Enstar takes 71% drop in first quarter income
Bermuda-based Enstar suffered a 71% decline in first quarter net income to $119 million as the company suffered a decline in fair value changes in marketable securities.
The legacy re/insurer also benefited in the first quarter of 2023 of a one-time $194 million gain on the novation of a closed block of life annuity policies and the unwinding of its life reinsurance subsidiary Enhanzed Re.
Enstar's net income fell from $424 million in the three months to March 31, 2023 but the company saw run-off liability earnings rise to $24 million from $10 million but total investment returns fell from $344 million to $224 million in the period.
Return on equity fell to 2.4% for the quarter compared to ROE 9.5% in the first quarter of 2023.
"The prior-year period’s ROE and Adjusted ROE* included a $194 million net gain recognized on the novation of Enhanzed Re reinsurance closed block of life annuity policies," management said. "Year-over-year ROE performance was also impacted by a decline in the gain from fair value changes in trading securities, funds held and other investments. First quarter 2024 Adjusted ROE* also excludes $25 million of net realized losses on our fixed maturities and fair value changes in trading securities and funds held."
Dominic Silvester, Enstar CEO, said: “Our momentum continues with a growth in book value of 1.7% in the first quarter, driven by solid performance in our investment portfolio and another quarter of positive run-off liability earnings.
"We were pleased to execute a $400 million Loss Portfolio Transfer with SiriusPoint earlier this week. The transaction expands our Workers’ Compensation portfolio, which is a line of business where we have a wealth of experience and have had significant success.
"We look forward to taking advantage of opportunities across our business throughout the year, as we stay focused on meeting the growing risk management needs of the (re)insurance sector while creating long-term value for our shareholders.”
Enstar said the improvement in run-off liability earnings was driven by favourable development on its professional indemnity/directors and officers and asbestos lines of business, partially offset by adverse development on its general casualty and environmental lines of business.
Management said the drop in total investment income was caused by drops in fair value investments which fell from $206 million in 2023 to $85 million in 2024. This offset a gain in investment income, which rose from $156 million to $160 million.
Recognized investment results in the first quarter of 2024 benefited from net investment income of $160 million and fair value change in other investments, including equities, of $104 million, partially offset by net realized and unrealized losses on our fixed maturities, including other comprehensive income (“OCI”), of $37 million.
Enstar also noted that its Bermuda-based wholly owned subsidiary Cavello Bay Reinsurance Limited was assigned an Insurer Financial Strength Rating of ‘A’ with stable outlook by S&P Global Ratings.
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