Fitch Ratings has affirmed Legacy specialist Enstar’s Long-Term Issuer Default Rating (IDR) at ‘BBB’, senior unsecured notes at ‘BBB-‘ and preference shares at ‘BB+’.
The rating outlook has been revised to positive from stable, reflecting what Fitch considers to be very strong and growing capitalisation with continued reasonable financial leverage.
Fitch also notes Enstar’s solid business franchise acquiring and managing non-life runoff companies, as well as strong non-life runoff business profitability.
Offsets to these positives include the company’s risk profile, which Fitch says is potentially subject to change based on future acquisitions and capital needs, considerable exposure to long-tailed reserves and reduced fixed-charge coverage.
Fitch views Enstar’s overall business profile as moderate compared with other non-life re/insurers, maintaining a leading position in its core non-life runoff re/insurance operations, with a very experienced, disciplined and highly knowledgeable management team.
Fitch also believes Enstar has been successful with its runoff acquisition strategy, generating favorable returns and significant growth in book value per share.
Enstar recently exited the controlling positions in its active underwriting platforms of StarStone Insurance Bermuda Limited and Atrium Underwriting Group Limited.
As such, these businesses are no longer consolidated into Enstar’s financial results. Fitch viewed the company’s active underwriting as more opportunistic with a less favorable overall business profile and not as a core business.
As a result, Enstar’s overall earnings could improve with the removal of the volatile active underwriting operations.
