Press release·02/27/2025 22:30:59

Overview of Financial Performance

Enstar Group Limited, a leading provider of capital release solutions, reported its financial results for the year ended December 31, 2024. The company’s consolidated results reflect its continued progress in acquiring and managing run-off insurance portfolios for its clients.

In 2024, Enstar entered into a merger agreement to be acquired for $5.1 billion. The merger is expected to close in mid-2025, subject to regulatory approvals. As a result of the merger agreement, Enstar recognized a $63 million goodwill impairment charge.

Despite the goodwill impairment, Enstar had a strong financial performance in 2024. The company’s net income attributable to ordinary shareholders was $540 million, down from $1.1 billion in 2023. The decrease was primarily due to a current year tax expense of $62 million, compared to a tax benefit of $250 million in the prior year. Enstar also saw a decrease in other income and investment returns in 2024.

Enstar’s comprehensive income attributable to the company was $571 million in 2024, compared to $1.1 billion in 2023. Book value per share (BVPS) and fully diluted book value per share (FDBVPS) increased by 10.7% and 9.4%, respectively, from the end of 2023 to the end of 2024, primarily due to the comprehensive income for the year.

Revenue and Profit Trends

Enstar’s revenue is primarily driven by its run-off business, where the company acquires and manages insurance portfolios in run-off. In 2024, the company’s run-off segment generated $79 million in total revenue, up from $52 million in 2023. This increase was mainly due to higher other income, which included a recovery of professional fees and a net gain on the sale of subsidiaries.

The run-off segment reported a net loss of $44 million in 2024, compared to net income of $62 million in 2023. The decrease was primarily due to the $63 million goodwill impairment charge and a $44 million decrease in favorable prior period development (PPD) of loss reserves. The company’s 2024 PPD was $149 million, compared to $131 million in 2023.

Enstar’s investments segment, which manages the company’s investment portfolio, generated net income of $1.0 billion in 2024, down from $1.1 billion in 2023. The decrease was mainly due to a $114 million decline in the aggregate of realized losses and fair value changes on fixed maturities, as well as losses from equity method investments. This was partially offset by an increase in fair value changes on other investments, including equities.

Strengths and Weaknesses

One of Enstar’s key strengths is its ability to effectively manage run-off insurance portfolios and generate favorable prior period development. The company’s 2024 run-off liability earnings (RLE) percentage, a measure of the impact of its claims management strategies, was 1.3%, compared to 1.1% in 2023. Enstar’s adjusted RLE percentage, which excludes certain items, was 1.2% in 2024, down from 1.8% in 2023.

Another strength is Enstar’s investment portfolio, which generated a total investment return (TIR) of 6.3% in 2024, compared to 7.2% in 2023. The company’s adjusted TIR, which excludes the impact of changes in the fair value of fixed maturities, was 6.1% in 2024, up from 5.3% in 2023.

A potential weakness for Enstar is the impact of interest rate movements on its fixed income investments. The increase in interest rates in 2024 contributed to $752 million in cumulative net unrealized losses on Enstar’s fixed maturities, trading, and available-for-sale investments, as well as funds held. This adversely impacted the company’s BVPS and FDBVPS by $51.24 and $49.65 per share, respectively, as of the end of 2024.

Another weakness is the company’s exposure to asbestos and environmental (A&E) liabilities, which resulted in $32 million in defendant A&E expenses in 2024, up from a $1 million expense in 2023. Enstar’s management of these liabilities will be an important factor in the company’s future performance.

Outlook and Future Prospects

The pending merger with a private equity firm is a significant event for Enstar. The $5.1 billion transaction represents a premium to the company’s book value and is expected to provide liquidity for Enstar’s shareholders. However, the merger is still subject to regulatory approvals, and there is no guarantee that it will be completed as planned.

Looking ahead, Enstar’s ability to continue acquiring and effectively managing run-off insurance portfolios will be crucial to its future success. The company’s strong track record in this area, as evidenced by its favorable prior period development and RLE metrics, suggests that it is well-positioned to capitalize on opportunities in the run-off market.

Enstar’s investment portfolio performance will also be a key factor in the company’s financial results. While the company has demonstrated its ability to generate strong investment returns, the impact of interest rate movements on its fixed income investments remains a risk.

Overall, Enstar’s 2024 financial results demonstrate the company’s continued progress in its core run-off business, despite the one-time goodwill impairment charge related to the pending merger. The company’s strong balance sheet and experienced management team suggest that Enstar is well-equipped to navigate the challenges and opportunities ahead.