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Enstar returns to Q3 profit on investment gains

7th November 2019 - Author: Matt Sheehan

Bermuda-based re/insurance, run-off and legacy specialist, Enstar Group Limited, has reported consolidated net earnings of $117.7 million for the third quarter of 2019, helped by net realized and unrealized gains of $148.2 million.

enstarThis represents an increase in net earnings of $133.7 million when compared with the net loss of $16.0 million reported by Enstar in Q3 2018.

The company explained that its Q3 results were positively impacted by unrealized gains on fixed maturity securities, which are primarily accounted for on a trading basis through net earnings, and unrealized gains on our equity securities.

Additionally, Enstar said that comparability between periods was impacted by the loss portfolio transfer reinsurance transactions it completed in 2019 with Maiden, AmTrust and Amerisure, and during 2018 with Zurich Australia, Neon and Novae.

Out of Enstar’s three operating segments, Non-life Run-off was the only one to post positive results, recording net earnings of $141.3 million in Q3 2019, compared to $32.6 million for the same period last year.

The increase in net earnings of $108.7 million was primarily due to net realize and unrealized gains of $138.2 million on the investment portfolio, compared to net losses in the previous year.

In contrast, Enstar’s two active underwriting businesses – Atrium and Starstone – reported net losses of $1.8 million and $2.7 million, respectively.

Atrium’s results compared with net earnings of $2.0 million in Q3 2018, with the decrease caused by an increased loss frequency that included Hurricane Dorian, as well as certain space and aviation losses.

Starstone, while still delivering a loss, improved significantly on its net loss of $37.1 million in Q3 2018, with the decrease in losses owing primarily to lower net incurred losses and increased net realized and unrealized gains on our investment portfolio.

The 2019 results also include the consolidation of StarStone Group’s reinsurance to KaylaRe following Enstar’s acquisition of the portion of KaylaRe it did not already own, and the results of a loss portfolio transfer on discontinued lines.

Enstar recently announced that it had rejected a potential sale of its Atrium and Starstone businesses, after carrying out a market evaluation with Stone Point Capital LLC.

Enstar’s net realize and unrealized gains of $148.2 million last quarter compared with $57.2 million for the same period in the prior year.

Net unrealized gains for the quarter included $82.0 million and $20.9 million on our investments in fixed maturities, trading and funds withheld – directly managed, respectively, and gains of $10.1 million and $4.0 million on equity securities and other investments, respectively.

Investment income was $85.5 million, compared to $69.4 million in Q3 2018, with the improvement driven by an increase in average investable assets in Enstar’s Non-Life Run-off segment.

Looking at the first nine months of 2019, Enstar’s consolidated net earnings amounted to $708.3 million, representing an increase of $757.3 million from net losses of $48.9 million for the same period in 2018.

For the nine-month period, the Non-life Run-off segment posted net earnings of $819.9 million, up from $37.2 million last year, with the increase driven by net realized and unrealized gains on the investment portfolio and higher investment income, partially offset by an increase in net incurred losses.

Atrium recorded earnings of $8.8 million, versus $5.5 million in 2018, while Starstone saw net losses of $66.9 million, compared with $61.7 million for the nine-month period last year.

Net realized and unrealized gains were $878.7 million, compared to $254.7 million last year, while net investment income was $241.9 million, compared to $202.2 million last year.

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