Enstar Group Limited Reports Third Quarter Results
Enstar Group Limited (Nasdaq: ESGR) reported a net loss of $196.0 million for Q3 2021, translating to $10.68 per share. In contrast, net earnings for the first nine months of 2021 were $364.6 million ($17.53 per share), down from $615.0 million in Q3 2020. The loss was mainly due to $273.3 million in net realized and unrealized losses, largely from the InRe Fund amidst market volatility. Non-GAAP operating loss stood at $176.0 million for Q3 while net investment income for nine months reached $231.0 million. Shareholder equity decreased to $5.6 billion.
- Net earnings for the nine months reached $364.6 million, a significant figure despite losses in Q3.
- Non-GAAP operating income for the nine months was $398.2 million.
- Reported a net loss of $196.0 million for Q3 2021.
- A substantial drop in Q3 net earnings compared to $615.0 million in Q3 2020.
- Net realized and unrealized losses of $273.3 million primarily from the InRe Fund.
- Decrease in ordinary shareholders' equity to $5.6 billion from $6.2 billion at year-end.
- Net Loss of
$196.0 million and Net Earnings of$364.6 million for the Three and Nine Months Ended September 30, 2021 - Non-GAAP Operating Loss1 of
$176.0 million and Non-GAAP Operating Income1 of$398.2 million for the Three and Nine Months Ended September 30, 2021 - Fully diluted book value per share of
$307.09 as of September 30, 2021, an increase of26.7% year over year
HAMILTON, Bermuda, Nov. 04, 2021 (GLOBE NEWSWIRE) -- Enstar Group Limited (Nasdaq: ESGR) filed its quarterly report on Form 10-Q with the SEC earlier today, reporting its earnings (loss) and financial position for the three and nine months ended September 30, 2021.
Enstar reported a consolidated net loss of
The key driver of the net loss for the three months ended September 30, 2021 was:
- Net realized and unrealized losses of
$273.3 million , including$285.2 million relating to our consolidated variable interest entity, the InRe Fund, from which we redeemed$1.5 billion . Following our decision to redeem, the InRe Fund's investments were impacted by significant volatility in Chinese and other global equity markets. We are continuing the orderly wind down of the InRe Fund's remaining investment portfolio, which was$447.7 million as of September 30, 2021.
The key drivers of net earnings for the nine months ended September 30, 2021 were:
- Net investment income of
$231.0 million and net realized and unrealized gains of$111.2 million including$299.8 million relating to our consolidated variable interest entity, other investments and equities, partially offset by$188.6 million in net realized and unrealized losses relating to fixed income securities; and
- Earnings from equity method investments of
$100.8 million .
Non-GAAP operating loss1 was
Enstar's ordinary shareholders' equity at September 30, 2021 amounted to
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 110 companies and portfolios since its formation in 2001. For further information about Enstar, see www.enstargroup.com.
Non-GAAP Operating Income
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, Enstar's management believes 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 (loss) 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 the fair value option has been elected, (iii) (gain) loss on purchases and sales of subsidiaries, if any, (iv) 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 the fair value option has been elected 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 purchases and sales 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 (loss) per ordinary share excluding the per diluted share amounts of each of the adjustments used to calculate non-GAAP operating income (loss).
Enstar's management 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. Enstar's management 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.
Non-GAAP operating income (loss) attributable to Enstar ordinary shareholders is calculated by the addition or subtraction of certain items from within our consolidated statements of earnings (loss) to or from net earnings (loss) attributable to Enstar ordinary shareholders, the most directly comparable GAAP financial measure, as illustrated in the table below:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| (expressed in thousands of U.S. dollars, except share and per share data) | |||||||||||||||||||
| Net earnings (loss) attributable to Enstar ordinary shareholders | $ | (195,958 | ) | $ | 615,013 | $ | 364,565 | $ | 896,745 | ||||||||||
| Adjustments: | |||||||||||||||||||
| Net realized and unrealized (gains) losses on fixed maturity investments and funds held - directly managed (1) | 86,816 | (67,294 | ) | 182,855 | (207,097 | ) | |||||||||||||
| Change in fair value of insurance contracts for which the fair value option has been elected | (10,877 | ) | 21,042 | (68,636 | ) | 96,848 | |||||||||||||
| Net gain on purchase and sales of subsidiaries | (46,688 | ) | — | (61,582 | ) | — | |||||||||||||
| Net earnings from discontinued operations | — | (4,031 | ) | — | (810 | ) | |||||||||||||
| Tax effects of adjustments (2) | (3,317 | ) | 5,771 | (14,596 | ) | 19,070 | |||||||||||||
| Adjustments attributable to noncontrolling interest (3) | (6,013 | ) | 3,881 | (4,372 | ) | (536 | ) | ||||||||||||
| Non-GAAP operating income (loss) attributable to Enstar Group Limited ordinary shareholders (4) | $ | (176,037 | ) | $ | 574,382 | $ | 398,234 | $ | 804,220 | ||||||||||
| Diluted net earnings (loss) per ordinary share (5) | $ | (10.68 | ) | $ | 28.24 | $ | 17.53 | $ | 41.14 | ||||||||||
| Adjustments: | |||||||||||||||||||
| Net realized and unrealized (gains) losses on fixed maturity investments and funds held - directly managed (1) | 4.73 | (3.09 | ) | 8.79 | (9.50 | ) | |||||||||||||
| Change in fair value of insurance contracts for which the fair value option has been elected | (0.59 | ) | 0.97 | (3.30 | ) | 4.44 | |||||||||||||
| Net gain on purchase and sales of subsidiaries | (2.54 | ) | — | (2.96 | ) | — | |||||||||||||
| Net earnings from discontinued operations | — | (0.19 | ) | — | (0.04 | ) | |||||||||||||
| Tax effects of adjustments (2) | (0.18 | ) | 0.26 | (0.70 | ) | 0.87 | |||||||||||||
| Adjustments attributable to noncontrolling interest (3) | (0.33 | ) | 0.18 | (0.21 | ) | (0.02 | ) | ||||||||||||
| Diluted non-GAAP operating income (loss) per ordinary share (4) (5) | $ | (9.59 | ) | $ | 26.37 | $ | 19.15 | $ | 36.89 | ||||||||||
| Weighted average ordinary shares outstanding: | |||||||||||||||||||
| Basic | 18,349,483 | 21,578,106 | 20,502,755 | 21,564,447 | |||||||||||||||
| Diluted | 18,548,368 | 21,778,729 | 20,793,640 | 21,799,627 | |||||||||||||||
(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 5 - "Investments" to our condensed consolidated financial statements included within Item 1 of our Quarterly Report on Form 10-Q for the period ended September 30, 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 Annual Report on Form 10-K for the year ended December 31, 2020 and in our Quarterly Report on Form 10-Q for the interim period ended September 30, 2021 and are incorporated herein by reference. Furthermore, Enstar undertakes no obligation to update any written or oral forward-looking statements or publicly announce any updates or revisions to any of the forward-looking statements contained herein, to reflect any change in its expectations with regard thereto or any change in events, conditions, circumstances or assumptions underlying such statements, except as required by law.
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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
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