Enstar Group Limited · OTC:ESGOF
Enstar — Investor Presentation (March 2020)
39 slides from Enstar's investor presentation, Mar 2, 2020
Slide 1: Realising Value: Investor Update
Realising Value Enstar Group Limited Investor Update March 2, 2020 ENSTARGROUP.COM
Slide 2: Disclaimer
Disclaimer IMPORTANT INFORMATION REGARDING FORWARD‐LOOKING STATEMENTS This presentation, and oral statements made with respect to information contained in this presentation, may include certain forward‐looking statements regarding our views with respect to our business, operations, loss reserves, st
Slide 3: Agenda
Agenda 1 Highlights 2 About Enstar 3 Non‐Life Run‐off 4 Active Underwriting 5 Investments 6 Capital Management 7 Management, Governance and Operations 3
Slide 4: Highlights: Enstar Continuing to Deliver on Strategy
Highlights Enstar Continuing to Deliver on Strategy • In 2018 we acquired $4.5bn in assets and $3.2bn in gross loss reserves Non‐life • In 2019 we completed and announced $2.8bn in acquired gross loss reserves Run‐off • We have a robust pipeline of global opportunities • We are paying over $1.0bn in
Slide 5: Highlights: Financial Metrics
Highlights Financial Metrics Growth in Assets and Reserves ($m) Net Earnings ($m) $902 $19,363 $16,556 $13,606 $12,866 $11,773 $11,176 $9,937 $10,357 $8,620 $8,109 $7,568 $7,793 $6,606 $312 $5,878 $6,199 $5,236 $5,564 $265 $4,283 $209 $214 $220 $3,291 $3,661 $174 $154 $168 2010 2011 2012 2013 2014 2
Slide 6: About Enstar: Introduction
About Enstar Introduction Leading Global Insurance Group • Diversified mix of innovative risk transfer solutions • Well‐positioned for profitability across insurance cycles • Geographically diversified across the United States, United Kingdom, Europe, Australia and Rest of World • Specialty underwri
Slide 7: About Enstar: A Global Group
About Enstar A Global Group With 30 offices across 12 countries, and 1,400+ staff Enstar Group offers global solutions Canada Active Europe Run‐off, Active, Life Belgium France Germany United States Ireland Run‐off, Active, Life Italy Bermuda 13 Offices Liechtenstein Executive Team, Run‐off & Active
Slide 8: About Enstar: Company Overview
About Enstar Company Overview $19.4bn $197.93 $4.9bn Enstar Group Limited is a Bermuda‐ based holding company, listed on NASDAQ: Assets Fully Diluted Book Value Shareholders’ Equity December 31, 2019 Per Share December 31, 2019 • Common Shares (ESGR) December 31, 2019 • Preferred Shares (ESGRO, ESGR
Slide 9: About Enstar: Operating Segment Overview
About Enstar Operating Segment Overview Loss & LAE Reserves • Premier market leader in the run‐off space As of December 31, 2019 • Acquires P&C companies or portfolios in run‐off and manages the acquired 2.2% 0.2% businesses, generating profits through loss reserve savings, operational efficiencies,
Slide 10: About Enstar: Successful Track Record
About Enstar Successful Track Record Acquired Total Assets and Gross Reserves By Year Assets Gross Reserves Acquired $31.8bn $m $m of total assets acquired 2009 and prior $6,720 $4,868 2010 $1,577 $1,358 2011 $2,098 $1,966 2012 $411 $411 $25.0bn 2013 $3,660 $2,635 2014 $2,547 $1,292 of total gross l
Slide 11: Non-Life Run-off: Acquisitions - The Cornerstone of our Business
Non‐Life Run‐off Acquisitions ‐ The Cornerstone of our Business 101 Dedicated, cross‐ total acquisitive transactions/new functional acquisition business since formation review teams 51 Secure business companies / portfolios acquired through stock purchase or merger partner 50 Focused on companies /
Slide 12: Non-Life Run-off: Why Companies Place Business in Run-off
Non‐Life Run‐off Why Companies Place Business in Run‐off Focus on Core Business Strategic Portfolio Exit business with low returns Management (ROE, Growth, Profitability) Transfer loss reserves for capital relief Assume run‐off liabilities through broader acquisition M&A Activity Discontinuation of
Slide 13: Non-Life Run-off: Methods of Acquisition for Run-off Companies
Non‐Life Run‐off Methods of Acquisition for Run‐off Companies Most jurisdictions have similar methodologies to enable business to be placed into run‐off: Bermuda USA UK Europe All Other Company Acquisition ✔✔✔✔✔ (stock purchase / merger) Reinsurance Loss Portfolio ✔✔✔✔✔ Transfer / RITC ✔ ✔ ✔ ✔ Schem
Slide 14: Non-Life Run-off: Re-Underwriting the Liabilities on Acquisitions
Non‐Life Run‐off Re‐Underwriting the Liabilities on Acquisitions Run‐off acquirers re‐underwrite risk with more information than the original underwriter: • Loss trends generally are known when liabilities are acquired and can be re‐underwritten • Claims have a degree of maturity and typically have
Slide 15: Non-Life Run-off: Outlook: Economic Factors and Trends
Non‐Life Run‐off Outlook: Economic Factors and Trends Our expectation is that a number of insurance and global economic factors and trends will continue to support an active market for run‐off transactions: Prolonged Low Solvency II & Capital Brexit Interest Rate Reserve Releases Efficiency Environm
Slide 16: Non-Life Run-off: Market Opportunity: Size of the Market
Non‐Life Run‐off Market Opportunity: Size of the Market The non‐life legacy market is large and growing. Global run off liabilities are estimated at $791bn NORTH UK & AMERICA CONTINENTAL $364bn EUROPE REST OF WORLD $292bn $135bn Source: Global Insurance Run‐Off Survey 2019 performed by PWC, IRLA, AI
Slide 17: Non-Life Run-off: Recent Transactions
Non‐Life Run‐off Recent transactions Transaction Structure Completion Status Assets Gross Primary Lines of Business Liabilities/ Loss Reserves AmTrust RITCs Reinsurance Completed Q1 2019 $1.1bn $1.2bn Property, Marine/Aviation/ (Syndicate 1206, to Close Transit, PI/D&O, General 1861, 2526, 5820) (RI
Slide 18: Non-Life Run-off: Illustrative Economics of a Run-off Transaction
Non‐Life Run‐off Illustrative Economics of a Run‐off Transaction Settling claims for a lower amount than the claims were purchased for and redeploying released capital We model a range of Internal Rate of Returns (IRR) for every transaction in our pipeline Settling claims faster than the original cl
Slide 19: Non-Life Run-off: Enstar's Record of Effective Liability Management
Non‐Life Run‐off Enstar’s Record of Effective Liability Management For most insurance companies, claims experience is an expense item For Enstar’s non‐life run‐off business, claims experience generates core earnings Non‐life Run‐off: Reduction in Net Ultimate Losses (prior period) $450 $400 $428 $35
Slide 20: Non-Life Run-off: Claims Consultancy and Advisory
Non‐Life Run‐off Claims Consultancy and Advisory Insurance & Reinsurance Proactive Management Managed Care Audit & Consultancy Strategies Services Established in 1999, Cranmore is a Managing Third Party Established in 2000, acquired specialist insurance and reinsurance Administrators (TPAs) in 2013
Slide 21: Active Underwriting Overview
Active Underwriting Overview Gross Written Premiums by Product 2019 Gross Written Premiums by Product 2019 8% 13% Binding Authorities Casualty 13% Marine, Aviation and Marine 11% Transit 39% 41% $917.6m Property Reinsurance 13% $192.4m Corporate member Workers' 9% (25% of S609) Accident and Health C
Slide 22: Active Underwriting: StarStone: Recent Developments
Active Underwriting StarStone: Recent Developments StarStone Recent Developments • Strengthened management team in late 2018 • Shareholders provided strong support through 2018 and 2019 • In early 2019, the underwriting portfolio was segmented into Continuing and Discontinued Lines 2019 Results 2018
Slide 23: Active Underwriting: Atrium: Top Tier Lloyd's Underwriting
Active Underwriting Atrium: Top Tier Lloyd’s Underwriting Atrium is a long established leading specialist insurance and reinsurance business, underwriting through Syndicate 609 at Lloyds. • Acquired in November 2013; Atrium has a 2019 Results 2018 Results history dating back to the 1930’s • Provides
Slide 24: Investments: Overview
Investments Overview Enstar maintains a high‐quality, duration‐matched portfolio that emphasizes on the preservation of capital, liquidity and prudent diversification of portfolio assets Portfolio Metrics 2019 2018 Credit Quality (Fixed income) A+ A+ Duration (Fixed income and Cash) 4.76 4.86 Levera
Slide 25: Investments: Portfolio Composition
Investments Portfolio composition $14.7bn 4.8yrs A+ 2.8% Total Investments Average Duration Average Credit Rating Book Yield Investment Portfolio Composition by Asset Class Equities & Fixed Income, Trading and AFS Alternatives other 72.8% 19.1% 8.1% Fixed Income, Trading and AFS Alternatives U.S. Go
Slide 26: Investments: Strategic Investments
Investments Strategic Investments We have selectively invested our capital in these businesses for longer‐term returns or capabilities that may be complementary to our business. Enhanzed Re ‐ Joint venture between Enstar, Allianz SE and Hillhouse Capital Management, Ltd. Enhanzed Re will reinsure li
Slide 27: Capital Management: Capital, Liquidity & Leverage
Capital Management Capital, Liquidity & Leverage We invest funds from self‐generated capital and borrowed financing to pursue strategic growth opportunities • Total capital under management of $6.5 billion as of December 31, 2019 • Strong Capital Base Group holds capital for regulated insurers based
Slide 28: Capital Management: Enstar's Model: Releasing and Recycling Capital
Capital Management Enstar’s Model: Releasing and Recycling Capital Enstar recycles capital through our business operating cycle Enstar acquires insurance liabilities Enstar generates profits from run‐ off entities through loss reserve savings, operational efficiencies, and investment income Redeploy
Slide 29: Capital Management: Progression of Group Capital
Capital Management Progression of Group Capital Chart Title Amounts in millions 2019 4,332 510 453 842 349 $6,486 2018 3,392 510 471 348 513 $5,234 2017 3,137 489 348 299 $4,273 2016 2,802 463 674 $3,939 0Common Shares 1,000 2,000Preferred Shares 3,000RNCI+NCI 4,000Public Debt 5,000Bank Debt 6,000 7
Slide 30: Management, Governance and Operations: Our Executive Officers
Management, Governance and Operations Our Executive Officers Dominic Silvester Paul O’Shea Orla Gregory Chief Executive Officer President, Co‐founder Chief Operating Officer & Co‐founder Years at Enstar: 24 Years at Enstar: 24 Years at Enstar: 16 Industry Experience: 25+ years Industry Experience: 2
Slide 31: Management, Governance and Operations: Core Competencies
Management, Governance and Operations Core Competencies Core Competencies Business Strategy Continue to leverage experience and Sourcing Transactions industry relationships to identify growth opportunities Engage in highly‐disciplined acquisition, management and reinsurance practices Pricing Discipl
Slide 32: Management, Governance and Operations: M&A Expertise and Due Diligence
Management, Governance and Operations M&A Expertise and Due Diligence Appetite for Growth – Our objective is to continue to grow our run‐off business in order to provide an opportunity for future earnings and replenish our Price and reserves as they successfully run off Return Strategic Fit – We det
Slide 33: Management, Governance and Operations: Disciplined Claims Management
Management, Governance and Operations Disciplined Claims Management Utilize effective claims management & commutation capabilities and strategies to settle liabilities Capabilities • Large team of dedicated professionals • Specialized by major claims type: workers compensation, asbestos, engineering
Slide 34: Appendix
ENSTAR Appendix 34
Slide 35: Financial Historical Data Summary: Income Statement
Financial Historical Data Summary Income Statement December 31 2014 2015 2016 2017 2018 2019 $ millions Net premiums earned $ 543.0 $ 753.7 $ 823.5 $ 613.1 $ 895.6 $ 1,154.9 Fees & commission income 34.9 39.3 39.4 66.1 35.1 28.5 Net investment income 66.0 122.6 185.5 208.8 270.7 321.3 Net realized a
Slide 36: Financial Historical Data Summary: Balance Sheet
Financial Historical Data Summary Balance Sheet December 31 $ millions 2014 2015 2016 2017 2018 2019 Assets Investable assets1 6,392.4 7,728.7 8,733.1 10,143.3 12,545.9 14,672.0 Reinsurance balances recoverable 1,305.5 1,451.9 1,460.7 2,021.0 2,029.7 2,379.9 Other 2,239.0 2,591.9 2,671.9 1,442.0 1,9
Slide 37: Reconciliation of Non-GAAP Financial Measures
Financial Historical Data Reconciliation of Non‐GAAP Financial Measures Non‐GAAP operating income (loss) attributable to Enstar Group Limited ordinary shareholders is calculated by the addition or subtraction of certain items from within our consolidated statements of earnings to or from net earning
Slide 38: Reconciliation of Net Favorable Loss Reserve Development
Financial Historical Data Reconciliation of Net Favorable Loss Reserve Development December 31 $ millions Notes 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Assets Net incurred Losses (311,834) (293,461) (237,953) (182,975) (264,711) (270,830) (285,881) (190,674) (306,067) 51,625 (per NLRO inco
Slide 39: Thank you
Thank you Please send any enquiries to [email protected] 39 |enstargroup.com Property of Enstar Group Limited – Not for Distribution