 per fully diluted ordinary share) for the three months ended March 31, 2021, compared to non-GAAP operating loss of $337.8 million (or loss of $15.68 per fully diluted ordinary share) for the three months ended March 31, 2020.

Enstar's ordinary shareholders' equity at March 31, 2021 amounted to $6.3 billion (or $284.72 per fully diluted ordinary share), compared to $6.2 billion (or $281.20 per fully diluted ordinary share) at December 31, 2020. The Form 10-Q, which is available on Enstar's website, www.enstargroup.com, contains a more detailed description of Enstar's business and financial results.

About Enstar

Enstar is a NASDAQ-listed leading global insurance group that offers innovative capital release solutions through its network of group companies in Bermuda, the United States, the United Kingdom, Continental Europe, Australia, and other international locations. A market leader in completing legacy acquisitions, Enstar has acquired over 100 companies and portfolios since its formation in 2001. For further information about Enstar, see www.enstargroup.com.

Non-GAAP Financial Measures

In addition to presenting net earnings (loss) attributable to Enstar ordinary shareholders and diluted earnings (loss) per ordinary share determined in accordance with U.S. GAAP, we believe that presenting non-GAAP operating income (loss) attributable to Enstar ordinary shareholders and diluted non-GAAP operating income (loss) per ordinary share, non-GAAP financial measures as defined in SEC Regulation G, provides investors with valuable measures of our performance.

Non-GAAP operating income (loss) is net earnings attributable to Enstar ordinary shareholders excluding: (i) net realized and unrealized (gains) losses on fixed maturity investments and funds held - directly managed included in net earnings (loss), (ii) change in fair value of insurance contracts for which we have elected the fair value option, (iii) (gain) loss on sale of subsidiaries, if any, (vi) net (earnings) loss from discontinued operations, if any, (v) tax effect of these adjustments, where applicable, and (vi) attribution of share of adjustments to noncontrolling interest, where applicable. We eliminate the impact of net realized and unrealized (gains) losses on fixed maturity investments and funds held - directly managed, included in net earnings (loss), and change in fair value of insurance contracts for which we have elected the fair value option because these items are subject to significant fluctuations in fair value from period to period, driven primarily by market conditions and general economic conditions, and therefore their impact on our earnings is not reflective of the performance of our core operations. We eliminate the impact of (gain) loss on sale of subsidiaries and net (earnings) loss from discontinued operations because these are not reflective of the performance of our core operations. Diluted Non-GAAP operating income (loss) per ordinary share is diluted net earnings per ordinary share excluding the per diluted share amounts of each of the adjustments used to calculate non-GAAP operating income.

We believe these non-GAAP measures enable readers of our consolidated financial statements to analyze our results in a way that is more aligned with the manner in which our management measures our underlying performance. We believe that presenting these non-GAAP financial measures, which may be defined and calculated differently by other companies, improves the understanding of our consolidated results of operations. These measures should not be viewed as substitutes for those calculated in accordance with U.S. GAAP.

Reconciliation of Non-GAAP Financial Measures

Non-GAAP operating income attributable to Enstar ordinary shareholders is calculated by the addition or subtraction of certain items from within our consolidated statements of earnings to or from net earnings attributable to Enstar ordinary shareholders, the most directly comparable GAAP financial measure, as illustrated in the table below:

	Three Months Ended
	March 31,
	2021				2020
	(expressed in thousands of U.S. dollars, except share and per share data)
Net earnings (loss) attributable to Enstar ordinary shareholders	$	183,197			$	(516,821	)
Adjustments:
Net realized and unrealized losses on fixed maturity investments and funds held - directly managed (1)	206,183				277,561
Change in fair value of insurance contracts for which we have elected the fair value option	(75,472		)		(58,237		)
Net gain on sale of subsidiaries	(14,894		)		—
Net loss from discontinued operations	—				2,069
Tax effects of adjustments (2)	(16,148		)		(25,965		)
Adjustments attributable to noncontrolling interest (3)	864				(16,411		)
Non-GAAP operating income (loss) attributable to Enstar Group Limited ordinary shareholders (4)	$	283,730			$	(337,804	)
Diluted net earnings (loss) per ordinary share (5)	$	8.38			$	(23.98	)
Adjustments:
Net realized and unrealized losses on fixed maturity investments and funds held - directly managed (1)	9.43				12.86
Change in fair value of insurance contracts for which we have elected the fair value option	(3.45		)		(2.70		)
Net gain on sale of subsidiaries	(0.68		)		—
Net loss from discontinued operations	—				0.10
Tax effects of adjustments (2)	(0.74		)		(1.20		)
Adjustments attributable to noncontrolling interest (3)	0.04				(0.76		)
Diluted non-GAAP operating income (loss) per ordinary share (4) (5)	$	12.98			$	(15.68	)
Weighted average ordinary shares outstanding:
Basic	21,562,341				21,549,844
Diluted	21,852,324				21,779,906

⁽¹⁾ Represents the net realized and unrealized gains and losses related to fixed maturity securities. Our fixed maturity securities are held directly on our balance sheet and also within the "Funds held - directly managed" balance. Refer to Note 4 - "Investments" to our consolidated financial statements included within Item 1 of our Quarterly Report on Form 10-Q for the three months ended March 31, 2021 for further details on our net realized and unrealized gains and losses.
⁽²⁾ Represents an aggregation of the tax expense or benefit associated with the specific country to which the pre-tax adjustment relates, calculated at the applicable jurisdictional tax rate.
⁽³⁾ Represents the impact of the adjustments on the net earnings (loss) attributable to noncontrolling interest associated with the specific subsidiaries to which the adjustments relate.
⁽⁴⁾ Non-GAAP financial measure.
⁽⁵⁾ During a period of loss, the basic weighted average ordinary shares outstanding is used in the denominator of the diluted loss per ordinary share computation as the effect of including potentially dilutive securities would be anti-dilutive.

Cautionary Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include statements regarding the intent, belief or current expectations of Enstar and its management team. Investors are cautioned that any such forward-looking statements speak only as of the date they are made, are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Important risk factors regarding Enstar can be found under the heading "Risk Factors" in our Form 10-K for the year ended December 31, 2020 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.

^{________________________
1} Non-GAAP operating income (loss) and non-GAAP operating income (loss) per fully diluted ordinary share are non-GAAP financial measures as defined in SEC Regulation G. The reconciliations of these non-GAAP measures to the most comparable GAAP financial measures (net earnings (loss) attributable to Enstar ordinary shareholders and diluted net earnings (loss) per ordinary share, respectively) are provided below, along with a discussion of the rationale for the presentation of these items.

Contact: Enstar Communications
Telephone: +1 (441) 292-3645

FAQ

What were Enstar's net earnings for Q1 2021?

Enstar reported net earnings of $183.2 million for the three months ended March 31, 2021.

How did Enstar's earnings compare to the previous year?

In Q1 2020, Enstar faced a net loss of $516.8 million.

What was Enstar's non-GAAP operating income for Q1 2021?

The non-GAAP operating income for Enstar in Q1 2021 was $283.7 million.

What is the fully diluted book value per share for Enstar?

The fully diluted book value per share increased to $284.72 as of March 31, 2021.

What factors contributed to Enstar's net earnings in Q1 2021?

Key drivers included a $55.5 million reduction in net incurred losses and $118.0 million in earnings from equity method investments.