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 and nine months ended September
30, 2020.
Enstar reported consolidated net earnings of
$615.0 million (or $28.24 per fully diluted ordinary share)
and $896.7 million (or $41.14 per fully diluted ordinary
share) for the three and nine months ended September 30, 2020,
respectively, compared to consolidated net earnings of $117.7
million (or $5.42 per fully diluted ordinary share) and $708.3
million (or $32.58 per fully diluted ordinary share) for the three
and nine months ended September 30, 2019, respectively.
The key drivers of net earnings were:
- Net realized and unrealized gains of $500.0 million for the
three months ended September 30, 2020, including $432.7 million
relating to other investments and equities and $67.3 million
relating to fixed income securities;
- Net realized and unrealized gains of $838.6 million for the
nine months ended September 30, 2020, including $631.5 million
relating to other investments and equities and $207.1 million
relating to fixed income securities;
Non-GAAP operating income1 was $574.4 million
(or $26.37 per fully diluted ordinary share1) and
$804.2 million (or $36.89 per fully diluted ordinary share) for the
three and nine months ended September 30, 2020, respectively,
compared to non-GAAP operating income of $32.7 million (or $1.51
per fully diluted ordinary share) and $341.2 million (or $15.69 per
fully diluted ordinary share) for the three and nine months ended
September 30, 2019, respectively.
Enstar's ordinary shareholders' equity at
September 30, 2020 amounted to $5,310.9 million (or $242.36 per
fully diluted ordinary share), compared to $4,332.2 million (or
$197.93 per fully diluted ordinary share) at December 31, 2019. 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.
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.
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) excludes: (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 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. When
applicable, 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 |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
(expressed in thousands of U.S. dollars, except share and
per share data) |
Net earnings attributable to Enstar ordinary shareholders |
$ |
615,013 |
|
|
$ |
117,743 |
|
|
$ |
896,745 |
|
|
$ |
708,336 |
|
Adjustments: |
|
|
|
|
|
|
|
Net realized and unrealized (gains) on fixed maturity investments
and funds held - directly managed (1) |
(67,294 |
) |
|
(135,005 |
) |
|
(207,097 |
) |
|
(558,755 |
) |
Change in fair value of insurance contracts for which we have
elected the fair value option |
21,042 |
|
|
41,374 |
|
|
96,848 |
|
|
135,377 |
|
Net (earnings) loss from discontinued operations |
(4,031 |
) |
|
(7,916 |
) |
|
(810 |
) |
|
(12,041 |
) |
Tax effects of adjustments (2) |
5,771 |
|
|
12,042 |
|
|
19,070 |
|
|
50,841 |
|
Adjustments attributable to noncontrolling interest (3) |
3,881 |
|
|
4,500 |
|
|
(536 |
) |
|
17,397 |
|
Non-GAAP operating
income attributable to Enstar ordinary shareholders (4) |
$ |
574,382 |
|
|
$ |
32,738 |
|
|
$ |
804,220 |
|
|
$ |
341,155 |
|
|
|
|
|
|
|
|
|
Diluted net earnings per
ordinary share |
$ |
28.24 |
|
|
$ |
5.42 |
|
|
$ |
41.14 |
|
|
$ |
32.58 |
|
Adjustments: |
|
|
|
|
|
|
|
Net realized and unrealized (gains) on fixed maturity investments
and funds held - directly managed (1) |
(3.09 |
) |
|
(6.21 |
) |
|
(9.50 |
) |
|
(25.71 |
) |
Change in fair value of insurance contracts for which we have
elected the fair value option |
0.97 |
|
|
1.90 |
|
|
4.44 |
|
|
6.23 |
|
Net (earnings) loss from discontinued operations |
(0.19 |
) |
|
(0.36 |
) |
|
(0.04 |
) |
|
(0.55 |
) |
Tax effects of adjustments (2) |
0.26 |
|
|
0.55 |
|
|
0.87 |
|
|
2.34 |
|
Adjustments attributable to noncontrolling interest (3) |
0.18 |
|
|
0.21 |
|
|
(0.02 |
) |
|
0.80 |
|
Diluted non-GAAP operating
income per ordinary share (4) |
$ |
26.37 |
|
|
$ |
1.51 |
|
|
$ |
36.89 |
|
|
$ |
15.69 |
|
|
|
|
|
|
|
|
|
Weighted average ordinary
shares outstanding: |
|
|
|
|
|
|
|
Basic |
21,578,106 |
|
|
21,488,216 |
|
|
21,564,447 |
|
|
21,476,586 |
|
Diluted |
21,778,729 |
|
|
21,720,497 |
|
|
21,799,627 |
|
|
21,741,499 |
|
(1) Represents the net realized and unrealized
gains and losses related to fixed maturity securities included in
net earnings (loss). 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
consolidated financial statements included within Item 1 of our
Quarterly Report on Form 10-Q 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 Statements
Forward-Looking 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. In particular, the evolving COVID-19 pandemic
has caused significant economic and financial turmoil globally, as
well as uncertainty and volatility in the financial markets. Due to
the global uncertainty, we are unable to predict the longer-term
effects of the pandemic on our business at this time. Important
risk factors regarding Enstar can be found under the heading "Risk
Factors" in our Form 10-K for the year ended December 31, 2019 and
in our Form 10-Q for the three months ended September 30, 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.
Uncertainties Relating to the COVID-19 Pandemic
We expect that uncertainty and volatility in
financial markets will continue to impact the value of our
investments. The scope, duration and magnitude of the direct
and indirect effects of the COVID-19 pandemic are changing rapidly
and are difficult to anticipate. As with others in our industry, we
are subject to economic factors such as interest rates, foreign
exchange rates, underwriting events, regulation, tax policy
changes, political risks and other market risks that can impact our
strategy, operations, and results. The underwriting losses related
to the COVID-19 pandemic disclosed in this press release represent
our estimates of net incurred losses and loss adjustment expenses
through September 30, 2020. Given the uncertainties associated with
COVID-19 and its impact, and the limited information upon which our
current estimates have been made, our preliminary reserves and the
underlying estimated level of claim losses and costs arising from
COVID-19 may materially change.
Contact: Enstar
CommunicationsTelephone: +1 (441) 292-3645
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