Enstar Group Limited · OTC:ESGOF
Enstar — Investor Presentation (May 2019)
41 slides from Enstar's investor presentation, May 9, 2019
Slide 1: Realising Value: Enstar Group Limited Investor Update
Realising Value Enstar Group Limited Investor Update May 9, 2019 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 |enstargroup.com 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 have completed and announced $957m in acquired gross loss reserves Run-off • We have a robust pipeline of global opportunities • We are paying over $1.4b
Slide 5: Highlights: Financial Metrics
Highlights Financial Metrics Assets and Reserves ($m) Net Earnings ($m) $4,171 2009 $2,479 $359 2010 $5,236 $312 $3,291 $265 2011 $6,606 $4,283 $209 $214 $220 $5,878 $174 $168 2012 $3,661 $135 $154 $8,620 2013 $5,564 $9,937 2014 $6,199 $11,773 2015 $7,568 $12,866 2016 $7,793 $13,606 2017 $8,109 $(16
Slide 6: About Enstar: Introduction
About Enstar Introduction 1 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 underw
Slide 7: About Enstar: A Global Group
About Enstar A Global Group With 35 offices across 15 countries, and 1,300+ 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 Enstar Group Limited, formed in 2001, is a Bermuda-based holding company, $18.1bn $3.8bn $4.3bn listed on NASDAQ: • Common Shares (ESGR) Assets Market Capitalization Shareholders’ Equity March 31, 2019 (Common Shares) March 31, 2019 • Preferred Shares (ESGRO, ESGRP) May
Slide 9: About Enstar: Operating Segment Overview
About Enstar Operating Segment Overview • Premier market leader in the run-off space Loss & LAE Reserves • Acquires P&C companies or portfolios in As at March 31, 2019 run-off and manages the acquired businesses, generating profits through loss reserve savings, operational efficiencies, and investme
Slide 10: About Enstar: Successful Track Record
About Enstar Successful Track Record Acquired Total Assets and Gross Reserves By Year Assets Gross Reserves Acquired $29.6bn $m $m 2008 and prior 6,469 4,673 of total assets acquired 2009 251 194 2010 1,577 1,358 2011 2,098 1,966 $22.8bn 2012 411 411 2013 3,660 2,635 of total gross loss reserves 201
Slide 11: Non-Life Run-off: Acquisitions - The Cornerstone of our Business
Non-Life Run-off Acquisitions - The Cornerstone of our Business 97 Dedicated, cross- total acquisitive transactions/new functional acquisition business since formation review teams 49 Secure business companies acquired through stock purchase or merger partner 48 Focused on portfolios of insurance or
Slide 12: Non-Life Run-off: Why Companies Place Business in Run-off
Non-Life Run-off Why Companies Place Business in Run-off Strategic Portfolio M&A Activity Management • Focus on Core Business • Assume run-off liabilities • Exit business with low through broader returns (ROE, Growth, acquisition Profitability) • Discontinuation of segment • Transfer loss reserves f
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 ✔ ✔ ✔
Slide 14: Non-Life Run-off: Re-Underwriting the Liabilities
Non-Life Run-off Re-Underwriting the Liabilities Run-off acquirers re-underwrite risk with more information than the original underwriter: i. Loss trends generally are known when liabilities are acquired and can be re-underwritten ii. Claims have a degree of maturity and typically have more predicta
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 P&C Rate Pressure Brexit Interest Rate Efficiency Environ
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 $730bn. Source: Global Insurance Run-Off Survey 2018 performed by PWC, IRLA, AIRROC |enstargroup.com 16
Slide 17: Non-Life Run-off: Recap of 2018 Transactions
Non-Life Run-off Recap of 2018 Transactions During 2018, 34 deals with $9bn of estimated gross liabilities were publicly announced. Enstar assumed approximately 35% of these liabilities. Source: PWC Report - 2018: A review of non-life insurance run-off deals |enstargroup.com 17
Slide 18: Non-Life Run-off: 2019 Transactions Update
Non-Life Run-off 2019 Transactions Update Transaction Status Assets Liabilities Cover Loss Lines of Business (Gross Reserves) Period AmTrust RITCs Q1 2019 $1.2bn $897.1m 2016 and prior Property, Marine (Completed) years Aviation & Transit, PI/D&O, General Casualty, Motor and Workers' Compensation Am
Slide 19: Non-Life Run-off: Illustrative Economics of a Run-off Transaction
Non-Life Run-off Illustrative Economics of a Run-off Transaction • We model a range of Internal Rate of Returns (IRR) for every transaction in our pipeline • Each transaction is bespoke, tailored to achieve both the de-risking strategies of the seller and Enstar’s return expectations • Depending on
Slide 20: 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: Net Favorable Loss Reserve Development 350,000 300,000 250,000 200
Slide 21: 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 22: Active Underwriting: Overview
Active Underwriting Overview Gross Written Premiums by Products Q1 2019 Gross Written Premiums by Products Q1 2019 4% 9% Marine, Aviation, and Transit 12% Casualty 24% Binding Authorities Property 17% 38% $251.4m Marine $54.0m Reinsurance Corporate member Workers' (25% of S609) 35% Compensation Acci
Slide 23: Active Underwriting: StarStone: Recent Developments
Active Underwriting StarStone: Recent Developments • We purchased StarStone in 2013, with co-investors - the Trident funds (managed by Stone Point Capital LLC) and the Dowling fund • Enstar’s investment in StarStone (excluding co-investors share) is $430m as at March 31, 2019. This represents ~10% o
Slide 24: Active Underwriting: StarStone: Focus on Underwriting Profitability
Active Underwriting StarStone: Focus on Underwriting Profitability StarStone’s leadership team are re-positioning the underwriting portfolio for 2019 to focus on core lines of business (those with a strong track record of profitability and expected to continue) and taking corrective actions in under
Slide 25: 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 history dating back to the 1930’s • Provides diverse speciality insura
Slide 26: Investments: Overview
Investments Overview Metrics 2018 2017 Credit Quality (Fixed income) A+ A+ Duration (Fixed income and Cash) 4.86 4.98 Leverage (Investments / Equity) 2.9 2.8 Other investments / Equity % 65% 47% $ thousands 2018 2017 Change Fixed income investments increased Fixed income investments* $ 8,712,672 $ 7
Slide 27: Investments: March 31, 2019 (at Fair Value)
Investments March 31, 2019 (at Fair Value) $11.8bn 4.93yrs A+ 2.9% Total Investments Average Duration Average Investment Book Yield Portfolio Credit Rating Equities and other Investment Portfolio Composition by Asset Class: 74% 20% 6% Fixed Income, Trading and AFS Alternatives U.S. Government & Agen
Slide 28: Investments: Strategic Investments
Investments Strategic Investments Enhanzed Re Joint venture between Enstar, Allianz SE and Hillhouse Capital Management, Ltd. Enhanzed Re will reinsure life, Enhanzed Re $92m non-life run-off, and P&C insurance business. Enhanzed Re intends to write business sourced from Allianz SE and Enstar by max
Slide 29: Investments: Enhanzed Re
Investments Enhanzed Re Equity Ownership Allianz SE Enstar Hillhouse Investments as of (24.9%) (47.4%) (27.7%) Loss and Loss Adjustments Expenses December 31, 2018 ($97m) as of December 31, 2018 ($850m) (excluding funds withheld) Fixed Income • One P&C Loss Portfolio $22m Transfer completed Enhanzed
Slide 30: 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 attributable to Enstar of $5.4 billion as of March 31, 20191 • Strong Capital Base Group holds capital for regulated insurers b
Slide 31: Capital Management: 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 32: Capital Management: Progression of Group Capital
Capital Management Progression of Group Capital Amounts in millions Chart Title~$1.5bn Q1 2019 3,758 510 468 348 756 $5,840 Q4 2018 3,392 510 471 348 513 $5,234 Q4 2017 3,137 489 348 299 $4,273 Q4 2016 2,802 463 674 $3,939 Common Shares Preferred Shares RNCI+NCI Public Debt Bank Debt As our group ha
Slide 33: Management, Governance and Operations: Our Executive Management Team
Management, Governance and Operations Our Executive Management Team Dominic Silvester Paul O’Shea Orla Gregory Chief Executive Officer President, Co-founder Chief Operating Officer & Co-founder Years at Enstar: 23 Years at Enstar: 23 Years at Enstar: 15 Industry Experience: 25+ years Industry Experi
Slide 34: Management, Governance and Operations: Core Competencies
Management, Governance and Operations Core Competencies Core Competencies Business Strategy Continue to leverage experience and industry Sourcing Transactions relationships to identify growth opportunities Engage in highly-disciplined acquisition, management and reinsurance practices Manage claims p
Slide 35: 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 reserves Price and as they successfully run off Return Strategic Fit – We det
Slide 36: 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 37: Appendix
Appendix |enstargroup.com 37
Slide 38: Financial Historical Data Summary: Income Statement
Financial Historical Data Summary Income Statement 12 Months Ended 3 Months Ended December 31, December 31, December 31, December 31, December 31, March 31, 2019 $ millions 2014 2015 2016 2017 2018 Net premiums earned $ 543.0 $ 753.7 $ 823.5 $ 613.1 $ 895.6 $ 335.3 Fees & commission income 34.9 39.3
Slide 39: Financial Historical Data Summary: Balance Sheet
Financial Historical Data Summary Balance Sheet $ millions December 31, 2014 December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2018 March 31, 2019 Assets Investable assets $ 6,392.4 $ 7,728.7 $ 8,733.1 $ 10,143.3 $ 12,545.9 $ 13,839.1 Reinsurance balances recoverable 1,305.5 1,451.9
Slide 40: 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 41: Thank you
Thank you Please send any enquiries to communications@enstargroup.com 41 |enstargroup.com Property of Enstar Group Limited –Not for Distribution