- Net Earnings of $38 million and Return on Equity of 0.9%, Primarily Driven by Investment Results
- Book Value per Ordinary Share of $282.37 (Adjusted* $277.01) as of September 30, 2023
- Closed Previously Announced Transaction with AIG, Subsequent to Quarter-End
- Post-Quarter End, Agreed to Repurchase $191 Million of Ordinary Shares at a 5% Discount to the Trailing 10-Day Volume Weighted Average Price of Enstar Ordinary Shares as of November 3, 2023 (Representing a 19.5% Discount to Book Value Per Ordinary Share as of September 30, 2023)
HAMILTON, Bermuda, Nov. 07, 2023 (GLOBE NEWSWIRE) -- Enstar Group Limited (Nasdaq: ESGR) filed its quarterly report on Form 10-Q with the SEC earlier today. The third quarter 2023 results with expanded commentary is available on Enstar's investor relations website at investor.enstargroup.com.
| Third Quarter 2023 Highlights: |
- Net earnings attributable to Enstar ordinary shareholders of $38 million, or $2.43 per diluted ordinary share, compared to net loss attributable to Enstar ordinary shareholders of $432 million, or $25.39 per diluted ordinary share, for the three months ended September 30, 2022.
- Return on equity ("ROE") of 0.9% and Adjusted ROE* of 2.5% for the quarter compared to (9.4)% and (2.5)%, respectively, in the third quarter of 2022. ROE performance was driven by investment returns of $146 million. Adjusted ROE* excludes $80 million of net realized and unrealized losses on our fixed maturities.
- Run-off liability earnings ("RLE") of $15 million was driven by favorable development on our workers' compensation and property lines of business and a reduction in the provisions for ULAE, partially offset by a charge to increase the value of certain portfolios that are held at fair value due to decreases in U.K. corporate bond yields and adverse development on our general casualty and all other line of business. In comparison, RLE of $141 million in the comparative quarter was positively impacted by favorable development in our workers' compensation and marine, aviation and transit lines of business, as well as income resulting from reductions in the value of certain portfolio liabilities that are held at fair value due to increases in global corporate bond yields. The comparative quarter results were partially offset by adverse development on our general casualty and motor lines of business.
- Annualized total investment return ("TIR") of 1.8% and Annualized Adjusted TIR* of 4.5%, compared to (13.1)% and (1.3)%, respectively, for the three months ended September 30, 2022. Recognized investment results benefited from net realized and unrealized gains on our other investments, including equities, of $86 million and net investment income of $143 million, partially offset by net realized and unrealized losses on our fixed maturities, including other comprehensive income ("OCI") of $143 million.
- Signed agreement with American International Group, Inc. ("AIG") to provide protection to AIG on its retained exposure to adverse development on Validus Re carried loss reserves, up to a limit of $400 million. The agreement became effective as of November 1, 2023, corresponding to the closing of AIG's sale of Validus Re to RenaissanceRe.
* Non-GAAP measure; refer to "Non-GAAP Financial Measures" further below for explanatory notes and a reconciliation to the most directly comparable GAAP measure.
| Announces Repurchase of $191 Million of Ordinary Shares in Accretive Transaction: |
Subsequent to the end of the third quarter, in two separate transactions, Enstar agreed to repurchase 791,735 ordinary shares from Canada Pension Plan Investment Board ("CPP Investments") and its affiliate, and 50,000 ordinary shares from the Trident V funds managed by Stone Point Capital LLC ("the Trident V Funds") at a price of $227.18 per share, totaling approximately $191 million in aggregate. The price represents a 5% discount to the trailing 10-day volume weighted average price of Enstar's ordinary shares as of the close of business on November 3, 2023. Additionally, Enstar's Chief Executive Officer, Dominic Silvester, will acquire 45,000 ordinary shares for approximately $10 million from the Trident V Funds.
These transactions are scheduled to close on November 14, 2023.
| Dominic Silvester, Enstar CEO, said: |
"We maintained strong operational momentum in the third quarter with our agreement with AIG and ongoing execution of our strategic priorities, while delivering year-to-date growth in book value per share.? As we look to the end of 2023, we will rely on our core strengths of scale, claims management experience and our strong balance sheet to continue providing long-term value."
| Nine Months Ended September 30, 2023 Highlights: |
- Net earnings attributable to Enstar ordinary shareholders of $483 million, or $30.05 per diluted ordinary share, compared to net loss attributable to Enstar ordinary shareholders of $1.1 billion, or $65.61 per diluted ordinary share, for the nine months ended September 30, 2022.
- ROE of 10.8% and Adjusted ROE* of 10.8%, compared to (19.5)% and (5.2)%, respectively, for the nine months ended September 30, 2022. ROE performance was driven by investment returns of $660 million and a year-to-date net gain recognized on the completion of the novation of the Enhanzed Re reinsurance of a closed block of life annuity policies of $195 million.
- RLE of $35 million was driven by favorable development on our workers' compensation and property lines of business and a reduction in the provisions for ULAE, partially offset by a charge to increase the value of certain portfolios that are held at fair value and adverse development on our general casualty and all other line of business. In comparison, RLE of $476 million for the nine months ended September 30, 2022 was positively impacted by favorable development in our workers' compensation, professional indemnity/directors and officers and marine, aviation and transit lines of business, as well as income resulting from reductions in the value of certain portfolio liabilities that are held at fair value due to increases in global corporate bond yields. The comparative period results were partially offset by adverse development in our general casualty and motor lines of business.
- Annualized TIR of 4.7% and Annualized Adjusted TIR* of 5.3%, compared to (13.0)% and (1.0)%, respectively, for the nine months ended September 30, 2022. Recognized investment results benefited from net realized and unrealized gains on our other investments, including equities, of $295 million and net investment income of $471 million, partially offset by net realized and unrealized losses on our fixed maturities, including other comprehensive income ("OCI") of $126 million.
- Completed $1.9 billion LPT agreement with certain subsidiaries of QBE Insurance Group Limited ("QBE") and AUD $360 million (USD $245 million) LPT with RACQ Insurance Limited ("RACQ"). At closing, we assumed net loss reserves of $2.0 billion from QBE and $179 million from RACQ, respectively.
- Amended and restated our existing revolving credit agreement, increasing commitments from $600 million to $800 million and increasing the term by five years.
- Repurchased remaining $341 million of non-voting convertible ordinary shares, at a price that represented a 13% discount to year-end book value at the time the repurchase was negotiated as reported in our Annual Report on Form 10-K for the year ended December 31, 2022, simplifying Enstar's capital structure. Following the adoption of the long-duration targeted improvements accounting standard which required adjustments to our financial statements (including equity) on a retrospective basis, the price paid in the repurchase transaction represented a 23% discount to year-end book value as reported in and further described in our Quarterly Report on Form 10-Q for the period ended September 30, 2023.
* 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:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2023 | 2022 | $ / pp / bp Change | 2023 | 2022 | $ / pp / bp Change | ||||||||||||||||||
| (in millions of U.S. dollars, except per share data) | |||||||||||||||||||||||
| Key Earnings Metrics | |||||||||||||||||||||||
| Net earnings (loss) attributable to Enstar ordinary shareholders | $ | 38 | $ | (432 | ) | $ | 470 | $ | 483 | $ | (1,133 | ) | $ | 1,616 | |||||||||
| Adjusted operating income (loss) attributable to Enstar ordinary shareholders* | $ | 128 | $ | (136 | ) | $ | 264 | $ | 634 | $ | (285 | ) | $ | 919 | |||||||||
| ROE | 0.9 | % | (9.4 | )% | 10.3 | pp | 10.8 | % | (19.5 | )% | 30.3 | pp | |||||||||||
| Annualized ROE | 14.4 | % | (26.0 | )% | 40.4 | pp | |||||||||||||||||
| Adjusted ROE* | 2.5 | % | (2.5 | )% | 5.0 | pp | 10.8 | % | (5.2 | )% | 16.0 | pp | |||||||||||
| Annualized Adjusted ROE* | 14.4 | % | (6.9 | ) | |||||||||||||||||||
| Key Run-off Metrics | |||||||||||||||||||||||
| Prior period development | $ | 15 | $ | 141 | $ | (126 | ) | $ | 35 | $ | 476 | $ | (441 | ) | |||||||||
| Adjusted prior period development* | $ | 32 | $ | 61 | $ | (29 | ) | $ | 76 | $ | 237 | $ | (161 | ) | |||||||||
| RLE | 0.1 | % | 1.2 | % | (1.1 | )pp | 0.3 | % | 4.0 | % | (3.7 | )pp | |||||||||||
| Adjusted RLE* | 0.2 | % | 0.5 | % | (0.3 | )pp | 0.6 | % | 1.9 | % | (1.3 | )pp | |||||||||||
| Key Investment Return Metrics | |||||||||||||||||||||||
| Total investable assets | $ | 18,594 | $ | 19,310 | $ | (716 | ) | $ | 18,594 | $ | 19,310 | $ | (716 | ) | |||||||||
| Adjusted total investable assets* | $ | 19,816 | $ | 21,236 | $ | (1,420 | ) | $ | 19,816 | $ | 21,236 | $ | (1,420 | ) | |||||||||
| Annualized investment book yield | 3.53 | % | 2.32 | % | 121 | bp | 3.73 | % | 2.15 | % | 158 | bp | |||||||||||
| Annualized TIR | 1.8 | % | (13.1 | )% | 14.9 | pp | 4.7 | % | (13.0 | )% | 17.7 | pp | |||||||||||
| Annualized Adjusted TIR* | 4.5 | % | (1.3 | )% | 5.8 | pp | 5.3 | % | (1.0 | )% | 6.3 | pp | |||||||||||
| As of | |||||||||||||||||||||||
| Key Shareholder Metrics | September 30, 2023 | December 31, 2022 | |||||||||||||||||||||
| Book value per ordinary share | $ | 282.37 | $ | 262.24 | $ | 20.13 | |||||||||||||||||
| Adjusted book value per ordinary share* | $ | 277.01 | $ | 258.92 | $ | 18.09 | |||||||||||||||||
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 Three and Nine Months Ended September 30, 2023 and 2022 |
Run-off Segment
The following is a discussion and analysis of the results of operations for our Run-off segment.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
| September 30, | $ Change | September 30, | $ Change | ||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||
| INCOME | (in millions of U.S. dollars) | ||||||||||||||||||||||||||||
| Net premiums earned | $ | 14 | $ | 1 | $ | 13 | $ | 29 | $ | 27 | $ | 2 | |||||||||||||||||
| Other income: | |||||||||||||||||||||||||||||
| Reduction in estimates of net ultimate defendant A&E liabilities - prior periods | - | - | - | 2 | 4 | (2 | ) | ||||||||||||||||||||||
| Reduction in estimated future defendant A&E expenses | 1 | - | 1 | 2 | 1 | 1 | |||||||||||||||||||||||
| All other income | - | 2 | (2 | ) | 7 | 14 | (7 | ) | |||||||||||||||||||||
| Total other income | 1 | 2 | (1 | ) | 11 | 19 | (8 | ) | |||||||||||||||||||||
| Total income | 15 | 3 | 12 | 40 | 46 | (6 | ) | ||||||||||||||||||||||
| EXPENSES | |||||||||||||||||||||||||||||
| Net incurred losses and LAE: | |||||||||||||||||||||||||||||
| Current period | 5 | 10 | (5 | ) | 18 | 35 | (17 | ) | |||||||||||||||||||||
| Prior periods: | |||||||||||||||||||||||||||||
| Reduction in estimates of net ultimate losses | (12 | ) | (46 | ) | 34 | (35 | ) | (183 | ) | 148 | |||||||||||||||||||
| Reduction in provisions for ULAE | (19 | ) | (15 | ) | (4 | ) | (37 | ) | (49 | ) | 12 | ||||||||||||||||||
| Total prior periods | (31 | ) | (61 | ) | 30 | (72 | ) | (232 | ) | 160 | |||||||||||||||||||
| Total net incurred losses and LAE | (26 | ) | (51 | ) | 25 | (54 | ) | (197 | ) | 143 | |||||||||||||||||||
| Acquisition costs | - | 1 | (1 | ) | 6 | 18 | (12 | ) | |||||||||||||||||||||
| General and administrative expenses (1) | 44 | 38 | 6 | 130 | 123 | 7 | |||||||||||||||||||||||
| Total expenses | 18 | (12 | ) | 30 | 82 | (56 | ) | 138 | |||||||||||||||||||||
| SEGMENT NET (LOSS) EARNINGS | $ | (3 | ) | $ | 15 | $ | (18 | ) | $ | (42 | ) | $ | 102 | $ | (144 | ) | |||||||||||||
(1) Includes an adjustment made to correct immaterial errors related to the allocation of third quarter 2022 expenses, which increased general and administrative expenses by $4 million and $14 million for the three and nine months ended September 30, 2022, respectively.
Overall Results
Three Months Ended September 30, 2023 versus 2022: Net loss from our Run-off segment was $3 million compared to net earnings of $15 million in the comparative quarter, primarily due to:
- A $30 million decrease in favorable PPD in the current quarter, mainly driven by a $34 million decrease in the reduction in estimates of net ultimate losses in comparison to the comparative quarter.
- During the third quarter of 2023, we recognized favorable development on our workers' compensation and property lines of business of $24 million and $17 million, respectively, as a result of favorable claims experience. The results were partially offset by adverse development on our general casualty line of business of $41 million, primarily due to a small number of large losses across several portfolios, particularly on excess business, and adverse development on our all other line of business of $17 million, driven by identified deterioration on abuse claims.
- In comparison, during the third quarter of 2022 we recognized favorable development of $54 million on our workers' compensation line of business as a result of favorable claim settlements, and favorable development of $28 million on our marine, aviation and transit line of business as a result of lower claim activity. This was partially offset by adverse development on our general casualty and motor lines of business of $21 million and $19 million, respectively, primarily due to worse than expected claims experience and adverse development on claims; partially offset by
- A net favorable change in net premiums earned, current period net incurred losses and LAE and acquisition costs of $19 million, following our exit of our StarStone International business beginning in 2020.
Nine Months Ended September 30, 2023 versus 2022: Net loss from our Run-off segment was $42 million compared to net earnings of $102 million in the comparative period, primarily due to:
- A $160 million decrease in favorable PPD, mainly driven by a $148 million decrease in the reduction in estimates of net ultimate losses in comparison to the comparative period.
- The prior period reduction in estimates of net ultimate losses of $35 million was driven by net favorable development across multiple Run-off segment lines of business. We recognized $44 million of favorable development on our workers' compensation line of business as a result of continued favorable claims experience and $16 million of favorable development on our property line of business as a result of favorable claims experience. The results were partially offset by $37 million of adverse development in our general casualty line of business, primarily due to a small number of large losses across several portfolios, particularly on excess business, and $18 million of adverse development on our all other line of business, driven by identified deterioration on abuse claims.
- We also increased our ULAE provision by $21 million as a result of assuming active claims control on our 2022 LPT agreement with Argo, which offset other ULAE reserve adjustments from our run-off operations.
- In comparison, during the nine months ended September 30, 2022, we recognized favorable development of $104 million on our workers' compensation line of business as a result of favorable claim settlements. We also recognized favorable development of $85 million on our professional indemnity/directors and officers line of business and favorable development of $38 million on our marine, aviation and transit line of business as a result of lower claims activity. This was partially offset by adverse development on our general casualty and motor lines of business of $31 million and $20 million, respectively, as a result of worse than expected claims experience and adverse development on claims; partially offset by
- A net favorable change in net premiums earned, current period net incurred losses and LAE and acquisition costs of $31 million, following our exit of our StarStone International business beginning in 2020.
Investments Segment
The following is a discussion and analysis of the results of operations for our Investments segment.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
| September 30, | $ Change | September 30, | $ Change | ||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||
| (in millions of U.S. dollars) | |||||||||||||||||||||||||||||
| INCOME | |||||||||||||||||||||||||||||
| Net investment income: | |||||||||||||||||||||||||||||
| Fixed maturities | $ | 120 | $ | 94 | $ | 26 | $ | 396 | $ | 247 | $ | 149 | |||||||||||||||||
| Cash and restricted cash | 14 | 2 | 12 | 27 | 3 | 24 | |||||||||||||||||||||||
| Other investments, including equities | 15 | 22 | (7 | ) | 62 | 63 | (1 | ) | |||||||||||||||||||||
| Less: Investment expenses | (6 | ) | (4 | ) | (2 | ) | (14 | ) | (19 | ) | 5 | ||||||||||||||||||
| Total net investment income | 143 | 114 | 29 | 471 | 294 | 177 | |||||||||||||||||||||||
| Net realized (losses) gains: | |||||||||||||||||||||||||||||
| Fixed maturities | (12 | ) | (23 | ) | 11 | (62 | ) | (88 | ) | 26 | |||||||||||||||||||
| Other investments, including equities | (2 | ) | (13 | ) | 11 | 29 | (23 | ) | 52 | ||||||||||||||||||||
| Net realized (losses) gains: | (14 | ) | (36 | ) | 22 | (33 | ) | (111 | ) | 78 | |||||||||||||||||||
| Net unrealized gains (losses): | |||||||||||||||||||||||||||||
| Fixed maturities, trading | (68 | ) | (391 | ) | 323 | (66 | ) | (1,061 | ) | 995 | |||||||||||||||||||
| Other investments, including equities | 88 | (151 | ) | 239 | 266 | (445 | ) | 711 | |||||||||||||||||||||
| Total net unrealized gains (losses): | 20 | (542 | ) | 562 | 200 | (1,506 | ) | 1,706 | |||||||||||||||||||||
| Total income (loss) | 149 | (464 | ) | 613 | 638 | (1,323 | ) | 1,961 | |||||||||||||||||||||
| EXPENSES | |||||||||||||||||||||||||||||
| General and administrative expenses (1) | 12 | 9 | 3 | 33 | 26 | 7 | |||||||||||||||||||||||
| Total expenses | 12 | 9 | 3 | 33 | 26 | 7 | |||||||||||||||||||||||
| (Losses) earnings from equity method investments | (3 | ) | (20 | ) | 17 | 22 | 12 | 10 | |||||||||||||||||||||
| SEGMENT NET EARNINGS (LOSS) | $ | 134 | $ | (493 | ) | $ | 627 | $ | 627 | $ | (1,337 | ) | $ | 1,964 | |||||||||||||||
(1) Includes an adjustment made to correct immaterial errors related to the allocation of third quarter 2022 expenses, which decreased general and administrative expenses by $0 and $2 million for the three and nine months ended September 30, 2022, respectively.
Overall Results
Three Months Ended September 30, 2023 versus 2022: Net earnings from our Investments segment were $134 million for the three months ended September 30, 2023 compared to net losses of $493 million for the three months ended September 30, 2022. The favorable movement of $627 million was primarily due to:
- a decrease in net realized and unrealized losses on fixed maturities of $334 million, primarily as a result of a less significant increase in interest rates across U.S., U.K. and European markets relative to the comparable quarter;
- net realized and unrealized gains on other investments, including equities, of $86 million, compared to net realized and unrealized losses of $164 million in the comparative period. The favorable variance of $250 million was primarily driven by:
- Net gains for the three months ended September 30, 2023, primarily driven by our private equity funds, private credit funds, CLO equities and fixed income funds, which are typically recorded on a one quarter lag, largely as a result of second quarter 2023 global equity market performance and tightening high yield credit spreads; in comparison to
- Net losses for the three months ended September 30, 2022, primarily driven by our public equities, fixed income funds, private equity funds and hedge funds, largely as a result of global equity market declines and widening of high yield credit spreads; and
- an increase in our net investment income of $29 million, which is primarily due to the reinvestment of fixed maturities at higher yields, deployment of consideration received from deals closed over the past 12 months and the impact of rising interest rates on the $3.3 billion of our average fixed maturities outstanding during the period that are subject to floating interest rates. Our floating rate investments generated increased net investment income of $20 million, which equates to an increase of 168 basis points on those investments in comparison to the prior quarter.
Nine Months Ended September 30, 2023 versus 2022: Net earnings from our Investments segment were $627 million for the nine months ended September 30, 2023 compared to net losses of $1.3 billion for the nine months ended September 30, 2022. The favorable movement of $2.0 billion was primarily due to:
- a decrease in net realized and unrealized losses on fixed maturities of $1.0 billion, primarily as a result of a less significant increase in interest rates across U.S., U.K. and European markets relative to the comparative period, in addition to a tightening of credit spreads in the current period;
- net realized and unrealized gains on other investments, including equities, of $295 million, compared to net realized and unrealized losses of $468 million in the comparative period. The favorable variance of $763 million was primarily driven by:
- Net gains for the nine months ended September 30, 2023, primarily due to our public equities, private equity funds, private credit funds and fixed income funds, largely as a result of strong global equity market performance and tightening of high yield credit spreads; in comparison to
- Net losses for the nine months ended September 30, 2022, due to our public equities, fixed income funds, CLO equities and hedge funds, largely as a result of global equity market declines and widening of high yield credit spreads; and
- an increase in our net investment income of $177 million, which is primarily due to the reinvestment of fixed maturities at higher yields, deployment of consideration received from deals closed over the past 12 months and the impact of rising interest rates on the $3.2 billion of our average fixed maturities outstanding during the period that are subject to floating interest rates. Our floating rate investments generated increased net investment income of $76 million, which equates to an increase of 269 basis points on those investments in comparison to the prior period.
| Income and (Loss) Earnings by Segment - For the Three and Nine Months Ended September 30, 2023 and 2022 |
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2023 | 2022 | $ Change | 2023 | 2022 | $ Change | ||||||||||||||||||
| (in millions of U.S. dollars) | |||||||||||||||||||||||
| INCOME | |||||||||||||||||||||||
| Run-off | $ | 15 | $ | 3 | $ | 12 | $ | 40 | $ | 46 | $ | (6 | ) | ||||||||||
| Assumed Life | 1 | 2 | (1 | ) | 276 | 17 | 259 | ||||||||||||||||
| Investments | 149 | (464 | ) | 613 | 638 | (1,323 | ) | 1,961 | |||||||||||||||
| Legacy Underwriting | - | - | - | - | 8 | (8 | ) | ||||||||||||||||
| Subtotal | 165 | (459 | ) | 624 | 954 | (1,252 | ) | 2,206 | |||||||||||||||
| Corporate and other | (4 | ) | (7 | ) | 3 | (7 | ) | 10 | (17 | ) | |||||||||||||
| Total income (loss) | $ | 161 | $ | (466 | ) | $ | 627 | $ | 947 | $ | (1,242 | ) | $ | 2,189 | |||||||||
| SEGMENT NET EARNINGS (LOSS) | |||||||||||||||||||||||
| Run-off (1) | $ | (3 | ) | $ | 15 | $ | (18 | ) | $ | (42 | ) | $ | 102 | $ | (144 | ) | |||||||
| Assumed Life | 1 | (7 | ) | 8 | 276 | 15 | 261 | ||||||||||||||||
| Investments (1) | 134 | (493 | ) | 627 | 627 | (1,337 | ) | 1,964 | |||||||||||||||
| Legacy Underwriting | - | - | - | - | - | - | |||||||||||||||||
| Total segment net earnings (loss) | 132 | (485 | ) | 617 | 861 | (1,220 | ) | 2,081 | |||||||||||||||
| Corporate and other (1) | (94 | ) | 53 | (147 | ) | (378 | ) | 87 | (465 | ) | |||||||||||||
| NET EARNINGS (LOSS) ATTRIBUTABLE TO ENSTAR ORDINARY SHAREHOLDERS | $ | 38 | $ | (432 | ) | $ | 470 | $ | 483 | $ | (1,133 | ) | $ | 1,616 | |||||||||
(1) Third quarter 2022 presentation of segment results include an adjustment made to correct immaterial errors related to the allocation of expenses. For the three and nine months ended September 30, 2022, Run-off segment general and administrative expenses increased by $4 million and $14 million, respectively, Investment segment general and administrative expenses decreased by $0 and $2 million, respectively, and Corporate and other activities general and administrative expenses decreased by $4 million and $12 million, respectively.
For additional detail on the Assumed Life segment, the Legacy Underwriting segment and Corporate and other activities, please refer to our Quarterly Report on Form 10-Q for the period ended September 30, 2023.
| 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', '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.
| Contacts |
For Investors: Matthew Kirk (investor.relations@enstargroup.com)
For Media: Jenna Kerr (communications@enstargroup.com)
ENSTAR GROUP LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Three and Nine Months Ended September 30, 2023 and 2022
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| (expressed in millions of U.S. dollars, except share and per share data) | |||||||||||||||
| INCOME | |||||||||||||||
| Net premiums earned | $ | 14 | $ | 4 | $ | 29 | $ | 52 | |||||||
| Net investment income | 143 | 116 | 471 | 302 | |||||||||||
| Net realized losses | (14 | ) | (36 | ) | (33 | ) | (111 | ) | |||||||
| Net unrealized gains (losses) | 20 | (546 | ) | 200 | (1,518 | ) | |||||||||
| Other (expense) income | (2 | ) | (4 | ) | 280 | 33 | |||||||||
| Total income (loss) | 161 | (466 | ) | 947 | (1,242 | ) | |||||||||
| EXPENSES | |||||||||||||||
| Net incurred losses and loss adjustment expenses | |||||||||||||||
| Current period | 5 | 13 | 18 | 39 | |||||||||||
| Prior periods | (15 | ) | (141 | ) | (35 | ) | (476 | ) | |||||||
| Total net incurred losses and loss adjustment expenses | (10 | ) | (128 | ) | (17 | ) | (437 | ) | |||||||
| Policyholder benefit expenses | - | 7 | - | 25 | |||||||||||
| Amortization of net deferred charge assets | 34 | 21 | 75 | 60 | |||||||||||
| Acquisition costs | - | - | 6 | 20 | |||||||||||
| General and administrative expenses | 91 | 66 | 265 | 234 | |||||||||||
| Interest expense | 22 | 23 | 67 | 71 | |||||||||||
| Net foreign exchange gains | (23 | ) | (17 | ) | (24 | ) | (27 | ) | |||||||
| Total expenses | 114 | (28 | ) | 372 | (54 | ) | |||||||||
| EARNINGS (LOSS) BEFORE INCOME TAXES | 47 | (438 | ) | 575 | (1,188 | ) | |||||||||
| Income tax benefit (expense) | 7 | (8 | ) | 12 | (4 | ) | |||||||||
| (Losses) earnings from equity method investments | (3 | ) | (20 | ) | 22 | 12 | |||||||||
| NET EARNINGS (LOSS) | 51 | (466 | ) | 609 | (1,180 | ) | |||||||||
| Net (earnings) loss attributable to noncontrolling interests | (4 | ) | 43 | (99 | ) | 74 | |||||||||
| NET EARNINGS (LOSS) ATTRIBUTABLE TO ENSTAR | 47 | (423 | ) | 510 | (1,106 | ) | |||||||||
| Dividends on preferred shares | (9 | ) | (9 | ) | (27 | ) | (27 | ) | |||||||
| NET EARNINGS (LOSS) ATTRIBUTABLE TO ENSTAR ORDINARY SHAREHOLDERS | $ | 38 | $ | (432 | ) | $ | 483 | $ | (1,133 | ) | |||||
| Earnings (loss) per ordinary share attributable to Enstar: | |||||||||||||||
| Basic | $ | 2.46 | $ | (25.39 | ) | $ | 30.26 | $ | (65.61 | ) | |||||
| Diluted | $ | 2.43 | $ | (25.39 | ) | $ | 30.05 | $ | (65.61 | ) | |||||
| Weighted average ordinary shares outstanding: | |||||||||||||||
| Basic | 15,464,824 | 17,013,348 | 15,962,910 | 17,269,870 | |||||||||||
| Diluted | 15,606,105 | 17,126,880 | 16,070,925 | 17,382,578 | |||||||||||
ENSTAR GROUP LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 2023 and December 31, 2022
| September 30, 2023 | December 31, 2022 | ||||||
| (in millions of U.S. dollars, except share data) | |||||||
| ASSETS | |||||||
| Short-term investments, trading, at fair value | $ | 4 | $ | 14 | |||
| Short-term investments, available-for-sale, at fair value (amortized cost: 2023 - $59; 2022 - $37) | 59 | 38 | |||||
| Fixed maturities, trading, at fair value | 1,904 | 2,370 | |||||
| Fixed maturities, available-for-sale, at fair value (amortized cost: 2023 - $5,901; 2022 - $5,871; net of allowance: 2023 - $23; 2022 - $33) | 5,267 | 5,223 | |||||
| Funds held - directly managed | 2,678 | 2,040 | |||||
| Equities, at fair value (cost: 2023 - $831; 2022 - $1,357) | 881 | 1,250 | |||||
| Other investments, at fair value (includes consolidated variable interest entity: 2023 - $63; 2022 - $3) | 3,637 | 3,296 | |||||
| Equity method investments | 409 | 397 | |||||
| Total investments | 14,839 | 14,628 | |||||
| Cash and cash equivalents | 497 | 822 | |||||
| Restricted cash and cash equivalents | 387 | 508 | |||||
| Accrued interest receivable | 74 | 72 | |||||
| Reinsurance balances recoverable on paid and unpaid losses (net of allowance: 2023 - $134; 2022 - $131) | 735 | 856 | |||||
| Reinsurance balances recoverable on paid and unpaid losses, at fair value | 214 | 275 | |||||
| Insurance balances recoverable (net of allowance: 2023 and 2022 - $5) | 173 | 177 | |||||
| Funds held by reinsured companies | 2,871 | 3,582 | |||||
| Net deferred charge assets | 763 | 658 | |||||
| Other assets | 478 | 576 | |||||
| TOTAL ASSETS | $ | 21,031 | $ | 22,154 | |||
| LIABILITIES | |||||||
| Losses and loss adjustment expenses | $ | 11,836 | $ | 11,721 | |||
| Losses and loss adjustment expenses, at fair value | 1,108 | 1,286 | |||||
| Future policyholder benefits | - | 821 | |||||
| Defendant asbestos and environmental liabilities | 572 | 607 | |||||
| Insurance and reinsurance balances payable | 230 | 100 | |||||
| Debt obligations | 1,831 | 1,829 | |||||
| Other liabilities | 384 | 462 | |||||
| TOTAL LIABILITIES | 15,961 | 16,826 | |||||
| COMMITMENTS AND CONTINGENCIES | |||||||
| REDEEMABLE NONCONTROLLING INTERESTS | 183 | 168 | |||||
| SHAREHOLDERS' EQUITY | |||||||
| Ordinary Shares (par value $1 each, issued and outstanding 2023: 16,031,203; 2022: 17,588,050): | |||||||
| Voting Ordinary Shares (issued and outstanding 2023: 16,031,203; 2022: 15,990,338) | 16 | 16 | |||||
| Non-voting convertible ordinary Series C Shares (issued and outstanding 2023: 0; 2022: 1,192,941) | - | 1 | |||||
| Non-voting convertible ordinary Series E Shares (issued and outstanding 2023: 0; 2022: 404,771) | - | - | |||||
| Preferred Shares: | |||||||
| Series C Preferred Shares (issued and held in treasury 2023 and 2022: 388,571) | - | - | |||||
| Series D Preferred Shares (issued and outstanding 2023 and 2022: 16,000; liquidation preference $400) | 400 | 400 | |||||
| Series E Preferred Shares (issued and outstanding 2023 and 2022: 4,400; liquidation preference $110) | 110 | 110 | |||||
| Treasury shares, at cost (Series C Preferred shares 2023 and 2022: 388,571) | (422 | ) | (422 | ) | |||
| Joint Share Ownership Plan (voting ordinary shares, held in trust 2023 and 2022: 565,630) | (1 | ) | (1 | ) | |||
| Additional paid-in capital | 455 | 766 | |||||
| Accumulated other comprehensive loss | (570 | ) | (302 | ) | |||
| Retained earnings | 4,889 | 4,406 | |||||
| Total Enstar Shareholders' Equity | 4,877 | 4,974 | |||||
| Noncontrolling interests | 10 | 186 | |||||
| TOTAL SHAREHOLDERS' EQUITY | 4,887 | 5,160 | |||||
| TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND SHAREHOLDERS' EQUITY | $ | 21,031 | $ | 22,154 | |||
| 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 maturity investments 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 investments 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.
The following table presents more information on each non-GAAP measure. The results and GAAP reconciliations for these measures are set forth further below.
| Non-GAAP Measure | Definition | Purpose of Non-GAAP Measure over GAAP Measure | ||
| Adjusted book value per ordinary share | Total Enstar ordinary shareholders' equity Divided by Number 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 maturities 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 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 maturities 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 maturities 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 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:
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: -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: -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) and Add: -net nominal defendant A&E liability exposures and estimated future expenses. | |||
| 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 maturities (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 maturities and funds held-directly managed; and -unrealized (gains) losses on fixed maturities, AFS 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 included within AOCI -net unrealized (gains) losses on fixed maturities, trading |
(1) Comprises the discount rate and risk margin components.
(2) The reinsurance contractual arrangements (including the Capacity Lease Agreement) described in Note 5 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022 were settled during the second quarter of 2023. As a result of the settlement, we do not expect to record any transactions in the Legacy Underwriting segment in 2023.
| Reconciliation of GAAP to Non-GAAP Measures |
The table below presents a reconciliation of BVPS to Adjusted BVPS*:
| September 30, 2023 | December 31, 2022 | |||||||||||||||||||||||
| Equity (1) | Ordinary Shares | Per Share Amount | Equity (1) (2) | Ordinary Shares | Per Share Amount | |||||||||||||||||||
| (in millions of U.S. dollars, except share and per share data) | ||||||||||||||||||||||||
| Book value per ordinary share | $ | 4,367 | 15,465,573 | $ | 282.37 | $ | 4,464 | 17,022,420 | $ | 262.24 | ||||||||||||||
| Non-GAAP adjustment: | ||||||||||||||||||||||||
| Share-based compensation plans | 298,932 | 218,171 | ||||||||||||||||||||||
| Adjusted book value per ordinary share* | $ | 4,367 | 15,764,505 | $ | 277.01 | $ | 4,464 | 17,240,591 | $ | 258.92 | ||||||||||||||
(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.
(2) Enstar ordinary shareholders' equity as of December 31, 2022 has been retrospectively adjusted for the impact of adopting ASU 2018-12. Refer to Note 8 to our condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the period ended September 30, 2023 for further information.
The table below presents a reconciliation of ROE to Adjusted ROE* and Annualized ROE to Annualized Adjusted ROE*:
| Three Months Ended | |||||||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||||||
| Net earnings (loss) (1) | Opening equity (1) | (Adj) ROE | Annualized (Adj) ROE | Net earnings (loss) (1) | Opening equity (1) | (Adj) ROE | Annualized (Adj) ROE | ||||||||||||||||||||
| (in millions of U.S. dollars) | |||||||||||||||||||||||||||
| Net earnings (loss)/Opening equity/ROE/Annualized ROE (1) | $ | 38 | $ | 4,403 | 0.9 | % | 3.5 | % | $ | (432 | ) | $ | 4,619 | (9.4 | )% | (37.4 | )% | ||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||||
| Net realized losses on fixed maturities, AFS (2) / Net unrealized losses on fixed maturities, AFS (3) | 12 | 550 | 23 | 574 | |||||||||||||||||||||||
| Net unrealized losses on fixed maturities, trading (2) / Net unrealized losses on fixed maturities, trading (3) | 22 | 337 | 157 | 329 | |||||||||||||||||||||||
| Net realized and unrealized losses on funds held - directly managed (2) / Net unrealized losses on funds held - directly managed (3) | 46 | 166 | 238 | 342 | |||||||||||||||||||||||
| 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 (4) | 12 | (312 | ) | (82 | ) | (239 | ) | ||||||||||||||||||||
| Amortization of fair value adjustments / Fair value adjustments | 4 | (116 | ) | 4 | (99 | ) | |||||||||||||||||||||
| Tax effects of adjustments (5) | (6 | ) | - | (2 | ) | - | |||||||||||||||||||||
| Adjustments attributable to noncontrolling interests (6) | - | - | (42 | ) | - | ||||||||||||||||||||||
| Adjusted operating income (loss)/Adjusted opening equity/Adjusted ROE/Annualized adjusted ROE* | $ | 128 | $ | 5,028 | 2.5 | % | 10.2 | % | $ | (136 | ) | $ | 5,526 | (2.5 | )% | (9.8 | )% | ||||||||||
(1) Net earnings (loss) comprises net earnings (loss) 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) Net realized gains (losses) on fixed maturities, AFS and funds held - directly managed are included in net realized gains (losses) in our condensed consolidated statements of earnings. Net unrealized gains (losses) on fixed maturities, trading and funds held - directly managed are included in net unrealized gains (losses) in our condensed consolidated statements of earnings.
(3) Our fixed maturities are held directly on our balance sheet and also within the "Funds held - directly managed" balance.
(4) Comprises the discount rate and risk margin components.
(5) 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.
(6) 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.
| Nine Months Ended | |||||||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||||||
| Net earnings (loss) (1) | Opening equity (1)(2) | (Adj) ROE | Annualized (Adj) ROE | Net earnings (loss) (1) | Opening equity (1) | (Adj) ROE | Annualized (Adj) ROE | ||||||||||||||||||||
| (in millions of U.S. dollars) | |||||||||||||||||||||||||||
| Net earnings (loss)/Opening equity/ROE/Annualized ROE (1) | $ | 483 | $ | 4,464 | 10.8 | % | 14.4 | % | $ | (1,133 | ) | $ | 5,813 | (19.5 | )% | (26.0 | )% | ||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||||
| Net realized losses on fixed maturities, AFS (3) / Net unrealized losses on fixed maturities, AFS (4) | 55 | 647 | 88 | 36 | |||||||||||||||||||||||
| Net unrealized losses on fixed maturities, trading (3) / Net unrealized losses on fixed maturities, trading (4) | 24 | 400 | 556 | (134 | ) | ||||||||||||||||||||||
| Net realized and unrealized losses on funds held - directly managed (3) / Net unrealized losses on funds held - directly managed (4) | 49 | 780 | 517 | 9 | |||||||||||||||||||||||
| 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 (5) | 24 | (294 | ) | (228 | ) | (107 | ) | ||||||||||||||||||||
| Amortization of fair value adjustments / Fair value adjustments | 13 | (124 | ) | 11 | (106 | ) | |||||||||||||||||||||
| Tax effects of adjustments (6) | (12 | ) | - | (6 | ) | - | |||||||||||||||||||||
| Adjustments attributable to noncontrolling interests (7) | (2 | ) | - | (90 | ) | - | |||||||||||||||||||||
| Adjusted operating income (loss)/Adjusted opening equity/Adjusted ROE/Annualized adjusted ROE* | $ | 634 | $ | 5,873 | 10.8 | % | 14.4 | % | $ | (285 | ) | $ | 5,511 | (5.2 | )% | (6.9 | )% | ||||||||||
(1) Net earnings (loss) comprises net earnings (loss) 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) Enstar ordinary shareholders' equity as of December 31, 2022 has been retrospectively adjusted for the impact of adopting ASU 2018-12. Refer to Note 8 to our condensed consolidated financial statements for further information.
(3) Net realized gains (losses) on fixed maturities, AFS and funds held - directly managed are included in net realized gains (losses) in our condensed consolidated statements of earnings. Net unrealized gains (losses) on fixed maturities, trading and funds held - directly managed are included in net unrealized gains (losses) in our condensed consolidated statements of earnings.
(4) Our fixed maturities are held directly on our balance sheet and also within the "Funds held - directly managed" balance.
(5) Comprises the discount rate and risk margin components.
(6) 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.
(7) 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 RLE to Adjusted RLE* and Annualized RLE to Annualized Adjusted RLE*:
| Three Months Ended | As of | Three Months Ended | |||||||||||||||||||
| September 30, 2023 | September 30, 2023 | June 30, 2023 | September 30, 2023 | September 30, 2023 | |||||||||||||||||
| RLE / PPD | Net loss reserves | Net loss reserves | Average net loss reserves | RLE % | Annualized RLE % | ||||||||||||||||
| (in millions of U.S. dollars) | |||||||||||||||||||||
| PPD/net loss reserves/RLE/Annualized RLE | $ | 15 | $ | 12,155 | $ | 12,939 | $ | 12,547 | 0.1 | % | 0.5 | % | |||||||||
| Non-GAAP Adjustments: | |||||||||||||||||||||
| Net loss reserves - current period | - | (15 | ) | (11 | ) | (13 | ) | ||||||||||||||
| Amortization of fair value adjustments / Net fair value adjustments associated with the acquisition of companies | 4 | 112 | 116 | 114 | |||||||||||||||||
| Changes in fair value - fair value option / Net fair value adjustments for contracts for which we have elected the fair value option (1) | 12 | 292 | 312 | 302 | |||||||||||||||||
| Change in estimate of net ultimate liabilities - defendant A&E / Net nominal defendant A&E liabilities | - | 533 | 550 | 542 | |||||||||||||||||
| Reduction in estimated future expenses - defendant A&E / Estimated future expenses - defendant A&E | 1 | 33 | 34 | 33 | |||||||||||||||||
| Adjusted PPD/Adjusted net loss reserves/ Adjusted RLE/Annualized Adjusted RLE* | $ | 32 | $ | 13,110 | $ | 13,940 | $ | 13,525 | 0.2 | % | 0.9 | % | |||||||||
| Three Months Ended | As of | Three Months Ended | ||||||||||||||||||||
| September 30, 2022 | September 30, 2022 | June 30, 2022 | September 30, 2022 | September 30, 2022 | ||||||||||||||||||
| RLE / PPD | Net loss reserves | Net loss reserves | Average net loss reserves | RLE % | Annualized RLE % | |||||||||||||||||
| (in millions of U.S. dollars) | ||||||||||||||||||||||
| PPD/net loss reserves/RLE/Annualized RLE | $ | 141 | $ | 11,819 | $ | 12,524 | $ | 12,172 | 1.2 | % | 4.6 | % | ||||||||||
| Non-GAAP Adjustments: | ||||||||||||||||||||||
| Net loss reserves - current period | - | (36 | ) | (25 | ) | (31 | ) | |||||||||||||||
| Assumed Life | - | (141 | ) | (149 | ) | (145 | ) | |||||||||||||||
| Legacy Underwriting | (2 | ) | (137 | ) | (140 | ) | (139 | ) | ||||||||||||||
| Amortization of fair value adjustments / Net fair value adjustments associated with the acquisition of companies | 4 | 95 | 99 | 97 | ||||||||||||||||||
| Changes in fair value - fair value option / Net fair value adjustments for contracts for which we have elected the fair value option (1) | (82 | ) | 305 | 239 | 272 | |||||||||||||||||
| Change in estimate of net ultimate liabilities - defendant A&E / Net nominal defendant A&E liabilities | - | 572 | 574 | 573 | ||||||||||||||||||
| Reduction in estimated future expenses - defendant A&E / Estimated future expenses - defendant A&E | - | 35 | 36 | 36 | ||||||||||||||||||
| Adjusted PPD/Adjusted net loss reserves/Adjusted RLE/Annualized Adjusted RLE* | $ | 61 | $ | 12,512 | $ | 13,158 | $ | 12,835 | 0.5 | % | 1.9 | % | ||||||||||
(1) Comprises the discount rate and risk margin components.
*Non-GAAP measure.
| Nine Months Ended | As of | Nine Months Ended | |||||||||||||||||||
| September 30, 2023 | September 30, 2023 | December 31, 2022 | September 30, 2023 | September 30, 2023 | |||||||||||||||||
| RLE / PPD | Net loss reserves | Net loss reserves | Average net loss reserves | RLE % | Annualized RLE % | ||||||||||||||||
| (in millions of U.S. dollars) | |||||||||||||||||||||
| PPD/net loss reserves/RLE/Annualized RLE | $ | 35 | $ | 12,155 | $ | 12,011 | $ | 12,083 | 0.3 | % | 0.4 | % | |||||||||
| Non-GAAP Adjustments: | |||||||||||||||||||||
| Net loss reserves - current period | - | (15 | ) | - | (8 | ) | |||||||||||||||
| Legacy Underwriting | - | - | (139 | ) | (69 | ) | |||||||||||||||
| Amortization of fair value adjustments / Net fair value adjustments associated with the acquisition of companies | 13 | 112 | 124 | 118 | |||||||||||||||||
| Changes in fair value - fair value option / Net fair value adjustments for contracts for which we have elected the fair value option (1) | 24 | 292 | 294 | 293 | |||||||||||||||||
| Change in estimate of net ultimate liabilities - defendant A&E / Net nominal defendant A&E liabilities | 2 | 533 | 572 | 553 | |||||||||||||||||
| Reduction in estimated future expenses - defendant A&E / Estimated future expenses - defendant A&E | 2 | 33 | 35 | 34 | |||||||||||||||||
| Adjusted PPD/Adjusted net loss reserves/Adjusted RLE/Annualized Adjusted RLE* | $ | 76 | $ | 13,110 | $ | 12,897 | $ | 13,004 | 0.6 | % | 0.8 | % | |||||||||
| Nine Months Ended | As of | Nine Months Ended | ||||||||||||||||||||
| September 30, 2022 | September 30, 2022 | December 31, 2021 | September 30, 2022 | September 30, 2022 | ||||||||||||||||||
| RLE / PPD | Net loss reserves | Net loss reserves | Average net loss reserves | RLE % | Annualized RLE % | |||||||||||||||||
| (in millions of U.S. dollars) | ||||||||||||||||||||||
| PPD/net loss reserves/RLE/Annualized RLE | $ | 476 | $ | 11,819 | $ | 11,926 | $ | 11,873 | 4.0 | % | 5.3 | % | ||||||||||
| Non-GAAP Adjustments: | ||||||||||||||||||||||
| Net loss reserves - current period | - | (36 | ) | - | (18 | ) | ||||||||||||||||
| Assumed Life | (29 | ) | (141 | ) | (181 | ) | (161 | ) | ||||||||||||||
| Legacy Underwriting | 2 | (137 | ) | (153 | ) | (146 | ) | |||||||||||||||
| Amortization of fair value adjustments / Net fair value adjustments associated with the acquisition of companies | 11 | 95 | 106 | 101 | ||||||||||||||||||
| Changes in fair value - fair value option / Net fair value adjustments for contracts for which we have elected the fair value option (1) | (228 | ) | 305 | 107 | 206 | |||||||||||||||||
| Change in estimate of net ultimate liabilities - defendant A&E / Net nominal defendant A&E liabilities | 4 | 572 | 574 | 573 | ||||||||||||||||||
| Reduction in estimated future expenses - defendant A&E / Estimated future expenses - defendant A&E | $ | 1 | $ | 35 | $ | 36 | $ | 36 | ||||||||||||||
| Adjusted PPD/Adjusted net loss reserves/Adjusted RLE/Annualized Adjusted RLE* | $ | 237 | $ | 12,512 | $ | 12,415 | $ | 12,464 | 1.9 | % | 2.5 | % | ||||||||||
(1) Comprises the discount rate and risk margin components.
*Non-GAAP measure.
The tables below present a reconciliation of our Annualized TIR to our Annualized Adjusted TIR*:
| Three Months Ended | Nine months ended | ||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||
| (in millions of U.S. dollars) | |||||||||||||||
| Net investment income | $ | 143 | $ | 116 | $ | 471 | $ | 302 | |||||||
| Net realized losses | |||||||||||||||
| Fixed maturities, AFS | (12 | ) | (23 | ) | (55 | ) | (88 | ) | |||||||
| Funds held - directly managed | - | - | (7 | ) | - | ||||||||||
| Net losses recognized on equity securities sold during the period | - | (11 | ) | 23 | (21 | ) | |||||||||
| Investment derivatives | (2 | ) | (2 | ) | 6 | (2 | ) | ||||||||
| Net realized losses | (14 | ) | (36 | ) | (33 | ) | (111 | ) | |||||||
| Net unrealized (losses) gains | |||||||||||||||
| Fixed maturities, trading | (22 | ) | (157 | ) | (24 | ) | (556 | ) | |||||||
| Funds held - directly managed | (46 | ) | (238 | ) | (42 | ) | (517 | ) | |||||||
| Net unrealized gains (losses) recognized on equity securities still held at the reporting date | 17 | (82 | ) | 86 | (284 | ) | |||||||||
| Other investments | 68 | (65 | ) | 180 | (141 | ) | |||||||||
| Investment derivatives | 3 | (4 | ) | - | (20 | ) | |||||||||
| Net unrealized gains (losses) | 20 | (546 | ) | 200 | (1,518 | ) | |||||||||
| (Losses) earnings from equity method investments | (3 | ) | (20 | ) | 22 | 12 | |||||||||
| Other comprehensive income: | |||||||||||||||
| Unrealized (losses) gains on fixed maturities, AFS, net of reclassification adjustments excluding foreign exchange | (63 | ) | (175 | ) | 2 | (657 | ) | ||||||||
| TIR ($) | $ | 83 | $ | (661 | ) | $ | 662 | $ | (1,972 | ) | |||||
| Non-GAAP adjustment: | |||||||||||||||
| Net realized and unrealized losses on fixed maturities, AFS and trading, and funds held-directly managed | 80 | 418 | 128 | 1,161 | |||||||||||
| Unrealized losses (gains) on fixed maturities, AFS, net of reclassification adjustments excluding foreign exchange | 63 | 175 | $ | (2 | ) | $ | 657 | ||||||||
| Adjusted TIR ($)* | $ | 226 | $ | (68 | ) | $ | 788 | $ | (154 | ) | |||||
| Total investments | $ | 14,839 | $ | 14,226 | $ | 14,839 | $ | 14,226 | |||||||
| Cash and cash equivalents, including restricted cash and cash equivalents | 884 | 1,357 | 884 | 1,357 | |||||||||||
| Funds held by reinsured companies | 2,871 | 3,727 | 2,871 | 3,727 | |||||||||||
| Total investable assets | $ | 18,594 | $ | 19,310 | $ | 18,594 | $ | 19,310 | |||||||
| Average aggregate invested assets, at fair value (1) | 18,951 | 20,140 | 18,684 | 20,192 | |||||||||||
| Annualized TIR % (2) | 1.8 | % | (13.1 | )% | 4.7 | % | (13.0 | )% | |||||||
| Non-GAAP adjustment: | |||||||||||||||
| Net unrealized losses on fixed maturities, AFS included within AOCI and net unrealized losses on fixed maturities, trading and funds held - directly managed | 1,222 | 1,926 | 1,222 | 1,926 | |||||||||||
| Adjusted investable assets* | $ | 19,816 | $ | 21,236 | $ | 19,816 | $ | 21,236 | |||||||
| Adjusted average aggregate invested assets, at fair value* (3) | $ | 20,089 | $ | 21,728 | $ | 19,955 | $ | 21,093 | |||||||
| Annualized adjusted TIR %* (4) | 4.5 | % | (1.3 | )% | 5.3 | % | (1.0 | )% | |||||||
(1) This amount is a two and four period average of the total investable assets for the three and nine months ended September 30, 2023 and 2022, 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 ($) by average aggregate invested assets, at fair value.
(3) This amount is a two and four period average of the adjusted investable assets* for the three and nine months ended September 30, 2023 and 2022, respectively, as presented above.
(4) Annualized adjusted TIR %* is calculated by dividing the annualized adjusted TIR* ($) by adjusted average aggregate invested assets, at fair value*.
*Non-GAAP measure.
