Enstar Group Limited (Nasdaq: ESGR) filed its annual report on Form
10-K with the SEC earlier today, reporting its earnings and
financial position for the year ended December 31, 2019.
Enstar reported consolidated net earnings of
$902.2 million (or earnings of $41.43 per fully diluted ordinary
share) for the year ended December 31, 2019, compared to
consolidated net losses of $162.4 million (or $7.84 loss per fully
diluted ordinary share) for the year ended December 31,
2018.
The key drivers of net earnings for the year
ended December 31, 2019 were:
- Net realized and unrealized gains on fixed income investments
of $534.7 million for the year ended December 31, 2019,
compared to net realized and unrealized losses of $243.1 million
for the year ended December 31, 2018. Many insurance companies
predominantly use available-for-sale accounting where unrealized
amounts are recorded directly to shareholders’ equity and therefore
do not impact earnings. Unrealized amounts would only become
realizable in the event of a sale of the specific securities prior
to maturity or a credit default. Historically, we have generally
accounted for our fixed income portfolio as trading, which is
reflected in earnings. However, from October 1, 2019 we have
elected to use available-for-sale accounting for all newly acquired
business and, where permissible, as trading fixed income securities
mature, we are reinvesting the proceeds into available-for-sale
securities;
- Net realized and unrealized gains on equities and other
investments of $496.6 million for the year ended December 31,
2019, compared to net realized and unrealized losses of $169.8
million for the year ended December 31, 2018.
Non-GAAP operating income1 was $553.4 million
(or $25.42 per fully diluted ordinary share) for the year ended
December 31, 2019, compared to $61.6 million (or $2.95 per
fully diluted ordinary share) for the year ended December 31,
2018.
Enstar's ordinary shareholders' equity at
December 31, 2019 amounted to $4,332.2 million (or $197.93 per
fully diluted ordinary share), compared to $3,391.9 million (or
$155.94 per fully diluted ordinary share) at December 31,
2018. The Form 10-K, which is available on Enstar's website,
www.enstargroup.com, contains a more detailed description of
Enstar's business and financial results.
1 Non-GAAP operating income and
non-GAAP operating income 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
Group Limited ordinary shareholders and diluted net earnings (loss)
per ordinary share, respectively) are provided below, and a
discussion of the rationale for the presentation of these items is
included later in this press release.
About Enstar
Enstar is a multi-faceted insurance group,
with approximately $19.4 billion in assets, that offers innovative
capital release solutions and specialty underwriting capabilities
through its network of group companies in Bermuda, the United
States, the United Kingdom, Continental
Europe, Australia, and other international locations.
Enstar is a market leader in completing legacy acquisitions,
having completed or announced the acquisition of over 100 companies
and portfolios since its formation in 2001. Enstar’s active
underwriting businesses include the StarStone group of companies,
an A- rated global specialty insurance group with multiple global
underwriting platforms, and the Atrium group of companies, which
manage and underwrite specialist insurance and reinsurance business
for Lloyd’s Syndicate 609. For further information about Enstar,
see www.enstargroup.com.
Non-GAAP Financial Measures
In addition to presenting net earnings (loss)
attributable to Enstar Group Limited 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 Group Limited ordinary
shareholders and diluted non-GAAP operating income (loss) per
ordinary share, non-GAAP financial measures as defined in Item
10(e) of Regulation S-K, provides investors with valuable measures
of our performance.
Non-GAAP operating income (loss) excludes: (i)
net realized and unrealized (gains) losses on fixed maturity
investments and funds held - directly managed, (ii) change in fair
value of insurance contracts for which we have elected the fair
value option, (iii) (gains) losses on sale of subsidiaries, (vi)
net (earnings) loss from discontinued operations, (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 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 (gains) losses on sale of subsidiaries and
net (earnings) loss from discontinued operations as these are
non-recurring rather than being reflective of the performance of
our core operations.
Further, we believe these non-GAAP measures
enable readers of the consolidated financial statements to more
easily analyze our results in a manner aligned with that in which
Enstar's management analyzes 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 the our consolidated results of operations. These
measures should not be viewed as a substitute for those calculated
in accordance with U.S. GAAP.
Reconciliation of Non-GAAP Financial
Measures
Non-GAAP operating income (loss) attributable to
Enstar Group Limited ordinary shareholders is calculated by the
addition or subtraction of certain items from within our
consolidated statements of earnings to or from net earnings (loss)
attributable to Enstar Group Limited ordinary shareholders, the
most directly comparable GAAP financial measure, as illustrated in
the table below:
|
|
Year Ended |
|
|
December 31, |
|
|
2019 |
|
2018 |
|
2017 |
|
In thousands of U.S. dollars(except for
per share data) |
Net earnings (loss)
attributable to Enstar Group Limited ordinary shareholders |
|
$ |
902,175 |
|
|
$ |
(162,354 |
) |
|
$ |
311,458 |
|
Adjustments: |
|
|
|
|
|
|
Net realized and unrealized (gains) losses on fixed maturity
investments and funds held - directly managed (1) |
|
(534,730 |
) |
|
243,093 |
|
|
(70,747 |
) |
Change in fair value of insurance contracts for which we have
elected the fair value option |
|
117,181 |
|
|
6,664 |
|
|
30,256 |
|
Loss on sale of subsidiary |
|
— |
|
|
— |
|
|
16,349 |
|
Net (earnings) loss from discontinued operations |
|
— |
|
|
— |
|
|
(14,183 |
) |
Tax effects of adjustments (2) |
|
51,102 |
|
|
(16,588 |
) |
|
5,364 |
|
Adjustments attributable to noncontrolling interest (3) |
|
17,689 |
|
|
(9,166 |
) |
|
4,840 |
|
Non-GAAP operating income
attributable to Enstar Group Limited ordinary shareholders (4) |
|
$ |
553,417 |
|
|
$ |
61,649 |
|
|
$ |
283,337 |
|
|
|
|
|
|
|
|
Diluted net earnings (loss)
per ordinary share |
|
$ |
41.43 |
|
|
$ |
(7.84 |
) |
|
$ |
15.95 |
|
Adjustments: |
|
|
|
|
|
|
Net realized and unrealized (gains) losses on fixed maturity
investments and funds held - directly managed (1) |
|
(24.55 |
) |
|
11.70 |
|
|
(3.62 |
) |
Change in fair value of insurance contracts for which we have
elected the fair value option |
|
5.38 |
|
|
0.32 |
|
|
1.55 |
|
Loss on sale of subsidiary |
|
— |
|
|
— |
|
|
0.84 |
|
Net (earnings) loss from discontinued operations |
|
— |
|
|
— |
|
|
(0.73 |
) |
Tax effects of adjustments (2) |
|
2.35 |
|
|
(0.79 |
) |
|
0.27 |
|
Adjustments attributable to noncontrolling interest (3) |
|
0.81 |
|
|
(0.44 |
) |
|
0.25 |
|
Diluted non-GAAP operating
income per ordinary share (4) |
|
$ |
25.42 |
|
|
$ |
2.95 |
|
|
$ |
14.51 |
|
|
|
|
|
|
|
|
Weighted average ordinary
shares outstanding - diluted |
|
21,775,066 |
|
|
20,904,176 |
|
|
19,527,591 |
|
(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 6
- "Investments" in the notes to our consolidated financial
statements included within Item 8 of this Annual Report on Form
10-K 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.
Cautionary Statement
This press release contains certain
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements include
statements regarding the intent, belief or current expectations of
Enstar and its management team. Investors are cautioned that any
such forward-looking statements speak only as of the date they are
made, are not guarantees of future performance and involve risks
and uncertainties, and that actual results may differ materially
from those projected in the forward-looking statements as a result
of various factors. Important risk factors regarding Enstar can be
found under the heading "Risk Factors" in Enstar's Form 10-K for
the year ended December 31, 2019 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.
Contact: Guy BowkerTelephone:
+1 (441) 292-3645
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