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Investment volatility drives Enstar to $906m loss

1st March 2023 - Author: Matt Sheehan

Enstar Group has reported a net loss of $906 million for 2022, after booking an investment segment loss of $1.3 billion due to volatility in the market.

enstarThe company’s headline performance metric was much lower than the net earnings of $502 million that it posted for 2021, despite its run-off segment actually growing earnings substantially.

Run-off earnings increased by $122 million to $339 million year-over-year, owing to a $148 million in favourable PPD, driven by a $78 million increase in the reduction in estimates of net ultimate losses.

Results for the year were driven by favourable development of $318 million on Enstar’s workers’ compensation line of business as a result of favourable claim settlements, most notably in the 2017 to 2021 acquisition years.

It also had favourable development of $56 million on our marine, aviation and transit lines of business relating to the 2014, 2018 and 2019 acquisition years as a result of favourable experience across a variety of claim types.

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However, these factors were partially offset by adverse development on its general casualty and motor lines of business of $57 million and $74 million, respectively, as a result of worse than expected claims experience, adverse development on claims and higher than expected claims severity.

For the investments segment, earnings fell by $1.8 billion from a positive result of $485 million in 2021, more than half of which was due to an increase in net realized and unrealized losses on Enstar’s fixed income securities of $964 million, driven by rising interest rates and widening of investment grade credit spreads.

It also took net realized and unrealized losses on its other investments of $433 million, in comparison to gains of $327 million in 2021 due to negative performance on public equities, CLO equities and hedge funds.

This was offset partially by a $136 million increase in net investment income due to the investment of new premium and reinvestment of fixed income securities at higher yields and the impact of rising interest rates.

“We are pleased to report strong fourth quarter results as we grew book value by 8.4% providing us with a positive end to a challenging 2022,” said Enstar CEO Dominic Silvester.

“While our annual performance was impacted by headwinds in the investment markets, our claims management function continues to outperform the industry driving prior period reserve savings of $756 million for the year.”

Looking ahead, Silvester added: “We expect to continue as the dominant player in the legacy market in 2023. Our balance sheet remains strong, and our scale, operational capabilities, and highly differentiated claims expertise will support accretive opportunities with new and long-standing partners while driving long-term value to our shareholders.”

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