NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020, 2019 and 2018
(Tabular information expressed in thousands of U.S. dollars except share and per share data)
1. DESCRIPTION OF BUSINESS
Enstar Group Limited ("Enstar") is a Bermuda-based holding company, formed in 2001. Enstar is a leading global insurance group that offers innovative capital release solutions through its network of group companies in Bermuda, the United States, the United Kingdom, Continental Europe, Australia, and other international locations. Our ordinary shares are listed on the NASDAQ Global Select Market under the ticker symbol "ESGR". Unless the context indicates otherwise, the terms "Enstar," "we," "us" or "our" mean Enstar Group Limited and its consolidated subsidiaries and the term "Parent Company" means Enstar Group Limited and not any of its consolidated subsidiaries.
Our business is organized into three segments:
(i) Non-life Run-off: This segment comprises the operations of our subsidiaries that are in the business of running off property and casualty and other non-life (re)insurance business. It also includes our management business, which manages the run-off portfolios of third parties through our service companies;
(ii) Atrium: Atrium Underwriters Ltd. is a managing general agent at Lloyd’s of London ("Lloyd's"), which manages Syndicate 609. Through our Lloyd’s corporate member, SGL No.1 Limited ("SGL No.1"), we provide 25% of the underwriting capacity for Atrium's Syndicate 609 (with the balance provided by traditional Lloyd’s Names). Atrium specializes in a wide range of industry classes, including marine, aviation and transit, property and casualty binding authorities, reinsurance, accident and health and non-marine direct and facultative. As of December 31, 2020, we have classified the Atrium segment as held-for-sale in view of the Exchange Transaction as discussed in Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations."; and
(iii) StarStone: StarStone was a global specialty insurer that offered a diverse range of property, casualty and specialty insurance through its operations in Bermuda, the United States, the United Kingdom, and Continental Europe. However, during 2020, StarStone's U.S. operations, including StarStone U.S. Holdings, Inc. and its subsidiaries ("StarStone U.S.") were sold and StarStone's remaining non-U.S. operations ("StarStone International") were placed into an orderly run-off. For further information, refer to Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations."
Atrium and StarStone are reported as separate segments as of December 31, 2020 because they were managed and operated in separate and distinct manners. Atrium employees were not involved in the management or strategy of StarStone, nor were StarStone employees involved in the management or strategy of Atrium. Atrium and StarStone were monitored and reported upon separately and distinctly and the strategies and business plans were determined independently of each other.
In addition, our other activities, which do not qualify as a reportable segment, include our corporate expenses, debt servicing costs, preferred share dividends, holding company income and expenses, foreign exchange and other miscellaneous items.
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2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The consolidated financial statements include our assets, liabilities and results of operations as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018. Results of operations for acquired subsidiaries are included from the date of acquisition. All significant intercompany transactions and balances have been eliminated. Certain prior period amounts have been reclassified to conform to the current period presentation as described in further detail in Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations." These reclassifications had no impact on net earnings.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our actual results may differ materially from these estimates. The impact of changes in estimates are reflected in earnings in the period during which the estimate is changed. Accounting policies that we believe are most dependent on assumptions and estimates are considered to be our critical accounting estimates and are related to the determination of:
•liability for losses and loss adjustment expenses ("LAE");
•reinsurance balances recoverable on paid and unpaid losses;
•defendant asbestos and environmental liabilities and related insurance balances recoverable;
•valuation allowances on reinsurance balances recoverable and deferred tax assets;
•impairment charges, including credit allowances on investment securities classified as available-for-sale ("AFS"), and impairments on deferred charge assets;
•gross and net premiums written and net premiums earned;
•fair value measurements of investments;
•fair value estimates associated with accounting for acquisitions;
•fair value estimates associated with loss portfolio transfer reinsurance agreements for which we have elected the fair value option; and
•redeemable noncontrolling interests.
We expect that uncertainty and volatility in financial markets relating to the COVID-19 pandemic will continue to impact the value of our investments. The scope, duration and magnitude of the direct and indirect effects of the COVID-19 pandemic are changing rapidly and are difficult to anticipate. As with others in our industry, we are subject to economic factors such as interest rates, foreign exchange rates, underwriting events, regulation, tax policy changes, political risks and other market risks that can impact our strategy, operations, and results.
Significant Accounting Policies
(a) Premiums
Non-Life
Non-life premiums written are earned on a pro-rata basis over the period the coverage is provided. Reinsurance premiums are recorded at the inception of the policy, are based upon contractual terms and, for certain business, are estimated based on underlying contracts or from information provided by insureds and/or brokers. Changes in reinsurance premium estimates are expected and may result in adjustments in future periods. Any subsequent differences arising on such estimates are recorded as premiums written in the period in which they are determined.
Certain non-life contracts are retrospectively rated and provide for a final adjustment to the premium based on the final settlement of all losses. Premiums on such contracts are adjusted based upon contractual terms, and management judgment is involved with respect to the estimate of the amount of losses that we expect to incur. Additional premiums are recognized at the time loss thresholds specified in the contract are exceeded and are earned over the coverage period, or are earned immediately if the period of risk coverage has passed.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Unearned Premium Reserves and Premiums Receivable
Unearned premium reserves represent the unexpired portion of policy premiums. For retrospectively rated contracts as well as those contracts whose written premium amounts are recorded based on premium estimates at inception, changes to accrued premiums arising from changes to these estimates are reflected as changes in premium balances receivable where appropriate.
Premium balances receivable are reported net of an allowance for expected credit losses as appropriate. The allowance is based upon our ongoing review of amounts outstanding, historical loss data, including delinquencies and write-offs, current and forecasted economic conditions and other relevant factors. However, the credit risk on our premiums receivable balances is substantially reduced where we have the ability to cancel the underlying policy if the policyholder does not pay the related premium.
(b) Acquisition Costs
Acquisition costs, consisting principally of commissions and brokerage expenses and certain premium taxes and fees incurred at the time a contract or policy is issued and that vary with and are directly related to the successful efforts of acquiring new insurance contracts or renewing existing insurance contracts, are deferred and amortized over the period in which the related premiums are earned. Deferred acquisition costs are limited to their estimated realizable value by line of business based on the related unearned premiums, anticipated claims and claim expenses and anticipated investment income.
A premium deficiency occurs if the sum of anticipated losses and loss adjustment expenses exceed unearned premiums, deferred acquisition costs and anticipated investment income. A premium deficiency is initially recognized by charging any deferred acquisition costs to expense to the extent required in order to eliminate the deficiency. If the premium deficiency exceeds the deferred acquisition costs then a liability is accrued for the excess deficiency.
(c) Losses and LAE
Non-life Run-off
The liability for losses and LAE in the Non-life Run-off segment includes an amount determined from reported claims and an amount, based on historical loss experience and industry statistics, for losses incurred but not reported ("IBNR") determined using a variety of actuarial methods. These estimates are continually reviewed and are necessarily subject to the impact of future changes in factors such as claim severity and frequency, changes in economic conditions including the impact of inflation, legal and judicial developments, and medical cost trends. Our estimates, at inception and on an ongoing basis, do not include an estimate for potential future commutations and policy buybacks. Commutations and policy buybacks are often unique and circumstance-based, and each commutation or policy buyback is separately negotiated. Therefore, the successful execution of one commutation or policy buyback does not necessarily impact the likelihood of other commutations or policy buybacks occurring in the future. While we believe that our liability for losses and LAE is adequate, the ultimate amount may be in excess of, or less than, the amounts recorded on our financial statements. Adjustments will be reflected as part of the net increase or reduction in losses and LAE liabilities in the periods in which they become known. Premium and commission adjustments may be triggered by changes in incurred losses, and any changes in such amounts are recorded in the same period that the related change in incurred loss is recognized.
Commutations of acquired companies’ exposures have the effect of accelerating the payout of claims compared to the probability-weighted ranges of actuarially projected cash flows that we applied when estimating the fair values of assets and liabilities at the time of acquisition. Commutations and policy buybacks provide an opportunity for us to exit exposures to certain policies and insureds generally at a discount to our estimate of the ultimate liability and provide us with the ability to eliminate exposure to further losses. Commutations and policy buybacks can be beneficial to us as they legally extinguish liabilities in full, reduce the potential for future adverse loss development, and reduce future claims handling costs. Any material acceleration of payout together with the impact of any material loss reserve savings in any period will also accelerate the amortization of fair value adjustments and deferred charge assets and gain liabilities in that period. Commutations are only executed directly with insureds or reinsureds and any gains realized or losses incurred on the settlement of losses and LAE liabilities through commutations or policy buybacks are recognized upon the execution of a commutation or policy buyback with the insured or reinsured.
Our (re)insurance subsidiaries also establish provisions for LAE relating to run-off costs for the estimated duration of the run-off, which are included in the liability for losses and LAE. These provisions are assessed at each reporting date, and provisions relating to future periods are adjusted to reflect any changes in estimates of the
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
periodic run-off costs or the duration of the run-off, including the impact of any acceleration of the run-off period that may be caused by commutations. Provisions relating to the current period together with any adjustment to future run-off provisions are included in net incurred losses and LAE in the consolidated statements of earnings.
Atrium and StarStone
The reserves for losses and LAE in the Atrium and StarStone segments include reserves for unpaid reported losses and for IBNR loss reserves. The reserves for unpaid reported losses and loss expenses are established by management based on reports from brokers, ceding companies and insureds and represent the estimated ultimate cost of events or conditions that have been reported to or specifically identified by us. The reserve for IBNR losses is established by us based on actuarially determined estimates of ultimate losses and loss expenses. Inherent in the estimate of ultimate losses and loss expenses are expected trends in claim severity and frequency and other factors which may vary significantly as claims are settled. Accordingly, ultimate losses and loss expenses may differ from the amounts recorded in the consolidated financial statements. These estimates are reviewed regularly and, as experience develops and new information becomes known, the reserves are adjusted as necessary. Such adjustments, if any, will be recorded in earnings in the period in which they become known. Prior period development arises from changes to loss estimates recognized in the current year that relate to loss reserves established in previous calendar years.
Components of Net Incurred Losses and LAE
Included within the total net incurred losses and LAE on our consolidated statement of earnings are the following items:
•Net losses paid: paid losses and LAE, net of related reinsurance recoveries.
•Net change in case and LAE reserves: the change in case reserves and associated LAE, net of related reinsurance recoveries.
•Net change in IBNR reserves: the change in IBNR reserves, net of related reinsurance recoveries.
•Increase (reduction) in estimates of net ultimate losses: the total of net losses paid, net change in case and LAE reserves and the net change in IBNR. This includes the net impact of commutations and policy buybacks on the liability for losses and LAE reserves and reinsurance recoveries.
•Increase (reduction) in provisions for unallocated LAE: the net change in our provision for unallocated LAE.
•Amortization of deferred charge assets and deferred gain liabilities: relates to retroactive reinsurance contracts where, if at the inception of the contract, the estimated undiscounted ultimate losses payable are in excess of the premiums received, a deferred charge asset is recorded for the excess; whereas, if the premiums received are in excess of the estimated undiscounted ultimate losses payable, a deferred gain liability is recorded for the excess, such that we don't record any gain or loss at the inception of these retroactive reinsurance contracts. In addition, for retrocessions of losses and LAE reserves that we have assumed through retroactive reinsurance contracts where the retroceded liabilities exceed the retrocession premiums paid, we record the excess as a deferred gain liability which is amortized to earnings over the estimated period during which the losses paid on the assumed retroceded liabilities are recovered from the retrocessionaire.
•Amortization of fair value adjustments: the amortization of the fair value adjustments associated with acquired companies, where the assumed losses and LAE reserves and the acquired reinsurance recoveries are fair valued on acquisition.
•Changes in fair value - fair value option: the changes in the fair value for reinsurance agreements where we have elected the fair value option. The change in fair value component includes the changes in the discounted cash flows and risk margin. The underlying ("nominal") net losses paid, net change in case and LAE reserves and the net change in IBNR reserves relating to these reinsurance agreements for which we have elected the fair value option are included within the appropriate line items described above.
•Net incurred losses and LAE: the total of the increase (reduction) in estimates of net ultimate losses, increase (reduction) in provisions for unallocated LAE, amortization of deferred charge assets and deferred gain liabilities, amortization of fair value adjustments and changes in fair value - fair value option.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(d) Defendant Asbestos and Environmental Liabilities
We acquired DCo LLC ("DCo") on December 30, 2016, and Morse TEC LLC ("Morse TEC") on October 30, 2019, as described in Note 3 - "Business Acquisitions." DCo and Morse TEC hold liabilities associated with personal injury asbestos claims and environmental claims arising from their legacy manufacturing operations. DCo and Morse TEC continue to process asbestos personal injury claims.
Defendant asbestos and environmental liabilities on our consolidated balance sheets include amounts for indemnity and defense costs for pending and future claims, determined using standard actuarial techniques for asbestos-related exposures. Defendant asbestos and environmental liabilities also include amounts for environmental liabilities associated with DCo's and Morse TEC's properties.
(e) Reinsurance Balances Recoverable on Paid and Unpaid Losses
Amounts recoverable from reinsurers are estimated in a manner consistent with the underlying liability for losses and loss adjustment expenses. We report our reinsurance balances recoverable on paid and unpaid losses net of an allowance for estimated uncollectible amounts. The allowance is based upon our ongoing review of the outstanding balances and reflects factors such as the duration of the collection period, credit quality, changes in reinsurer credit standing, default rates specific to the individual reinsurer, the geographical location of the reinsurer, contractual disputes with reinsurers over individual contentious claims, contract language or coverage issues, industry analyst reports and consensus economic forecasts.
A probability-of-default methodology that reflects current and forecasted economic conditions is used to estimate the allowance for uncollectible reinsurance due to credit-related factors. See "New Accounting Standards Adopted in 2020" below for the discussion on our adoption of the credit losses standard.
The allowance also includes estimated uncollectible amounts related to dispute risk with reinsurers. Amounts deemed to be uncollectible, including amounts due from known insolvent reinsurers, are written off against the allowance.
Changes in the allowance, as well as any subsequent collections of amounts previously written off, are reported as part of the net incurred losses and loss adjustment expenses in our consolidated statements of earnings.
On an ongoing basis, we also evaluate and monitor the financial condition of our reinsurers under voluntary schemes of arrangement to minimize our exposure to significant losses from potential insolvencies.
(f) Insurance Balances Recoverable
Amounts billed to and due from insurers providing coverage for our defendant asbestos liabilities are calculated in accordance with the terms of the individual insurance contracts.
The insurance balances recoverable related to our defendant asbestos liabilities are presented net of a provision for uncollectible amounts, reflecting the amount deemed not collectible primarily due to credit quality and contractual disputes with insurers over coverage issues.
(g) Investments, Cash and Cash Equivalents
Short-term investments and fixed maturity investments
Short-term investments comprise investments with a maturity greater than three months up to one year from the date of purchase. Fixed maturities comprise investments with a maturity of greater than one year from the date of purchase.
Short-term and fixed maturity investments classified as trading are carried at fair value, with realized and unrealized gains and losses included in net earnings and reported as net realized and unrealized gains and losses.
Short-term and fixed maturity investments classified as AFS are carried at fair value, with unrealized gains and losses excluded from net earnings and reported as a separate component of accumulated other comprehensive income (loss) ("AOCI"). Realized gains and losses on sales of investments classified as AFS are recognized in the consolidated statements of earnings.
The costs of short-term and fixed maturity investments are adjusted for amortization of premiums and accretion of discounts, recognized using the effective yield method and included in net investment income. For mortgage-backed and asset-backed investments, and any other holdings for which there is a prepayment risk, prepayment assumptions are evaluated and reviewed on a regular basis.
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Investment purchases and sales are recorded on a trade-date basis. Realized gains and losses on the sale of investments are based upon specific identification of the cost of investments.
Allowance for Credit Losses
We perform a detailed analysis every reporting period to identify any credit losses on our investment portfolios not measured at fair value through net earnings.
Some of the factors that we consider when assessing whether an allowance for credit losses is required on our debt securities include: (1) the extent to which the fair value has been less than the amortized cost; (2) the financial condition, near-term and long-term prospects of the issuer, including the relevant industry conditions and trends, and implications of rating agency actions and offering prices; (3) the likelihood of the recoverability of principal and interest; and (4) whether it is more likely than not that we will be required to sell the security prior to an anticipated recovery in value.
With effect from January 1, 2020, credit losses on our AFS debt securities are recognized through an allowance account which is deducted from the amortized cost basis of the security, with the net carrying value of the security presented on the consolidated balance sheet at the amount expected to be collected. To calculate the amount of the credit loss, we compare the present value of the expected future cash flows with the amortized cost basis of the AFS debt security, with the amount of the credit loss recognized being limited to the excess of the amortized cost basis over the fair value of the AFS debt security, effectively creating a “fair value floor”. See "New Accounting Standards Adopted in 2020" below for the discussion on our adoption of the credit losses standard.
For our AFS debt securities that we do not intend to sell or for which it is more likely than not that we will not be required to sell before an anticipated recovery in value, we separate the credit loss component of any unrealized losses from the amount related to all other factors and report the credit loss component in net realized investment gains (losses) in our consolidated statements of earnings. The unrealized losses related to non-credit factors is reported in other comprehensive income. The allowance for credit losses account is adjusted for any additional credit losses, write-offs and subsequent recoveries and is reflected in earnings.
For our AFS debt securities where we record a credit loss, a determination is made as to the cause of the credit loss and whether we expect a recovery in the fair value of the security. For our AFS debt securities where we expect a recovery in fair value, the constant effective yield method is utilized, and the investment is amortized to par.
For our AFS debt securities that we intend to sell or for which it is more likely than not that we will be required to sell before an anticipated recovery in fair value, the full amount of the unrealized loss is included in net realized investment gains (losses). The new cost basis of the investment is the previous amortized cost basis less the credit loss recognized in net realized investment gains (losses). The new cost basis is not adjusted for any subsequent recoveries in fair value.
We report the investment income accrued on our AFS debt securities within other assets and therefore separately from the underlying AFS debt securities. In addition, due to the short-term period during which accrued investment income remains unpaid, which is typically six months or less, since the coupon on our AFS debt securities is paid semi-annually or more frequently, we have elected not to establish an allowance for credit losses on our accrued investment income balances. Accrued investment income is written off through net realized investment gains (losses) at the time the issuer of the debt security defaults or is expected to default on payments.
Uncollectible debt securities are written off when we determine that no additional payments of principal or interest will be received.
Other-Than-Temporary Impairments ("OTTI")
As discussed above and below, with effect from January 1, 2020, we adopted the new credit losses standard which replaced the OTTI model that was previously applicable to our AFS debt securities. The new approach now requires the recognition of impairment charges relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. A description of our historical OTTI process which was in place prior to our adoption of the new credit losses standard and which applied to our comparative financial statements is provided below.
Fixed maturity investments classified as AFS were reviewed quarterly to determine if they had sustained an impairment of value that was, based on our judgment, considered to be other than temporary. The process included reviewing each fixed maturity investment whose fair value was below amortized cost and: (1) determining if we had the intent to sell the fixed maturity investment; (2) determining if it was more likely than not that we would be
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required to sell the fixed maturity investment before its anticipated recovery; and (3) assessing whether a credit loss existed, that is, whether we anticipated if the present value of the cash flows expected to be collected from the fixed maturity investment would be less than the amortized cost basis of the investment.
In assessing whether it was more likely than not that we would be required to sell a fixed maturity investment before its anticipated recovery, we considered various factors including our future cash flow requirements, legal and regulatory requirements, the level of our cash, cash equivalents, short-term investments and fixed maturity investments available-for-sale in an unrealized gain position, and other relevant factors.
In evaluating credit losses, we considered a variety of factors in the assessment of a fixed maturity investment including: (1) the time period during which there had been a significant decline below cost; (2) the extent of the decline below cost and par; (3) the potential for the investment to recover in value; (4) an analysis of the financial condition of the issuer; (5) the rating of the issuer; and (6) failure of the issuer of the investment to make scheduled interest or principal payments.
If we concluded that an investment was other-than-temporarily impaired, then the difference between the fair value and the amortized cost of the investment was presented as an OTTI charge in the consolidated statements of earnings, with an offset for any non-credit related loss component of the OTTI charge recognized in other comprehensive income. Accordingly, only the credit loss component of the OTTI amount would have an impact on our earnings.
Equities
We hold investments in publicly traded equities and exchange-traded funds as well as in privately held equities. Our equity investments are carried at fair value with realized and unrealized gains and losses included in net earnings and reported as net realized and unrealized gains and losses.
Other investments, at fair value
Other investments include investments in limited partnerships and limited liability companies (collectively "private equities") and fixed income funds, hedge funds, equity funds, private credit funds and collateralized loan obligation ("CLO") equity funds that carry their investments at fair value, as well as direct investments in CLO equities. These other investments are stated at fair value, which ordinarily will be the most recently reported net asset value as advised by the fund manager or administrator. Many of our fund investments publish net asset values on a daily basis and provide daily liquidity while others report on a monthly or quarterly basis. The change in fair value is included in net realized and unrealized gains and losses on investments and recognized in net earnings.
Equity method investments
Investments in which the Company has significant influence over the operating and financial policies of the investee are classified as equity method investments and are accounted for using the equity method of accounting. In applying the equity method of accounting, investments are initially recorded at cost and are subsequently adjusted based on the Company's proportionate share of net income or loss of the investee, net of any distributions received from the investee. We typically record our proportionate share of an investee's net income or loss on a quarter lag in line with the timing of when they report their financial information to us. Any adjustments made to the carrying value of our equity method investees are based on the most recently available financial information from the investees. Changes in the carrying value of such investments are recorded in our consolidated statements of earnings as earnings (losses) from equity method investments. Any decline in the value of our equity method investments considered by management to be other-than-temporary is reflected in our consolidated statements of earnings in the period in which it is determined.
Cash and cash equivalents
Cash equivalents includes money market funds, fixed interest deposits and all highly liquid debt instruments purchased with an original maturity of three months or less.
(h) Variable interest entities
We have investments in certain limited partnership funds which are deemed to be variable interest entities (“VIEs”) and which are included in other investments at the reported net asset value (“NAV”). Determining whether to consolidate a VIE may require judgment in assessing (i) whether an entity is a VIE, and (ii) if we are the entity’s primary beneficiary and thus required to consolidate the entity. To determine if we are the primary beneficiary of a VIE, we evaluate whether we have (i) the power to direct the activities that most significantly impact the VIE’s
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economic performance, and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our evaluation includes identification of the activities that most significantly impact the VIE’s economic performance and an assessment of our ability to direct those activities based on governance provisions, contractual arrangements to provide or receive certain services, funding commitments and other applicable agreements and circumstances. Our assessment of whether we are the primary beneficiary of our VIEs requires significant assumptions and judgment.
(i) Funds Held
Under funds held arrangements, the reinsured company has retained funds that would otherwise have been remitted to our reinsurance subsidiaries. The funds balance is credited with investment income and losses payable are deducted. Funds held are shown under two categories on the consolidated balance sheets, funds held where we receive the underlying portfolio economics are shown as "Funds held - directly managed", and funds held where we receive a fixed crediting rate are shown as "Funds held by reinsured companies". Funds held by reinsured companies are carried at cost. Funds held - directly managed, are carried at fair value and represents the aggregate of funds held at cost and the value of an embedded derivative. The embedded derivative relates to our contractual right to receive the return on the underlying investment portfolio economics. The investment returns on both categories of funds held are recognized in net investment income and net realized and unrealized gains (losses). The revaluation of the embedded derivative is included in net unrealized gains (losses).
(j) Fees and Commission Income
Fees and commission income primarily includes profit commissions earned from managed Lloyd's syndicates as well as fees earned under fronting and consulting arrangements with third-party clients, which are recorded on an accrual basis.
(k) Foreign Exchange
Our reporting currency is the U.S. dollar. Assets and liabilities of certain of our subsidiaries and equity method investees whose functional currency is not the U.S. dollar are translated at period end exchange rates. Revenues and expenses of such foreign entities are translated at average exchange rates during the year. The effect of the currency translation adjustments for these foreign entities is included in accumulated other comprehensive income (loss).
Other foreign currency assets and liabilities that are considered monetary items are translated at exchange rates in effect at the balance sheet date. Foreign currency revenues and expenses are translated either at transaction date exchange rates or using an appropriately weighted average exchange rate for the reporting period. These exchange gains and losses are recognized in net earnings.
(l) Share-based Compensation
We primarily use four types of share-based compensation arrangements: (i) restricted shares, restricted share units and performance share units ("PSUs"), (ii) joint share ownership program ("JSOP"), (iii) cash-settled stock appreciation rights ("SARs") and (iv) shares issued under our employee share purchase plans. With the exception of SARs and the incentive plan awards issued to certain employees of Atrium and StarStone, our share-based compensation awards qualify for equity classification. For equity-classified awards, the fair value of the compensation cost is measured at the grant date and is expensed over the service period of the award within general and administrative expenses in the consolidated statements of earnings except for PSUs where the expense also varies depending on the performance multiplier on the award. The SARs, the Atrium and StarStone incentive plan awards are classified as liability awards. Liability classified awards are recorded at fair value within other liabilities in the consolidated balance sheet with changes in fair value relating to the vested portion of the award recorded within general and administrative expenses in the consolidated statements of earnings.
(m) Derivative Instruments
We utilize derivative instruments in our foreign currency, investments and interest rate risk management strategies and recognize all derivatives as either assets or liabilities in the consolidated balance sheets and carry them at the fair value of the specific instrument utilized. Changes in the fair value as well as realized gains or losses on derivative instruments are recognized in net earnings if they are not designated as qualifying hedging instruments or if the criteria for establishing a perfectly effective designated hedging relationship for our net investment hedges has not been met. However, if a designated net investment hedge is deemed to be perfectly effective, then we recognize the changes in the fair value of the underlying hedging instrument in accumulated other comprehensive income (loss) until the application of hedge accounting is discontinued. Any cumulative gains or
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losses arising on designated net investment hedges are deferred in accumulated other comprehensive income (loss) until the cumulative translation adjustment ("CTA") from the underlying hedged net investment is recognized in net earnings due to a disposal, deconsolidation or substantial liquidation.
Certain of our funds held arrangements also contain embedded derivatives as described above, which are carried at fair value. In addition, we may also hold equity call options and other derivatives carried at fair value, as part of our investment strategy.
(n) Income Taxes
Certain of our subsidiaries and branches operate in jurisdictions where they are subject to taxation. Current and deferred tax expense or benefit is allocated to net earnings (loss), or, in certain cases, to discontinued operations or other comprehensive income (loss). Current tax is recognized and measured upon enacted tax laws and rates applicable in the relevant jurisdiction in the period in which the income tax becomes accruable or realizable. Deferred taxes are provided for temporary differences between the carrying amount of assets and liabilities used in the financial statements and the tax basis used in the various jurisdictional tax returns. When our assessment indicates that all or some portion of deferred tax assets will not be realized, a valuation allowance is recorded against the deferred tax assets to reduce the assets to an amount more likely than not to be realized.
We recognize the benefit relating to tax positions only where the position is more likely than not to be sustained assuming examination by tax authorities. A recognized tax benefit is measured as the largest amount that is greater than 50 percent likely of being realized upon settlement. A liability or other adjustment is recognized for any tax benefit (along with any interest and penalty, if applicable) claimed in a tax return in excess of the amount allowed to be recognized in the financial statements under U.S. GAAP. Any changes in amounts recognized are recorded in the period in which they are determined in our consolidated statements of earnings.
(o) Earnings Per Share
Basic earnings per share is based on the weighted average number of ordinary shares outstanding and excludes potentially dilutive securities such as restricted shares, restricted share units, warrants, options and convertible securities. Diluted earnings per share is based on the weighted average number of ordinary and ordinary share equivalents outstanding calculated using the treasury stock method for all potentially dilutive securities. When the effect of dilutive securities would be anti-dilutive, these securities are excluded from the calculation of diluted earnings per share.
(p) Acquisitions, Goodwill and Intangible Assets
The acquisition method is used to account for all business acquisitions. This method requires that we record the acquired assets and liabilities at their estimated fair value. The fair values of each of the acquired reinsurance assets and liabilities are derived from probability-weighted ranges of the associated projected cash flows, based on actuarially prepared information and management’s run-off strategy. Our run-off strategy, as well as that of other run-off market participants, is expected to be different from the seller's as generally sellers are not specialized in running off (re)insurance liabilities whereas we and other market participants do specialize in such run-offs.
The key assumptions used by us and, we believe, by other run-off market participants in the valuation of acquired companies are (i) the projected payout, timing and amount of claims liabilities; (ii) the related projected timing and amount of reinsurance collections; (iii) an appropriate discount rate, which is applied to determine the present value of the future cash flows; (iv) the estimated unallocated LAE to be incurred over the life of the run-off; (v) the impact of any accelerated run-off strategy; and (vi) an appropriate risk margin.
The difference between the nominal carrying values of the acquired reinsurance liabilities and assets as of the acquisition date and their fair value is recorded as a fair value adjustment ("FVA") on the consolidated balance sheet. The FVA is amortized over the estimated payout period of the acquired outstanding losses and LAE and reinsurance balances recoverable. To the extent the actual payout experience after the acquisition is materially faster or slower than anticipated at the time of the acquisition as a result of, (i) our active claims management strategies, which include commutations and policy buybacks, (ii) an adjustment to the estimated ultimate loss reserves, (iii) changes in bad debt provisions, or (iv) changes in estimates of future run-off costs following accelerated payouts, then the amortization of the FVA is adjusted to reflect such changes.
Intangible assets arising from our business acquisitions are classified as either definite-lived or indefinite-lived intangible assets. Definite-lived intangible assets are amortized over their useful lives with the amortization expense being recognized in the consolidated statements of earnings. Indefinite-lived intangible assets are however not subject to amortization. The carrying values of intangible assets are reviewed for indicators of impairment at least
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
annually. Impairment is recognized if the carrying values of the definite-lived intangible assets are not recoverable from their undiscounted cash flows and is measured as the amount by which the carrying value exceeds the fair value. Similarly, for indefinite-lived intangible assets, if the carrying value of the asset exceeds its fair value, then an impairment loss is recognized in an amount equal to the excess.
The difference between the fair value of net assets acquired and the purchase price is recorded as goodwill and included as an asset on the consolidated balance sheet or as a gain from bargain purchase in the consolidated statements of earnings. Goodwill is established initially upon acquisition and assessed at least annually for impairment. If the goodwill asset is determined to be impaired it is written down in the period in which the determination is made.
(q) Retroactive Reinsurance
Retroactive reinsurance policies provide indemnification for losses and LAE with respect to past loss events. In our Non-life Run-off segment we generally use the balance sheet accounting approach for assumed loss portfolio transfers, whereby at the inception of the contract there are no premiums or losses recorded in earnings.
Deferred Charge Assets and Deferred Gain Liabilities
If, at the inception of a Non-life Run-off retroactive reinsurance contract, the estimated undiscounted ultimate losses payable are in excess of the premiums received, a deferred charge asset is recorded for the excess; whereas, if the premiums received are in excess of the estimated undiscounted ultimate losses payable, a deferred gain liability is recorded for the excess, such that we don't record any gain or loss at the inception of these retroactive reinsurance contracts. In addition, for retrocessions of losses and LAE reserves that we have assumed through retroactive reinsurance contracts where the retroceded liabilities exceed the retrocession premiums paid, we record the excess as a deferred gain liability which is amortized to earnings over the estimated period during which the losses paid on the assumed retroceded liabilities are recovered from the retrocessionaire.
The premium consideration that we charge the ceding companies under retroactive reinsurance contracts may be lower than the undiscounted estimated ultimate losses payable due to the time value of money. After receiving the premium consideration in full from our cedents at the inception of the contract, we invest the premium received over an extended period of time, thereby generating investment income. We expect to generate profits from these retroactive reinsurance contracts when taking into account the premium received and expected investment income, less contractual obligations and expenses.
Deferred charge assets, recorded in other assets, and deferred gain liabilities, recorded in other liabilities, are amortized over the estimated claim payment period of the related contract with the periodic amortization reflected in earnings as a component of losses and LAE. The amortization of deferred charge assets and deferred gain liabilities is adjusted at each reporting period to reflect new estimates of the amount and timing of remaining loss and LAE payments. Changes in the estimated amount and the timing of payments of unpaid losses may have an effect on the unamortized deferred charge assets and deferred gain liabilities and the amount of periodic amortization. When liabilities for losses and LAE are extinguished through commutations and policy buybacks, they are removed from our estimates for the remaining loss and LAE payments, and this will generally result in an acceleration of the amortization of the deferred charge assets and deferred gain liabilities. Deferred charge assets are assessed at each reporting period for impairment and if the asset is determined to be impaired, then it is written down in the period in which the determination is made with that write down reflected in earnings as a component of net incurred losses and LAE.
Fair Value Option
In our Non-life Run-off segment, we have elected to apply the fair value option for certain loss portfolio transfer reinsurance transactions. This is an irrevocable election that applies to all balances under the insurance contract, including funds held assets, reinsurance balances recoverable on paid and unpaid losses, and the liability for losses and loss adjustment expenses.
We use an internal model to calculate the fair value of the liability for losses and loss adjustment expenses and the reinsurance balances recoverable on paid and unpaid losses. The nominal amounts related to the funds held assets, reinsurance balances recoverable on paid and unpaid losses, and the liability for losses and loss adjustment expenses, are inputs in our internal model. Note 12 - "Fair Value Measurements" describes the internal model, including the observable and unobservable inputs used in the model.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(r) Redeemable Noncontrolling Interest
In connection with the acquisitions of Arden, Atrium and StarStone, certain subsidiaries issued shares to noncontrolling interests. These shares provide certain redemption rights to the holders, which may be settled in our own shares or cash or a combination of cash and shares, at our option. Redeemable noncontrolling interests with redemption features that are not solely within our control are classified within temporary equity in the consolidated balance sheets and carried at their redemption value, which is fair value. Any change in the fair value is recognized through retained earnings as if the balance sheet date was also the redemption date.
(s) Held-for-sale Business and Discontinued Operations
We report a business as held-for-sale when certain criteria are met, which include (1) management has either approved the sale or is in the process of obtaining approval to sell the business and is committed to a formal plan to sell the business, (2) the business is available for immediate sale in its present condition, (3) the business is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (4) the sale is anticipated to occur within the next 12 months, among other specified criteria. A business classified as held-for-sale is recorded at the lower of its carrying amount or estimated fair value less costs to sell. If the carrying amount of the business exceeds its estimated fair value, a loss is recognized. Assets and liabilities related to the businesses classified as held-for-sale are separately reported in our Consolidated Balance Sheets beginning in the period in which the business is classified as held-for-sale. Refer to Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations" for further information regarding our held-for-sale business.
Disposals that represent strategic shifts that have or will have a major effect on our operations and financial results are reported as discontinued operations which requires the restatement of the comparatives reflected on our consolidated financial statements. In addition, transactions with discontinued operations are not eliminated on consolidation and any transactions that were previously eliminated on consolidation but which will continue with the discontinued operations are restated for all periods presented and reflected within continuing operations in our consolidated financial statements.
New Accounting Standards Adopted in 2020
Accounting Standards Update ("ASU") 2020-10 – Codification Improvements
In October 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-10, which (1) removes references to various FASB Concepts Statements, (2) situates all disclosure guidance in the appropriate disclosure section of the Codification, and (3) makes other improvements and technical corrections to the Codification, with these amendments being applied retrospectively. We early adopted this guidance and that adoption did not have a material impact on our consolidated financial statements and disclosures.
ASU 2020-09 – Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762
In October 2020, the FASB issued ASU 2020-09, which amends and supersedes various SEC paragraphs included in a number of Codification Topics pursuant to the issuance of the SEC's Release No. 33-10762. Through Release No. 33-10762, which was issued in March 2020, the SEC made amendments to the financial disclosure requirements in Regulation S-X for guarantors and issuers of guaranteed securities registered or being registered, and issuers’ affiliates whose securities collateralize securities registered or being registered, to improve those requirements for both investors and registrants. The changes made by the SEC are intended to (1) provide investors with material information given the specific facts and circumstances, (2) make the disclosures easier to understand, and (3) reduce the costs and burdens to registrants.
The amended rules in Release No. 33-10762 became effective on January 4, 2021, although early compliance was permitted. We elected early compliance with the new rules subsequent to their issuance. Because the amendments made by the FASB in this ASU are designed to ensure alignment of the relevant SEC paragraphs in various Codification Topics with the amended rules in Release No. 33-10762, the amendments did not have a material impact on our disclosures, since we already elected early compliance with the amended rules in Release No. 33-10762.
ASU 2020-04 and ASU 2021-01– Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, which is codified in Accounting Standards Codification ("ASC") 848 and which provides entities with temporary optional expedients and exceptions to the existing US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Inter-bank Offered Rate ("LIBOR") and other inter-bank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate ("SOFR").
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Under the provisions of ASU 2020-04, entities can elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can also elect various optional expedients for hedging relationships affected by reference rate reform, if certain criteria are met. Once elected, the amendments in this guidance must be applied prospectively for all eligible contract modifications.
Subsequently in January 2021, the FASB issued ASU 2021-01 to refine the scope of ASC 848 and clarify that certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, the ASU clarified that certain provisions in ASC 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments in ASU 2021-01 are effective immediately for all entities and can be applied either on a full retrospective or prospective basis depending on the facts and circumstances.
ASU 2020-04 was effective upon issuance and can be applied through to December 31, 2022. We adopted the ASU upon its issuance and as we transition from LIBOR to alternative reference rates, we have elected the temporary optional expedients and exceptions to the existing US GAAP guidance on contract modifications and hedge accounting permitted by the ASU, as appropriate. The adoption of this standard did not have any impact on our consolidated financial statements and disclosures.
ASU 2020-03 – Codification Improvements to Financial Instruments
In March 2020, the FASB issued ASU 2020-03, which makes narrow-scope improvements to various topics within the codification relating to financial instruments, including the new credit losses standard. The amendments related to certain specific issues covered by the ASU were effective immediately upon the issuance of the ASU, while certain specific issues covered by the ASU and affecting the credit losses standard in ASU 2016-13 were effective in 2020 for those entities that have already adopted ASU 2016-13. We adopted the amendments in this ASU upon its issuance and that adoption did not have a material impact on our consolidated financial statements and the related disclosures.
ASUs 2016-13, 2018-19, 2019-04, 2019-05, 2019-10 and 2019-11, Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU 2016-13, which is codified in ASC 326 - Financial Instruments - Credit Losses, amending the guidance on the impairment of financial instruments and significantly changing how entities measure credit losses for most financial assets and certain other financial instruments, including reinsurance balances recoverable on paid and unpaid losses that are not measured at fair value through net earnings. The ASU replaced the “incurred loss” approach that was previously applied to determine credit losses with an “expected loss” model for financial instruments measured at amortized cost. Under the "expected loss" model, the estimate of expected credit losses should consider historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. The expected credit losses and subsequent adjustments to such losses are recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the consolidated balance sheet at the amount expected to be collected.
ASU 2016-13 also amends the other-than-temporary impairment ("OTTI") model that was previously applicable to AFS debt securities, with the new approach now requiring the recognition of impairments relating to credit losses through an allowance account and limiting the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. This revised approach records the full effect of reversals of any credit losses in current period earnings, compared to previous guidance where this reversal was amortized over the lifetime of the security. Under this revised approach, the length of time a security has been in an unrealized loss position will no longer be considered in determining whether to record a credit loss. In addition, the historical and implied volatility of the fair value of a security and recoveries or declines in fair value after the balance sheet date will no longer be considered when making a determination of whether a credit loss exists.
We adopted ASU 2016-13 and all the related amendments on January 1, 2020 using the modified retrospective approach for our financial instruments carried at amortized cost, and prospectively for our AFS debt securities as required by the standard, resulting in an overall reduction in retained earnings of $6.1 million as summarized below:
•A cumulative effect adjustment of $3.0 million relating to our financial instruments carried at amortized cost,
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
which primarily relates to our insurance balances recoverable on paid and unpaid losses. We already carried significant specific allowances for credit losses of $147.6 million on our reinsurance balances recoverable on paid and unpaid losses, relating primarily to our Non-life Run-off segment and therefore the adoption of this standard did not have a material impact on our balance sheet; and
•$3.1 million related to our AFS debt securities whose fair values were less than their amortized cost basis.
Recently Issued Accounting Pronouncements Not Yet Adopted
ASU 2020-08 – Codification Improvements to Subtopic 310-20 - Receivables - Nonrefundable Fees and Other Costs
In October 2020, the FASB issued ASU 2020-08 to clarify that an entity should re-evaluate whether a callable debt security is within the scope of ASC 310-20-35-33 during each reporting period. All entities are required to apply the amendments in this ASU on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities.
The amendments in this ASU are effective for interim and annual reporting periods beginning after December 15, 2020, and early adoption is not permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and the related disclosures.
ASU 2020-06 – Accounting for Convertible Instruments and Contracts in an Entity's Own Equity
In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity's own equity. For convertible instruments, the ASU eliminates two of the three accounting models in ASC 470-20 that require separate accounting for embedded conversion features. The ASU also simplifies an issuer's application of the derivatives scope exception in ASC 815-40 for contracts in its own equity and removes some of the conditions that preclude a freestanding contract from being classified in equity, thereby allowing more of such contracts to qualify for equity classification.
The amendments in this ASU are effective for interim and annual reporting periods beginning after December 15, 2021 and, although early adoption is permitted, the amendments may not be adopted earlier than during interim and annual reporting periods beginning after December 15, 2020. In addition, the FASB specified that an entity should adopt the guidance as of the beginning of its annual reporting period through either a modified retrospective method of transition or a fully retrospective method of transition. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and the related disclosures.
ASU 2020-01 - Clarifying the Interactions between ASC 321, ASC 323 and ASC 815
In January 2020, the FASB issued ASU 2020-01 to clarify the interaction of the accounting for equity securities under ASC 321 and investments accounted for under the equity method of accounting in ASC 323 and the accounting for certain forward contracts and purchased options accounted for under ASC 815. With respect to the interactions between ASC 321 and ASC 323, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting when applying the measurement alternative in ASC 321, immediately before applying or upon discontinuing the equity method of accounting. With respect to forward contracts or purchased options to purchase securities, the amendments clarify that when applying the guidance in ASC 815-10-15-141(a), an entity should not consider whether upon the settlement of the forward contract or exercise of the purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method in ASC 323 or the fair value option in accordance with ASC 825. The ASU is effective for interim and annual reporting periods beginning after December 15, 2020, although early adoption is permitted, including adoption in any interim period. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and disclosures.
ASU 2019-12 - Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued ASU 2019-12 which removes certain exceptions for (1) recognizing deferred taxes for investments, (2) performing intraperiod tax allocation, and (3) calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating income taxes to a legal entity that is not subject to income taxes. The ASU is effective for interim and annual reporting periods beginning after December 15, 2020, although early adoption is permitted, including adoption in any interim period. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and disclosures.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
3. BUSINESS ACQUISITIONS
2019
Morse TEC
Overview
On October 30, 2019, we completed the acquisition of Morse TEC LLC ("Morse TEC") through our subsidiary, Enstar Holdings (US) LLC for $0 purchase price. Morse TEC held $0.7 billion in liabilities associated with personal injury asbestos claims and environmental claims arising from BorgWarner's legacy manufacturing operations. We applied the acquisition method to account for the Morse TEC transaction as required by ASC 805 - Business Combinations, with no goodwill or gain from bargain purchase being recorded on the acquisition. In addition, no intangible assets were identified for recognition on the acquisition.
Fair Value of Net Assets Acquired and Liabilities Assumed
The following table summarizes the fair values of the assets acquired and liabilities assumed in the Morse TEC transaction at the acquisition date, which were allocated to the Non-life Run-off segment.
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
Cash and cash equivalents
|
|
$
|
171,412
|
|
|
|
|
Deferred tax assets
|
|
140,000
|
|
Other assets - insurance balances receivable
|
|
371,116
|
|
|
|
|
TOTAL ASSETS
|
|
682,528
|
|
LIABILITIES
|
|
|
Defendant asbestos and environmental liabilities
|
|
662,507
|
|
|
|
|
|
|
|
Other liabilities
|
|
20,021
|
|
TOTAL LIABILITIES
|
|
$
|
682,528
|
|
NET ASSETS ACQUIRED AT FAIR VALUE
|
|
—
|
|
Morse TEC's Results Included in the Consolidated Statement of Earnings
The table below summarizes the results of the Morse TEC operations, which were included in our consolidated statement of earnings from the acquisition date to December 31, 2019:
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
488
|
|
|
|
|
General and administrative expenses
|
|
(1,459)
|
|
Other expenses
|
|
(1,512)
|
|
Net loss
|
|
$
|
(2,483)
|
|
2018
Maiden Re North America
Overview
On December 27, 2018, we completed the acquisition of Maiden Reinsurance North America, Inc. (“Maiden Re North America”) from a subsidiary of Maiden Holdings, Ltd. ("Maiden Holdings"). Maiden Re North America is an insurance company domiciled in Missouri that provides property and casualty treaty reinsurance, casualty facultative reinsurance and accident and health treaty reinsurance. As part of the transaction, we also novated and assumed certain reinsurance agreements from Maiden Holdings' Bermuda reinsurer, including certain reinsurance agreements with Maiden Re North America. Refer to Note 4 - "Significant New Business" for additional information relating to these reinsurance agreements. We have operated the business in run-off since we acquired it.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Purchase Price
The total cash paid in the transaction was $286.4 million, subject to certain post-closing adjustments. The components of the consideration paid to acquire all of the outstanding shares of Maiden Re North America were as follows:
|
|
|
|
|
|
|
|
|
Cash paid
|
|
$
|
286,375
|
|
Adjustment for the fair value of preexisting relationships
|
|
10,273
|
|
Total purchase price
|
|
$
|
296,648
|
|
Net assets acquired at fair value (including preexisting relationships)
|
|
$
|
296,648
|
|
Excess of purchase price over fair value of net assets acquired
|
|
$
|
—
|
|
The purchase price was allocated to the acquired assets and liabilities of Maiden Re North America based on their estimated fair values at the acquisition date.
Adjustment for the Fair Value of Preexisting Relationships
Enstar had contractual preexisting relationships with Maiden Re North America, which were deemed to be effectively settled at fair value on the acquisition date. The differences between the carrying value and the fair value of the preexisting relationships was included as part of the purchase price in accordance with ASC 805 - Business Combinations. The fair value of the balances relating to preexisting reinsurance relationships with Maiden Re North America were deemed to equal their carrying values given their short-term nature and the expectation that they would all be settled within twelve months following acquisition.
Fair Value of Net Assets Acquired and Liabilities Assumed
The following table summarizes the fair values of the assets acquired and liabilities assumed (excluding preexisting relationships and net of the intercompany cession assumed as part of the transaction) in the Maiden Re North America transaction at the acquisition date, which have all been allocated to the Non-life Run-off segment.
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
Fixed maturities, trading, at fair value
|
|
$
|
1,098,593
|
|
Short-term investments, trading, at fair value
|
|
3,508
|
|
Total investments
|
|
1,102,101
|
|
Cash and cash equivalents
|
|
12,035
|
|
Restricted cash and cash equivalents
|
|
26,871
|
|
Premiums receivable
|
|
138,378
|
|
Prepaid reinsurance premiums
|
|
3,257
|
|
Reinsurance balances recoverable
|
|
87,018
|
|
|
|
|
|
|
|
Other assets
|
|
96,669
|
|
TOTAL ASSETS
|
|
$
|
1,466,329
|
|
LIABILITIES
|
|
|
Losses and LAE
|
|
$
|
1,027,367
|
|
Unearned premiums
|
|
85,696
|
|
|
|
|
Other liabilities
|
|
56,618
|
|
TOTAL LIABILITIES
|
|
1,169,681
|
|
NET ASSETS ACQUIRED AT FAIR VALUE
|
|
$
|
296,648
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Maiden Re North America's Results Included in the Consolidated Statement of Earnings
The table below summarizes the results of the Maiden Re North America operations, which were included in our consolidated statement of earnings from the acquisition date to December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
675
|
|
Net unrealized gains
|
|
3,749
|
|
General and administrative expenses
|
|
(435)
|
|
|
|
|
Net earnings
|
|
$
|
3,989
|
|
KaylaRe
Overview
On May 14, 2018, the Company acquired all of the outstanding shares and warrants of KaylaRe Holdings, Ltd. ("KaylaRe"). In consideration for the acquired shares and warrants of KaylaRe, the Company issued an aggregate of 2,007,017 ordinary shares to the shareholders of KaylaRe, comprising 1,501,778 voting ordinary shares and 505,239 Series E non-voting ordinary shares. Effective May 14, 2018, we consolidated KaylaRe into our consolidated financial statements, and any balances between KaylaRe and Enstar are now eliminated upon consolidation. Effective September 30, 2019, KaylaRe and KaylaRe Ltd. merged with Cavello Bay Reinsurance Limited, a wholly-owned subsidiary of the Company, with Cavello Bay Reinsurance Limited as the surviving company. Refer to Note 21 - "Related Party Transactions" for additional information relating to KaylaRe.
Purchase Price
The components of the consideration paid to acquire all of the outstanding shares and warrants of KaylaRe were as follows:
|
|
|
|
|
|
|
|
|
Fair value of Enstar ordinary shares issued
|
|
$
|
414,750
|
|
Fair value of previously held equity method investment
|
|
336,137
|
|
Adjustment for the fair value of preexisting relationships
|
|
37,169
|
|
Total purchase price
|
|
$
|
788,056
|
|
Net assets acquired at fair value (excluding preexisting relationships)
|
|
$
|
746,320
|
|
Excess of purchase price over fair value of net assets acquired
|
|
$
|
41,736
|
|
The purchase price was allocated to the acquired assets and liabilities of KaylaRe based on their estimated fair values at the acquisition date. We recognized goodwill of $41.7 million on the transaction, primarily attributable to (i) the capital synergies from integrating KaylaRe into our group capital structure, (ii) investment management capabilities on a total return basis, and (iii) the incremental acquired capital to be utilized for future Non-life Run-off transactions.
Fair Value of Enstar Ordinary Shares Issued
The fair value of the Enstar ordinary shares issued was based on the closing price of Enstar's voting ordinary shares of $206.65 as of May 14, 2018, the date the transaction closed. Enstar's non-voting ordinary shares are economically equivalent to Enstar's voting ordinary shares.
|
|
|
|
|
|
|
|
|
Number of Enstar ordinary shares issued
|
|
2,007,017
|
Closing price of Enstar voting ordinary shares as of May 14, 2018
|
|
$
|
206.65
|
|
Fair value of Enstar ordinary shares issued to shareholders of KaylaRe
|
|
$
|
414,750
|
|
Fair Value of Previously Held Equity Method Investment
Prior to the close of the transaction, Enstar held a 48.2% interest in KaylaRe, which was accounted for as an equity method investment in accordance with ASC 323 - Investments - Equity Method and Joint Ventures. The acquisition of the remaining 51.8% equity interest in KaylaRe was considered a step acquisition, whereby the Company remeasured the previously held equity method investment to fair value. The Company considered multiple factors in determining the fair value of the previously held equity method investment, including (i) the price negotiated with the selling shareholders for the 51.8% equity interest in KaylaRe, (ii) recent market transactions for similar companies, and (iii) current trading multiples for comparable companies. Based on this analysis, a valuation multiple of 1.05 to KaylaRe's carrying book value was determined to be appropriate to remeasure the previously held equity method investment at fair value. This resulted in the recognition of a gain of $16.0 million on completion
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
of the step acquisition of KaylaRe, which was recorded in earnings (losses) from equity method investments for the three and six months ended June 30, 2018.
|
|
|
|
|
|
|
|
|
Carrying value of previously held equity method investment prior to the close of the transaction
|
|
$
|
320,130
|
|
Price-to-book multiple
|
|
1.05
|
Fair value of previously held equity method investment prior to the close of the transaction
|
|
$
|
336,137
|
|
|
|
|
Gain recognized on remeasurement of previously held equity method investment to fair value
|
|
$
|
16,007
|
|
Adjustment for the Fair Value of Preexisting Relationships
Enstar had contractual preexisting relationships with KaylaRe, which were deemed to be effectively settled at fair value on the acquisition date. The differences between the carrying value and the fair value of the preexisting relationships was included as part of the purchase price in accordance with ASC 805 - Business Combinations. The fair value of the balances relating to preexisting reinsurance relationships with KaylaRe was determined using a discounted cash flow approach and, where applicable, consideration was given to stated contractual settlement provisions, when determining the loss to be recorded on the deemed settlement of these preexisting relationships. The fair values of the balances arising from the non-reinsurance preexisting relationships with KaylaRe were deemed to equal their carrying values given their short-term nature and the expectation that they would all be settled within the next twelve months.
As a result of effectively settling all the contractual preexisting relationships with KaylaRe, the Company recognized a loss of $15.6 million, which was recorded in other income (loss) in the three and six months ended June 30, 2018, as summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
Carrying value
|
|
Fair value
|
|
Loss on deemed settlement
|
Funds held by reinsured companies
|
$
|
386,793
|
|
|
$
|
386,793
|
|
|
$
|
—
|
|
Deferred acquisition costs/Value of business acquired
|
33,549
|
|
|
40,268
|
|
|
6,719
|
|
TOTAL ASSETS
|
420,342
|
|
|
427,061
|
|
|
6,719
|
|
LIABILITIES
|
|
|
|
|
|
Losses and LAE
|
339,747
|
|
|
333,205
|
|
|
(6,542)
|
|
Unearned premiums
|
105,602
|
|
|
105,602
|
|
|
—
|
|
Insurance and reinsurance balances payable
|
25,897
|
|
|
23,559
|
|
|
(2,338)
|
|
Other liabilities
|
1,864
|
|
|
1,864
|
|
|
—
|
|
TOTAL LIABILITIES
|
473,110
|
|
|
464,230
|
|
|
(8,880)
|
|
NET ASSETS (LIABILITIES)
|
$
|
(52,768)
|
|
|
$
|
(37,169)
|
|
|
$
|
15,599
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Fair Value of Net Assets Acquired and Liabilities Assumed
The following table summarizes the fair values of the assets acquired and liabilities assumed (excluding preexisting relationships) in the KaylaRe transaction at the acquisition date, which have all been allocated to the Non-life Run-off segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Fixed maturities, trading, at fair value
|
|
|
|
|
|
|
$
|
126,393
|
|
Other investments, at fair value
|
|
|
|
|
|
|
626,476
|
|
Total investments
|
|
|
|
|
|
|
752,869
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
5,657
|
|
Premiums receivable
|
|
|
|
|
|
|
10,965
|
|
|
|
|
|
|
|
|
|
Deferred acquisition costs
|
|
|
|
|
|
|
275
|
|
Other assets
|
|
|
|
|
|
|
614
|
|
TOTAL ASSETS
|
|
|
|
|
|
|
$
|
770,380
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Losses and LAE
|
|
|
|
|
|
|
$
|
4,059
|
|
Unearned premiums
|
|
|
|
|
|
|
10,984
|
|
Insurance and reinsurance balances payable
|
|
|
|
|
|
|
13
|
|
Other liabilities
|
|
|
|
|
|
|
9,004
|
|
TOTAL LIABILITIES
|
|
|
|
|
|
|
24,060
|
|
NET ASSETS ACQUIRED AT FAIR VALUE
|
|
|
|
|
|
|
$
|
746,320
|
|
KaylaRe's Results Included in the Consolidated Statement of Earnings
The table below summarizes the results of the KaylaRe operations, which are included in our consolidated statement of earnings from the acquisition date to December 31, 2018:
|
|
|
|
|
|
|
|
|
Premiums earned
|
|
$
|
13,627
|
|
Incurred losses and LAE
|
|
(12,364)
|
|
Acquisition costs
|
|
(341)
|
|
Underwriting income
|
|
922
|
|
Net investment income
|
|
3,096
|
|
Net unrealized gains
|
|
(47,769)
|
|
General and administrative expenses
|
|
(2,164)
|
|
Net loss
|
|
$
|
(45,915)
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
4. SIGNIFICANT NEW BUSINESS
We define significant new business as material transactions other than business acquisitions which are included in Note 3 - "Business Acquisitions." Generally, our significant new business takes the form of reinsurance or direct business transfers. The table below sets forth a summary of significant new business that we have completed between January 1, 2018 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
Date Completed
|
|
Total Assets Assumed
|
|
Deferred Charge Asset (1)
|
|
Total Liabilities Assumed
|
|
Net Fair Value Adjustment (2)
|
|
Primary Nature of Business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hannover Re
|
|
August 6, 2020
|
|
$
|
182,498
|
|
|
N/A
|
|
$
|
209,713
|
|
|
$
|
(27,215)
|
|
|
U.S. asbestos, environmental and workers' compensation liabilities
|
Munich Re
|
|
July 1, 2020
|
|
$
|
100,956
|
|
|
N/A
|
|
$
|
100,956
|
|
|
N/A
|
|
Australian public liability, professional liability and builders' warranty liabilities
|
AXA Group (3)
|
|
June 1, 2020
|
|
$
|
179,681
|
|
|
N/A
|
|
$
|
179,681
|
|
|
N/A
|
|
U.S. construction general liability
|
Aspen
|
|
June 1, 2020
|
|
$
|
770,000
|
|
|
$
|
11,746
|
|
|
$
|
781,746
|
|
|
N/A
|
|
Diversified mix of property, liability and specialty lines of business across the U.S., U.K. and Europe
|
Lyft
|
|
March 31, 2020
|
|
$
|
465,000
|
|
|
N/A
|
|
$
|
465,000
|
|
|
N/A
|
|
U.S. motor
|
Zurich (3)
|
|
October 1, 2019
|
|
$
|
507,061
|
|
|
$
|
115,815
|
|
|
$
|
622,876
|
|
|
N/A
|
|
U.S. asbestos and environmental liability
|
Maiden Re Bermuda
|
|
August 5, 2019
|
|
$
|
445,000
|
|
|
$
|
85,183
|
|
|
$
|
530,183
|
|
|
N/A
|
|
U.S. workers' compensation and General Casualty
|
Amerisure
|
|
April 11, 2019
|
|
$
|
45,463
|
|
|
$
|
2,873
|
|
|
$
|
48,336
|
|
|
N/A
|
|
U.S. construction defect
|
AmTrust
|
|
February 14, 2019
|
|
$
|
1,143,949
|
|
|
$
|
20,633
|
|
|
$
|
1,164,582
|
|
|
N/A
|
|
Lloyd's property, professional, marine, non-marine, affinity annual, extended warranty and political
|
Allianz SE
|
|
December 31, 2018
|
|
$
|
70,000
|
|
|
N/A
|
|
$
|
70,000
|
|
|
N/A
|
|
Asbestos and environmental
|
Maiden Re Bermuda
|
|
December 27, 2018
|
|
$
|
70,425
|
|
|
$
|
1,704
|
|
|
$
|
72,129
|
|
|
N/A
|
|
U.S. workers' compensation and motor
|
Coca-Cola
|
|
August 1, 2018
|
|
$
|
103,617
|
|
|
$
|
17,208
|
|
|
$
|
120,825
|
|
|
N/A
|
|
U.S. workers' compensation, auto liability, general and product liability
|
Zurich Australia
|
|
February 23, 2018
|
|
$
|
268,657
|
|
|
N/A
|
|
$
|
280,764
|
|
|
$
|
(12,107)
|
|
|
Australian motor
|
Neon
|
|
February 16, 2018
|
|
$
|
525,673
|
|
|
N/A
|
|
$
|
546,298
|
|
|
$
|
(20,625)
|
|
|
Medical malpractice, general liability, professional indemnity and marine
|
Novae
|
|
January 29, 2018
|
|
$
|
1,095,730
|
|
|
N/A
|
|
$
|
1,163,198
|
|
|
$
|
(67,468)
|
|
|
Financial, casualty, marine and energy, professional indemnity, aviation, motor and property
|
The table below sets forth a summary of significant new business that we have signed or completed between January 1, 2021 and March 1, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
Date Completed
|
|
|
|
|
|
Initial Estimate of Liabilities Assumed
|
|
|
|
Primary Nature of Business
|
AXA Group(4)
|
|
N/A - Announced February 25, 2021
|
|
|
|
|
|
$
|
1,395,000
|
|
|
|
|
Diversified mix of global casualty and professional lines
|
ProSight (4)
|
|
N/A - Announced January 15, 2021
|
|
|
|
|
|
$
|
500,000
|
|
|
|
|
U.S. discontinued workers' compensation and excess workers' compensation lines of business and adverse development cover on a diversified mix of general liability classes of business
|
CNA (4)
|
|
February 5, 2021
|
|
|
|
|
|
$
|
690,000
|
|
|
|
|
U.S. excess workers' compensation
|
Liberty Mutual (4)
|
|
January 8, 2021
|
|
|
|
|
|
$
|
420,000
|
|
|
|
|
U.S. energy liability, construction liability and homebuilders liability
|
(1) Where the estimated ultimate losses payable exceed the premium consideration received at the inception of the agreement, a deferred charge asset is recorded.
(2) When the fair value option is elected for any retroactive reinsurance agreement, an initial net fair value adjustment is recorded at the inception of the agreement.
(3) Effective October 1, 2020 and 2019, we ceded 10% of the AXA Group and Zurich transactions, respectively, to Enhanzed Reinsurance Ltd. ("Enhanzed Re"), in which we have an investment, on the same terms and conditions as those received by us.
(4) The retroactive reinsurance agreements with AXA Group, ProSight, CNA and Liberty Mutual either closed or are expected to close in 2021 and therefore the related balances are not included in our consolidated financial statements as of December 31, 2020.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
5. DIVESTITURES, HELD-FOR-SALE BUSINESSES AND DISCONTINUED OPERATIONS
Atrium Exchange Transaction
On August 13, 2020, we announced an exchange transaction with Trident V, L.P., Trident V Parallel Fund, L.P. and Trident V Professionals Fund, L.P. (collectively, the "Trident V Funds") managed by Stone Point Capital LLC ("Stone Point"). As part of the exchange, we entered into a recapitalization agreement with the Trident V Funds, Dowling Capital Partners I, L.P. and Capital City Partners LLC (collectively, the "Dowling Funds"), North Bay Holdings Limited ("North Bay"), and StarStone Specialty Holdings Limited ("SSHL"). On January 1, 2021, this transaction was completed.
As of December 31, 2020, Enstar owned an indirect 59.0% interest in North Bay and the Trident V Funds and the Dowling Funds owned 39.3% and 1.7%, respectively. North Bay owns 100.0% of SSHL, the holding company for the StarStone group, which previously included StarStone U.S. and still includes StarStone International. North Bay also owned 92.1% of Northshore Holdings Limited ("Northshore"), the holding company that owns Atrium Underwriting Group Limited and its subsidiaries (collectively, "Atrium") and Arden Reinsurance Company Ltd. ("Arden"). The remaining share ownership of Northshore is held on behalf of certain Atrium employees.
Pursuant to the terms of the recapitalization agreement, we exchanged a portion of our indirect interest in Northshore for all of the Trident V Funds’ indirect interest in StarStone U.S., which was owned through an interest in Core Specialty (the “Exchange Transaction”). Effective January 1, 2021, we own 25.23% of Core Specialty on a fully diluted basis, which in turn owns StarStone U.S., and 13.8% of Northshore, which continues to own Atrium and Arden. Furthermore, the Trident V Funds no longer own any interest in Core Specialty but own 76.3% of Northshore, while the Dowling Funds own 0.4% of Core Specialty and 1.6% of Northshore. The Exchange Transaction had no impact on the ultimate ownership of SSHL, which continues to own StarStone International, with us, the Trident V Funds and the Dowling Funds retaining our and their current ownership interests in SSHL of 59.0%, 39.3% and 1.7%, respectively.
Effective January 1, 2021, Northshore was deconsolidated and our remaining investment will be accounted for as a privately held equity investment and carried at its fair value.
Through our wholly-owned subsidiary SGL No.1, a Lloyd’s corporate member included within our Non-life Run-off segment, we provided 25% of the underwriting capacity on the 2017 to 2020 underwriting years of Atrium's Syndicate 609 at Lloyd’s. Effective January 1, 2021, and in conjunction with the completion of the Atrium Exchange Transaction, SGL No.1 ceased its provision of underwriting capacity on Syndicate 609. Accordingly, the 2020 underwriting year was the last underwriting year that SGL No. 1 participated in with respect to the Atrium business. We will continue to report SGL No. 1's 25% gross-up share of the 2020 and prior underwriting years of Syndicate 609 until the 2020 underwriting year completes an RITC into a successor year, which will be no earlier than December 31, 2022. There is no net retention for Enstar on Atrium's 2020 and prior underwriting years as the business was contractually transferred to the Atrium entities that were divested in the Exchange Transaction. Effective January 1, 2021, certain balances that SGL No. 1 has with Atrium and Arden will no longer be eliminated on consolidation.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of December 31, 2020, we have classified the assets and liabilities of Northshore as held-for-sale but it did not qualify as a discontinued operation since the pending disposal did not represent a strategic shift that would have a major effect on our operations and financial results. The following table summarizes the components of Northshore's assets and liabilities held-for-sale on our consolidated balance sheet as of December 31, 2020:
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Short-term investments, AFS, at fair value
|
$
|
1,720
|
|
|
|
Fixed maturities, trading, at fair value
|
154,026
|
|
|
|
|
|
|
|
Fixed maturities, AFS, at fair value
|
7,483
|
|
|
|
|
|
|
|
|
|
|
|
Other investments, at fair value
|
9,897
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
173,126
|
|
|
|
Cash and cash equivalents
|
71,156
|
|
|
|
Restricted cash and cash equivalents
|
152,044
|
|
|
|
Premiums receivable
|
62,392
|
|
|
|
|
|
|
|
|
|
|
|
Reinsurance balances recoverable on paid and unpaid losses
|
37,341
|
|
|
|
|
|
|
|
|
|
|
|
Funds held by reinsured companies
|
32,226
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
182,993
|
|
|
|
TOTAL ASSETS HELD-FOR-SALE
|
$
|
711,278
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
Losses and loss adjustment expenses
|
$
|
254,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance and reinsurance balances payable
|
12,393
|
|
|
|
|
|
|
|
Debt obligations
|
39,850
|
|
|
|
Other liabilities
|
177,265
|
|
|
|
TOTAL LIABILITIES HELD-FOR-SALE
|
$
|
483,657
|
|
|
|
|
|
|
|
NET ASSETS HELD-FOR-SALE
|
$
|
227,621
|
|
|
|
As of December 31, 2020, included in the table above were restricted investments of $94.4 million.
Recapitalization of StarStone U.S. and Discontinued Operations
On November 30, 2020, we completed the sale and recapitalization of StarStone U.S. through the sale of StarStone U.S. to Core Specialty, a newly formed entity with equity backing from funds managed by SkyKnight Capital, L.P., Dragoneer Investment Group and Aquiline Capital Partners LLC.
We received consideration of $282.0 million inclusive of $235.0 million of common shares of Core Specialty and cash of $47.0 million. The $235.0 million of common shares of Core Specialty represents a 25.23% interest in Core Specialty on a fully diluted basis. Our investment in Core Specialty is accounted for as an equity method investment and we record our proportionate share of the net earnings on a one quarter lag.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
StarStone U.S. comprised a substantial portion of the StarStone segment. We classified the assets and liabilities of StarStone U.S. as held-for-sale. The following table summarizes the components of StarStone U.S.'s assets and liabilities held-for-sale on our consolidated balance sheet as of December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019 (1)
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities, trading, at fair value
|
|
|
$
|
202,994
|
|
|
|
|
|
Fixed maturities, AFS, at fair value
|
|
|
375,337
|
|
|
|
|
|
Equities, at fair value
|
|
|
3,000
|
|
Other investments, at fair value
|
|
|
6,389
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
|
587,720
|
|
Cash and cash equivalents
|
|
|
78,613
|
|
Restricted cash and cash equivalents
|
|
|
5,815
|
|
Premiums receivable
|
|
|
99,367
|
|
Deferred tax assets
|
|
|
15,191
|
|
|
|
|
|
Reinsurance balances recoverable on paid and unpaid losses
|
|
|
530,604
|
|
|
|
|
|
|
|
|
|
Funds held by reinsured companies
|
|
|
35,861
|
|
Deferred acquisition costs
|
|
|
36,992
|
|
Goodwill and intangible assets
|
|
|
24,900
|
|
Other assets
|
|
|
59,707
|
|
TOTAL ASSETS HELD-FOR-SALE
|
|
|
$
|
1,474,770
|
|
|
|
|
|
LIABILITIES
|
|
|
|
Losses and loss adjustment expenses
|
|
|
$
|
836,761
|
|
|
|
|
|
|
|
|
|
Unearned premiums
|
|
|
218,166
|
|
Insurance and reinsurance balances payable
|
|
|
22,453
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
131,151
|
|
TOTAL LIABILITIES HELD-FOR-SALE
|
|
|
$
|
1,208,531
|
|
|
|
|
|
NET ASSETS HELD-FOR-SALE
|
|
|
$
|
266,239
|
|
(1) Following our decision to sell StarStone U.S. to Core Specialty which was completed on November 30, 2020, the assets and liabilities of StarStone U.S. as of December 31, 2019 were reclassified to held-for-sale on our consolidated balance sheets, in addition to the comparatives being restated since StarStone U.S. qualified as a discontinued operation.
As of December 31, 2019, included in the table above were restricted investments of $131.0 million.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The StarStone U.S. business qualified as a discontinued operation. The following table summarizes the components of net earnings (loss) from discontinued operations, net of income taxes, related to StarStone U.S., on the consolidated statements of earnings for the years ended December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
INCOME
|
|
|
|
|
|
Net premiums earned
|
$
|
291,326
|
|
|
$
|
350,814
|
|
|
$
|
199,796
|
|
|
|
|
|
|
|
Net investment income
|
12,849
|
|
|
15,606
|
|
|
10,572
|
|
Net realized and unrealized gains
|
5,431
|
|
|
19,385
|
|
|
(5,352)
|
|
Other income
|
49
|
|
|
9
|
|
|
10
|
|
|
309,655
|
|
|
385,814
|
|
|
205,026
|
|
EXPENSES
|
|
|
|
|
|
Net incurred losses and loss adjustment expenses
|
191,844
|
|
|
258,396
|
|
|
130,303
|
|
Acquisition costs
|
57,640
|
|
|
65,342
|
|
|
14,935
|
|
General and administrative expenses
|
60,236
|
|
|
60,003
|
|
|
58,590
|
|
Interest expense
|
2,066
|
|
|
2,600
|
|
|
2,120
|
|
Net foreign exchange (gains) losses
|
(13)
|
|
|
33
|
|
|
24
|
|
|
311,773
|
|
|
386,374
|
|
|
205,972
|
|
EARNINGS (LOSS) BEFORE INCOME TAXES
|
(2,118)
|
|
|
(560)
|
|
|
(946)
|
|
Income tax benefit
|
2,255
|
|
|
7,935
|
|
|
2,435
|
|
|
|
|
|
|
|
NET EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES, BEFORE GAIN ON SALE
|
$
|
137
|
|
|
$
|
7,375
|
|
|
$
|
1,489
|
|
|
|
|
|
|
|
DISPOSAL
|
|
|
|
|
|
Consideration received
|
$
|
281,989
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Less: Carrying value of subsidiary
|
(277,697)
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
Add: Net realized gains on AFS securities and cumulative currency translation adjustments previously recognized in AOCI
|
11,822
|
|
|
—
|
|
|
—
|
|
Gain on sale of subsidiary
|
$
|
16,114
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
NET EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES
|
$
|
16,251
|
|
|
$
|
7,375
|
|
|
$
|
1,489
|
|
Net loss (earnings) from discontinued operations attributable to noncontrolling interest
|
(8,717)
|
|
|
(3,025)
|
|
|
(611)
|
|
NET EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS ATTRIBUTABLE TO ENSTAR ORDINARY SHAREHOLDERS
|
$
|
7,534
|
|
|
$
|
4,350
|
|
|
$
|
878
|
|
Continuing Involvement Disclosures
Following the completion of the sale of StarStone U.S. to Core Specialty on November 30, 2020, our continuing involvement with StarStone U.S comprised of the following transactions:
LPT and ADC reinsurance agreement
In connection with the sale of StarStone U.S. to Core Specialty, one of our Non-life Run-off subsidiaries entered into an LPT and ADC reinsurance agreement with StarStone U.S. pursuant to which we reinsured all of the net loss reserves of StarStone U.S. in respect of premium earned prior to October 31, 2020. Under the terms of the LPT and ADC reinsurance agreement, we assumed total net loss reserves of $462.4 million from StarStone U.S. in exchange for a total reinsurance premium consideration of $478.2 million, subject to an aggregate limit of $130.0 million above the assumed total net loss reserves. Our Non-life Run-off subsidiary's obligations to StarStone U.S. under the LPT and ADC reinsurance agreement are guaranteed by us. The LPT and ADC reinsurance agreement between us and StarStone U.S. shall continue in force until such time as our liability with respect to the assumed total net loss reserves terminates.
Concurrent with the closing of the LPT and ADC reinsurance agreement, one of our wholly-owned subsidiaries entered into an Administrative Services Agreement ("ASA") with StarStone U.S., through which it was
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
appointed as an independent contractor to provide certain administrative services covering the business we assumed from StarStone U.S. through the LPT and ADC reinsurance agreement. This ASA became effective on November 30, 2020 and shall continue until its termination.
In addition, concurrent with the sale of StarStone U.S. to Core Specialty which was completed on November 30, 2020, one of our wholly-owned subsidiaries entered into a Transition Services Agreement ("TSA") with Core Specialty through which our subsidiary and Core Specialty agreed to provide certain transitional services to each other relating to the StarStone U.S. businesses, for a specified period of time. This TSA became effective on November 30, 2020 and unless otherwise agreed to in writing by both Core Specialty and us, shall terminate on the earliest to occur of (a) the 2-year anniversary of the agreement, (b) the date on which all the covered transitional services have been terminated, and (c) the termination of the agreement.
Reinsurance transactions previously eliminated on consolidation
The table below presents a summary of the total income and expenses which have been recognized within our continuing operations for the years ended December 31, 2020, 2019 and 2018, relating to intercompany transactions, primarily intra-group reinsurances, between StarStone U.S. and our subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Total Income
|
|
$
|
11,911
|
|
$
|
10,672
|
|
$
|
98,402
|
Total Expenses (1)
|
|
(16,397)
|
|
62,515
|
|
113,952
|
Net Earnings (Loss)
|
|
$
|
28,308
|
|
$
|
(51,843)
|
|
$
|
(15,550)
|
(1) For the year ended December 31, 2020, negative total expenses were driven by favorable loss development on the losses and LAE reserves ceded by StarStone U.S. to our subsidiaries.
Cash flows
The cash inflows (outflows) between our subsidiaries and StarStone U.S. for the years ended December 31, 2020, 2019 and 2018 were $99.2 million, $(53.9) million and $(64.6) million, respectively.
Equity method investment
We have applied the equity method of accounting to the common shares we acquired in Core Specialty as part-consideration for the sale of StarStone U.S. and which make up 25.23% of the total outstanding common shares in Core Specialty on a fully diluted basis. Since we account for our share of earnings attributable to our equity method investees on a quarter lag, the carrying value of our investment in the common shares of Core Specialty as at December 31, 2020 remained unchanged from our November 30, 2020 fair value of $235.0 million, when we completed the sale of StarStone U.S. to Core Specialty.
Run-off of StarStone International (non-U.S.)
On June 10, 2020, we announced that we placed StarStone International into an orderly run-off (the "StarStone International Run-Off"). The liabilities associated with the StarStone International Run-Off vary in duration, and the run-off is expected to occur over a number of years. Steps to reduce the size of StarStone International's operations have begun and will involve several phases that will occur over time. As a result, we cannot anticipate with certainty the expected completion date of the StarStone International Run-Off.
We continue to evaluate additional strategic options for StarStone International's operations and business. Consequently, such options could have the effect of mitigating costs associated with placing the business into run-off. The remaining StarStone International operations will continue to serve the needs of policyholders and ensure that the companies continue to meet all regulatory requirements. The results of StarStone International are included within continuing operations in the StarStone segment. Recent developments relating to StarStone International include:
•On October 2, 2020, StarStone International sold the renewal rights for its financial lines portfolio for consideration of $0.5 million.
•On October 14, 2020, we completed the sale of Vander Haeghen & Co. SA ("VdH"), a Belgium-based insurance agency majority owned by StarStone International entities, for consideration of €3.8 million ($4.5 million). We recognized a gain on the sale of $3.4 million in the fourth quarter of 2020.
•On November 17, 2020, we announced an agreement to sell StarStone Underwriting Limited ("SUL"), the Lloyd's managing agency, together with the right to operate Lloyd's Syndicate 1301, to Inigo Limited ("Inigo"). We currently have a 59.0% interest in SUL and the Trident V Funds and the Dowling Funds
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
currently own 39.3% and 1.7%, respectively. Upon closing, Enstar, the Trident V Funds and the Dowling Funds will receive $30.0 million of consideration from the sale of SUL in the form of Inigo shares. In addition, Enstar and the Trident V Funds have committed to invest up to $27.0 million and $18.0 million, respectively, into Inigo. The sale is expected to close in the first half of 2021, subject to regulatory approvals and satisfaction of customary closing conditions. Upon closing, we expect to own 5.4% of Inigo. As of December 31, 2020, our investment in Inigo was $16.9 million and was accounted for as a privately held equity investment and carried at fair value. In conjunction with the transaction, Enstar, the Trident V Funds and the Dowling Funds will retain the economics of Syndicate 1301’s 2020 and prior years’ underwriting portfolios as this business runs off.
•On February 11, 2021, we entered into an agreement to sell Arena N.V., a Belgium-based specialist accident and health managing general agent.
6. INVESTMENTS
We hold: (i) trading portfolios of short-term and fixed maturity investments and equities, carried at fair value; (ii) AFS portfolios of short-term and fixed maturity investments, carried at fair value; (iii) other investments carried at fair value; (iv) equity method investments; and (v) funds held - directly managed.
Short-term and Fixed Maturity Investments
Asset Types
The fair values of the underlying asset categories comprising our short-term and fixed maturity investments classified as trading and AFS and the fixed maturity investments included within our funds held - directly managed balance were as follows as of December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Short-term investments, trading
|
|
Short-term investments, AFS
|
|
Fixed maturities, trading
|
|
Fixed maturities, AFS
|
|
Fixed maturities, funds held - directly managed
|
|
Total
|
U.S. government and agency
|
$
|
—
|
|
|
$
|
243,556
|
|
|
$
|
123,874
|
|
|
$
|
474,442
|
|
|
$
|
109,176
|
|
|
$
|
951,048
|
|
U.K. government
|
—
|
|
|
—
|
|
|
37,508
|
|
|
13,574
|
|
|
—
|
|
|
51,082
|
|
Other government
|
3,424
|
|
|
3,213
|
|
|
327,437
|
|
|
146,914
|
|
|
21,165
|
|
|
502,153
|
|
Corporate
|
1,705
|
|
|
17,026
|
|
|
3,227,726
|
|
|
1,920,323
|
|
|
519,952
|
|
|
5,686,732
|
|
Municipal
|
—
|
|
|
—
|
|
|
79,959
|
|
|
30,032
|
|
|
52,678
|
|
|
162,669
|
|
Residential mortgage-backed
|
—
|
|
|
—
|
|
|
154,471
|
|
|
328,871
|
|
|
70,603
|
|
|
553,945
|
|
Commercial mortgage-backed
|
—
|
|
|
—
|
|
|
347,225
|
|
|
276,488
|
|
|
230,377
|
|
|
854,090
|
|
Asset-backed
|
—
|
|
|
—
|
|
|
296,692
|
|
|
204,456
|
|
|
56,312
|
|
|
557,460
|
|
Total fixed maturity and short-term investments
|
$
|
5,129
|
|
|
$
|
263,795
|
|
|
$
|
4,594,892
|
|
|
$
|
3,395,100
|
|
|
$
|
1,060,263
|
|
|
$
|
9,319,179
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
Short-term investments, trading
|
|
Short-term investments, AFS
|
|
Fixed maturities, trading
|
|
Fixed maturities, AFS
|
|
Fixed maturities, funds held - directly managed
|
|
Total
|
U.S. government and agency
|
$
|
—
|
|
|
$
|
111,583
|
|
|
$
|
208,296
|
|
|
$
|
269,661
|
|
|
$
|
106,537
|
|
|
$
|
696,077
|
|
U.K. government
|
24,411
|
|
|
1,069
|
|
|
122,012
|
|
|
14,280
|
|
|
—
|
|
|
161,772
|
|
Other government
|
21,958
|
|
|
387
|
|
|
575,017
|
|
|
84,760
|
|
|
20,734
|
|
|
702,856
|
|
Corporate
|
5,121
|
|
|
13,915
|
|
|
3,959,288
|
|
|
866,557
|
|
|
603,389
|
|
|
5,448,270
|
|
Municipal
|
—
|
|
|
1,381
|
|
|
87,451
|
|
|
2,399
|
|
|
49,456
|
|
|
140,687
|
|
Residential mortgage-backed
|
—
|
|
|
—
|
|
|
215,521
|
|
|
99,188
|
|
|
86,205
|
|
|
400,914
|
|
Commercial mortgage-backed
|
—
|
|
|
—
|
|
|
534,357
|
|
|
49,046
|
|
|
230,343
|
|
|
813,746
|
|
Asset-backed
|
—
|
|
|
—
|
|
|
441,393
|
|
|
152,161
|
|
|
76,681
|
|
|
670,235
|
|
Total fixed maturity and short-term investments
|
$
|
51,490
|
|
|
$
|
128,335
|
|
|
$
|
6,143,335
|
|
|
$
|
1,538,052
|
|
|
$
|
1,173,345
|
|
|
$
|
9,034,557
|
|
Included within residential and commercial mortgage-backed securities as of December 31, 2020 were securities issued by U.S. governmental agencies with a fair value of $458.1 million (as of December 31, 2019: $333.3 million). There were no senior secured loans within corporate securities as of December 31, 2020, compared to $31.4 million as of December 31, 2019.
Contractual Maturities
The contractual maturities of our short-term and fixed maturity investments, classified as trading and AFS, and the fixed maturity investments included within our funds held - directly managed balance are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
Amortized Cost
|
|
Fair Value
|
|
% of Total Fair Value
|
One year or less
|
|
$
|
489,559
|
|
|
$
|
494,490
|
|
|
5.3
|
%
|
More than one year through two years
|
|
710,621
|
|
|
726,331
|
|
|
7.8
|
%
|
More than two years through five years
|
|
2,097,923
|
|
|
2,206,020
|
|
|
23.7
|
%
|
More than five years through ten years
|
|
1,974,838
|
|
|
2,151,191
|
|
|
23.1
|
%
|
More than ten years
|
|
1,544,533
|
|
|
1,775,652
|
|
|
19.0
|
%
|
Residential mortgage-backed
|
|
545,628
|
|
|
553,945
|
|
|
5.9
|
%
|
Commercial mortgage-backed
|
|
828,155
|
|
|
854,090
|
|
|
9.2
|
%
|
Asset-backed
|
|
567,638
|
|
|
557,460
|
|
|
6.0
|
%
|
|
|
$
|
8,758,895
|
|
|
$
|
9,319,179
|
|
|
100.0
|
%
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Credit Ratings
The following table sets forth the credit ratings of our short-term and fixed maturity investments, classified as trading and AFS, and the fixed maturity investments included within our funds held - directly managed balance as of December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
Fair Value
|
|
% of Total
|
|
AAA
Rated
|
|
AA Rated
|
|
A Rated
|
|
BBB
Rated
|
|
Non-
Investment
Grade
|
|
Not Rated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency
|
|
$
|
935,014
|
|
|
$
|
951,048
|
|
|
10.2
|
%
|
|
$
|
951,048
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
U.K. government
|
|
46,988
|
|
|
51,082
|
|
|
0.6
|
%
|
|
—
|
|
|
43,199
|
|
|
7,883
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other government
|
|
463,765
|
|
|
502,153
|
|
|
5.4
|
%
|
|
244,041
|
|
|
159,095
|
|
|
42,337
|
|
|
51,413
|
|
|
5,267
|
|
|
—
|
|
Corporate
|
|
5,226,238
|
|
|
5,686,732
|
|
|
61.0
|
%
|
|
172,718
|
|
|
607,796
|
|
|
2,646,602
|
|
|
1,960,971
|
|
|
287,363
|
|
|
11,282
|
|
Municipal
|
|
145,469
|
|
|
162,669
|
|
|
1.7
|
%
|
|
8,270
|
|
|
78,585
|
|
|
55,631
|
|
|
20,183
|
|
|
—
|
|
|
—
|
|
Residential mortgage-backed
|
|
545,628
|
|
|
553,945
|
|
|
5.9
|
%
|
|
544,545
|
|
|
—
|
|
|
2,195
|
|
|
2,615
|
|
|
2,472
|
|
|
2,118
|
|
Commercial mortgage-backed
|
|
828,155
|
|
|
854,090
|
|
|
9.2
|
%
|
|
591,396
|
|
|
115,114
|
|
|
74,615
|
|
|
61,730
|
|
|
3,961
|
|
|
7,274
|
|
Asset-backed
|
|
567,638
|
|
|
557,460
|
|
|
6.0
|
%
|
|
239,733
|
|
|
84,058
|
|
|
119,757
|
|
|
89,898
|
|
|
24,014
|
|
|
—
|
|
Total
|
|
$
|
8,758,895
|
|
|
$
|
9,319,179
|
|
|
100.0
|
%
|
|
$
|
2,751,751
|
|
|
$
|
1,087,847
|
|
|
$
|
2,949,020
|
|
|
$
|
2,186,810
|
|
|
$
|
323,077
|
|
|
$
|
20,674
|
|
% of total fair value
|
|
|
|
|
|
|
|
29.5
|
%
|
|
11.7
|
%
|
|
31.6
|
%
|
|
23.5
|
%
|
|
3.5
|
%
|
|
0.2
|
%
|
Unrealized Gains and Losses on AFS Short-Term and Fixed Maturity Investments
The amortized cost, unrealized gains and losses, allowance for credit losses and fair values of our short-term and fixed maturity investments classified as AFS as of December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Unrealized Losses
|
|
|
2020
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Non-Credit Related Losses
|
|
Allowance for Credit Losses(1)
|
|
Fair Value
|
U.S. government and agency
|
|
$
|
715,527
|
|
|
$
|
3,305
|
|
|
$
|
(834)
|
|
|
$
|
—
|
|
|
$
|
717,998
|
|
U.K. government
|
|
12,494
|
|
|
1,080
|
|
|
—
|
|
|
—
|
|
|
13,574
|
|
Other government
|
|
142,459
|
|
|
7,721
|
|
|
(53)
|
|
|
—
|
|
|
150,127
|
|
Corporate
|
|
1,873,184
|
|
|
65,913
|
|
|
(1,567)
|
|
|
(181)
|
|
|
1,937,349
|
|
Municipal
|
|
28,881
|
|
|
1,155
|
|
|
(4)
|
|
|
—
|
|
|
30,032
|
|
Residential mortgage-backed
|
|
326,268
|
|
|
3,292
|
|
|
(689)
|
|
|
—
|
|
|
328,871
|
|
Commercial mortgage-backed
|
|
273,516
|
|
|
5,202
|
|
|
(2,097)
|
|
|
(133)
|
|
|
276,488
|
|
Asset-backed
|
|
204,312
|
|
|
846
|
|
|
(694)
|
|
|
(8)
|
|
|
204,456
|
|
|
|
$
|
3,576,641
|
|
|
$
|
88,514
|
|
|
$
|
(5,938)
|
|
|
$
|
(322)
|
|
|
$
|
3,658,895
|
|
(1) The Company adopted ASU 2016-13 and the related amendments on January 1, 2020. Refer to Note 1 - "Significant Accounting Policies" for further details.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The amortized cost, unrealized gains and losses and fair values of our short-term and fixed maturity investments classified as AFS as of December 31, 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
Non-OTTI
|
|
Fair
Value
|
U.S. government and agency
|
|
$
|
381,488
|
|
|
$
|
78
|
|
|
$
|
(322)
|
|
|
$
|
381,244
|
|
U.K. government
|
|
15,067
|
|
|
282
|
|
|
—
|
|
|
15,349
|
|
Other government
|
|
84,116
|
|
|
1,119
|
|
|
(88)
|
|
|
85,147
|
|
Corporate
|
|
880,667
|
|
|
3,739
|
|
|
(3,934)
|
|
|
880,472
|
|
Municipal
|
|
3,770
|
|
|
12
|
|
|
(2)
|
|
|
3,780
|
|
Residential mortgage-backed
|
|
99,646
|
|
|
221
|
|
|
(679)
|
|
|
99,188
|
|
Commercial mortgage-backed
|
|
49,219
|
|
|
30
|
|
|
(203)
|
|
|
49,046
|
|
Asset-backed
|
|
152,153
|
|
|
127
|
|
|
(119)
|
|
|
152,161
|
|
|
|
$
|
1,666,126
|
|
|
$
|
5,608
|
|
|
$
|
(5,347)
|
|
|
$
|
1,666,387
|
|
Gross Unrealized Losses on AFS Short-term and Fixed Maturity Investments
The following table summarizes our short-term and fixed maturity investments classified as AFS that were in a gross unrealized loss position, for which an allowance for credit losses has not been recorded, as of December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 Months or Greater
|
|
Less Than 12 Months
|
|
Total
|
2020
|
|
Fair
Value
|
|
Gross Unrealized
Losses
|
|
Fair
Value
|
|
Gross Unrealized
Losses
|
|
Fair
Value
|
|
Gross Unrealized
Losses
|
|
U.S. government and agency
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
55,839
|
|
|
$
|
(834)
|
|
|
$
|
55,839
|
|
|
$
|
(834)
|
|
|
UK government
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Other government
|
|
—
|
|
|
—
|
|
|
7,971
|
|
|
(53)
|
|
|
7,971
|
|
|
(53)
|
|
|
Corporate
|
|
—
|
|
|
—
|
|
|
199,048
|
|
|
(1,224)
|
|
|
199,048
|
|
|
(1,224)
|
|
|
Municipal
|
|
—
|
|
|
—
|
|
|
1,690
|
|
|
(4)
|
|
|
1,690
|
|
|
(4)
|
|
|
Residential mortgage-backed
|
|
4,626
|
|
|
(125)
|
|
|
79,149
|
|
|
(564)
|
|
|
83,775
|
|
|
(689)
|
|
|
Commercial mortgage-backed
|
|
38
|
|
|
(38)
|
|
|
67,094
|
|
|
(1,562)
|
|
|
67,132
|
|
|
(1,600)
|
|
|
Asset-backed
|
|
—
|
|
|
—
|
|
|
116,827
|
|
|
(564)
|
|
|
116,827
|
|
|
(564)
|
|
Total short-term and fixed maturity investments
|
|
$
|
4,664
|
|
|
$
|
(163)
|
|
|
$
|
527,618
|
|
|
$
|
(4,805)
|
|
|
$
|
532,282
|
|
|
$
|
(4,968)
|
|
The following table summarizes our short-term and fixed maturity investments classified as AFS that were in a gross unrealized loss position as of December 31, 2019, aggregated by major security type and length of time in continuous unrealized loss position:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 Months or Greater
|
|
Less Than 12 Months
|
|
Total
|
2019
|
|
Fair
Value
|
|
Gross Unrealized
Losses
|
|
Fair
Value
|
|
Gross Unrealized
Losses
|
|
Fair
Value
|
|
Gross Unrealized
Losses
|
|
U.S. government and agency
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
193,574
|
|
|
$
|
(322)
|
|
|
$
|
193,574
|
|
|
$
|
(322)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other government
|
|
1,080
|
|
|
(23)
|
|
|
37,796
|
|
|
(65)
|
|
|
38,876
|
|
|
(88)
|
|
|
Corporate
|
|
2,754
|
|
|
(306)
|
|
|
338,965
|
|
|
(3,628)
|
|
|
341,719
|
|
|
(3,934)
|
|
|
Municipal
|
|
128
|
|
|
—
|
|
|
761
|
|
|
(2)
|
|
|
889
|
|
|
(2)
|
|
|
Residential mortgage-backed
|
|
—
|
|
|
—
|
|
|
52,005
|
|
|
(679)
|
|
|
52,005
|
|
|
(679)
|
|
|
Commercial mortgage-backed
|
|
—
|
|
|
—
|
|
|
35,777
|
|
|
(203)
|
|
|
35,777
|
|
|
(203)
|
|
|
Asset-backed
|
|
—
|
|
|
—
|
|
|
101,591
|
|
|
(119)
|
|
|
101,591
|
|
|
(119)
|
|
Total short-term and fixed maturity investments
|
|
$
|
3,962
|
|
|
$
|
(329)
|
|
|
$
|
760,469
|
|
|
$
|
(5,018)
|
|
|
$
|
764,431
|
|
|
$
|
(5,347)
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of December 31, 2020 and 2019, the number of securities classified as AFS in an unrealized loss position for which an allowance for credit loss is not recorded was 407 and 479, respectively. Of these securities, the number of securities that had been in an unrealized loss position for twelve months or longer was 2 and 12, respectively.
The contractual terms of a majority of these investments do not permit the issuers to settle the securities at a price less than the amortized cost basis of the security. While credit spreads have increased, and in certain cases credit ratings were downgraded, we currently do not expect the issuers of these fixed income securities to settle them at a price less than their amortized cost basis and therefore it is expected that we will recover the entire amortized cost basis of each security. Furthermore, we do not intend to sell the securities that are currently in an unrealized loss position, and it is also not more likely than not that we will be required to sell the securities before the recovery of their amortized cost bases.
Allowance for Credit Losses on AFS Fixed Maturity Investments
We adopted ASU 2016-13 and the related amendments on January 1, 2020 prospectively, and recognized an allowance for credit losses of $3.1 million on initial adoption of the guidance. Our allowance for credit losses is derived based on various data sources, multiple key inputs and forecast scenarios. These include default rates specific to the individual security, vintage of the security, geography of the issuer of the security, industry analyst reports, credit ratings and consensus economic forecasts.
To determine the credit losses on our AFS securities, we use the probability of default ("PD") and loss given default ("LGD") methodology through a third-party proprietary tool which calculates the expected credit losses based on a discounted cash flow method. The tool uses effective interest rates to discount the expected cash flows associated with each AFS security to determine its fair value, which is then compared with its amortized cost basis to derive the credit loss on the security.
The methodology and inputs used to determine the credit loss by security type are as follows:
•Corporate and Government: Expected cashflows are derived that are specific to each security. The PD is based on a quantitative model that converts agency ratings to term structures that vary by country, industry and the state of the credit cycle. This is used along with macroeconomic forecasts to produce scenario conditioned PDs. The LGD is based on default studies provided by a third party which we use along with macroeconomic forecasts to produce scenario conditioned LGDs.
•Municipals: Expected cash flows are derived that are specific to each security. The PD model produces scenario conditioned PD output over the lifetime of the municipal security. These PDs are based on key macroeconomic and instrument specific risk factors. The LGD is derived based on a model which uses assumptions specific to the municipal securities.
For corporate, government and municipal securities, we use an explicit reversion and a three year forecast period, which we consider to be a reasonable duration during which an economic forecast could continue to be reliable.
•Asset backed, Commercial and Residential mortgaged-backed: Expected cash flows are derived that are specific to each security. The PD and LGD for each security is based on a quantitative model that generates scenario conditioned PD and LGD term structures based on the underlying collateral type, waterfall and other trustee information. This model also considers prepayments. For these security types, there is no explicit reversion and the forecasts are deemed reasonable and supportable over the life of the portfolio.
Due to the short-term period during which accrued investment income remains unpaid, which is typically six months or less since the coupon on our debt securities is paid semi-annually or more frequently, we elected not to establish an allowance for credit losses on our accrued investment income balances. Accrued investment income is written off through net realized investment gains (losses) at the time the issuer of the debt security defaults or is expected to default on payments.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table provides a reconciliation of the beginning and ending allowance for credit losses on our AFS debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
|
Other
government
|
|
Corporate
|
|
Residential mortgage-backed
|
|
Commercial
mortgage
backed
|
|
|
|
Asset-backed
|
|
Total
|
Allowance for credit losses, beginning of year
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cumulative effect of change in accounting principle
|
|
|
|
|
(22)
|
|
|
(2,987)
|
|
|
—
|
|
|
(50)
|
|
|
|
|
—
|
|
|
(3,059)
|
|
Allowances for credit losses on securities for which credit losses were not previously recorded
|
|
|
|
|
—
|
|
|
(10,748)
|
|
|
(2)
|
|
|
(675)
|
|
|
|
|
(142)
|
|
|
(11,567)
|
|
Additions to the allowance for credit losses arising from purchases of securities accounted for as PCD assets
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
Reductions for securities sold during the year
|
|
|
|
|
22
|
|
|
2,545
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
2,567
|
|
Reductions in the allowance for credit losses on securities we either intend to sell or more likely than not, we will be required to sell before the recovery of their amortized cost basis
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
(Increase) decrease to the allowance for credit losses on securities that had an allowance recorded in the previous period
|
|
|
|
|
—
|
|
|
11,009
|
|
|
2
|
|
|
592
|
|
|
|
|
134
|
|
|
11,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses, end of year
|
|
|
|
|
$
|
—
|
|
|
$
|
(181)
|
|
|
$
|
—
|
|
|
$
|
(133)
|
|
|
|
|
$
|
(8)
|
|
|
$
|
(322)
|
|
During the year ended December 31, 2020, we did not have any write-offs charged against the allowance for credit losses or any recoveries of amounts previously written-off.
Other-Than-Temporary Impairment on AFS Short-term and Fixed Maturity Investments
For the years ended December 31, 2019 and 2018, we did not recognize any OTTI losses on our AFS securities. We determined that no other-than-temporary credit losses existed as of December 31, 2019. A description of our OTTI process is included in Note 2 - "Significant Accounting Policies".
As discussed in detail in Note 2 - "Significant Accounting Policies", we adopted ASU 2016-13 and the related amendments on January 1, 2020 with this new guidance replacing the OTTI model that was previously applicable to our AFS debt securities. The new approach now requires the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value.
Equity Investments
The following table summarizes our equity investments classified as trading as of December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Publicly traded equity investments in common and preferred stocks
|
$
|
260,767
|
|
|
$
|
327,875
|
|
Exchange-traded funds
|
311,287
|
|
|
133,047
|
|
Privately held equity investments in common and preferred stocks
|
274,741
|
|
|
265,799
|
|
|
$
|
846,795
|
|
|
$
|
726,721
|
|
Equity investments include publicly traded common and preferred stocks, exchange-traded funds and privately held common and preferred stocks. Our publicly traded equity investments in common and preferred stocks predominantly trade on major exchanges and are managed by our external advisors. Our investments in exchange-traded funds also trade on major exchanges.
Our privately held equity investments in common and preferred stocks are direct investments in companies that we believe offer attractive risk adjusted returns and/or offer other strategic advantages. Each investment may have its own unique terms and conditions and there may be restrictions on disposals. There is no active market for these investments. Included within the above balance as of December 31, 2020 and 2019 is an investment in the parent company of AmTrust Financial Services, Inc. ("AmTrust"), with a fair value of $230.3 million and $240.1 million, respectively. Refer to Note 21 - "Related Party Transactions" for further information.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Other Investments, at fair value
The following table summarizes our other investments carried at fair value as of December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Hedge funds
|
|
$
|
2,638,339
|
|
|
$
|
1,121,904
|
|
Fixed income funds
|
|
552,541
|
|
|
481,039
|
|
Private equity funds
|
|
363,103
|
|
|
323,496
|
|
Private credit funds
|
|
192,319
|
|
|
—
|
|
Equity funds
|
|
190,767
|
|
|
410,149
|
|
CLO equity funds
|
|
166,523
|
|
|
87,509
|
|
CLO equities
|
|
128,083
|
|
|
87,555
|
|
Others
|
|
12,359
|
|
|
6,379
|
|
|
|
$
|
4,244,034
|
|
|
$
|
2,518,031
|
|
The valuation of our other investments is described in Note 12 - "Fair Value Measurements". Due to a lag in the valuations of certain funds reported by the managers, we may record changes in valuation with up to a three-month lag. We regularly review and discuss fund performance with the fund managers to corroborate the reasonableness of the reported net asset values and to assess whether any events have occurred within the lag period that would affect the valuation of the investments. The following is a description of the nature of each of these investment categories:
•Hedge funds may invest in a wide range of instruments, including debt and equity securities, and utilize various sophisticated strategies, including derivatives, to achieve their objectives. We invest in fixed income, equity and multi-strategy hedge funds.
•Fixed income funds comprise a number of positions in diversified fixed income funds that are managed by third-party managers. Underlying investments vary from high-grade corporate bonds to non-investment grade senior secured loans and bonds, in both liquid and illiquid markets. The liquid fixed income funds have regularly published prices.
•Private equity funds invest primarily in the financial services industry.
•Private credit funds invest in direct senior or collateralized loans.
•Equity funds invest in a diversified portfolio of U.S. and international publicly-traded equity securities.
•CLO equity funds invest primarily in the equity tranches of term-financed securitizations of diversified pools of corporate bank loans.
•CLO equities comprise investments in the equity tranches of term-financed securitizations of diversified pools of corporate bank loans.
•Others primarily comprise of a real estate debt fund that invests primarily in European commercial real estate equity.
The increase in our other investments carried at fair value between December 31, 2020 and December 31, 2019 was primarily attributable to unrealized gains of $1.3 billion and net additional subscriptions of $380.3 million to hedge funds, fixed income funds, private credit funds, CLO equities and CLO equity funds.
As of December 31, 2020, we had unfunded commitments of $975.5 million to other investments.
Certain of our other investments are subject to restrictions on redemptions and sales that are determined by the governing documents, which limits our ability to liquidate those investments. These restrictions may include lock-ups, redemption gates, restricted share classes or side pockets, restrictions on the frequency of redemption and notice periods. A gate is the ability to deny or delay a redemption request, whereas a side-pocket is a designated account for which the investor loses its redemption rights. Certain other investments may not have any restrictions governing their sale, but there is no active market and no guarantee that we will be able to execute a sale in a timely manner. In addition, even if certain other investments are not eligible for redemption or sales are restricted, we may still receive income distributions from those other investments. The table below details the estimated date by which proceeds would be received if we had provided notice of our intent to redeem or initiated a
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
sales process as of December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 1 Year
|
|
1-2 years
|
|
2-3 years
|
|
More than 3 years
|
|
Not Eligible/ Restricted
|
|
Total
|
|
Redemption Frequency
|
Hedge funds
|
|
$
|
2,590,164
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
48,175
|
|
|
$
|
2,638,339
|
|
|
Monthly to Bi-annually
|
Fixed income funds
|
|
537,055
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,486
|
|
|
552,541
|
|
|
Daily to Quarterly
|
Equity funds
|
|
190,767
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
190,767
|
|
|
Daily to Quarterly
|
Private equity funds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
363,103
|
|
|
363,103
|
|
|
N/A
|
CLO equity funds
|
|
94,313
|
|
|
61,741
|
|
|
10,469
|
|
|
—
|
|
|
—
|
|
|
166,523
|
|
|
Quarterly to Bi-annually
|
CLO equities
|
|
128,083
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
128,083
|
|
|
Daily to Quarterly
|
Private credit funds
|
|
—
|
|
|
9,250
|
|
|
|
|
—
|
|
|
183,069
|
|
|
192,319
|
|
|
N/A
|
Other
|
|
|
|
|
|
|
|
|
|
12,359
|
|
|
12,359
|
|
|
N/A
|
|
|
$
|
3,540,382
|
|
|
$
|
70,991
|
|
|
$
|
10,469
|
|
|
$
|
—
|
|
|
$
|
622,192
|
|
|
$
|
4,244,034
|
|
|
|
As of December 31, 2020 and 2019, we had $48.2 million and $51.8 million, respectively, of hedge funds subject to gates or side-pockets.
Equity Method Investments
The table below shows our equity method investments as of December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
Ownership %
|
|
Carrying Value
|
|
|
|
Ownership %
|
|
Carrying Value
|
Enhanzed Re
|
|
|
47.4
|
%
|
|
$
|
330,289
|
|
|
|
|
47.4
|
%
|
|
$
|
182,856
|
|
Citco (1)
|
|
|
31.9
|
%
|
|
53,022
|
|
|
|
|
31.9
|
%
|
|
51,742
|
|
Monument Re (2)
|
|
|
20.0
|
%
|
|
193,716
|
|
|
|
|
20.0
|
%
|
|
60,598
|
|
Clear Spring
|
|
|
—
|
%
|
|
—
|
|
|
|
|
20.0
|
%
|
|
10,645
|
|
Core Specialty
|
|
|
25.2
|
%
|
|
235,000
|
|
|
|
|
—
|
%
|
|
—
|
|
Other
|
|
|
27%
|
|
20,268
|
|
|
|
|
30%
|
|
20,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
832,295
|
|
|
|
|
|
|
$
|
326,277
|
|
(1) We own 31.9% of the common shares in HH CTCO Holdings Limited which in turn owns 15.4% of the convertible preferred shares, amounting to a 6.2% interest in the total equity of Citco III Limited ("Citco").
(2) We own 20.0% of the common shares in Monument Re as well as different classes of preferred shares which have fixed dividend yields and whose balances are included in the Investment amount.
Refer to Note 21 - "Related Party Transactions" for further information regarding the investments above. As of December 31, 2020, we had unfunded commitments of $68.7 million related to equity method investments.
Funds Held
Under funds held arrangements, the reinsured company has retained funds that would otherwise have been remitted to our reinsurance subsidiaries. We either have (i) funds held by reinsured companies, which are carried at amortized cost and on which we receive a fixed crediting rate, or (ii) funds held - directly managed, which are carried at fair value and on which we receive the underlying return on the portfolio. The investment returns on funds held by reinsured companies are recognized in net investment income and the investment returns on funds held - directly managed are recognized in net investment income and net realized and unrealized gains (losses). The funds held balance is credited with investment income and losses payable are deducted.
Funds Held - Directly Managed
Funds held - directly managed, where we receive the underlying return on the investment portfolio, are carried at fair value, either because we elected the fair value option at the inception of the reinsurance contract, or because it represents the aggregate of funds held at amortized cost and the fair value of an embedded derivative. The embedded derivative relates to our contractual right to receive the return on the underlying investment portfolio
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
supporting the reinsurance contract. We include the estimated fair value of these embedded derivatives in the consolidated balance sheets with the host contract in order to reflect the expected settlement of these features with the host contract. The change in the fair value of the embedded derivative is included in net unrealized gains (losses). The following table summarizes the components of the funds held - directly managed as of December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Fixed maturity investments, trading
|
$
|
1,060,263
|
|
|
$
|
1,173,345
|
|
Cash and cash equivalents
|
9,067
|
|
|
10,296
|
|
Other assets
|
5,560
|
|
|
3,911
|
|
|
$
|
1,074,890
|
|
|
$
|
1,187,552
|
|
The following table summarizes the short-term and fixed maturity investment components of funds held - directly managed as of December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Funds held - Directly Managed - Fair Value Option
|
|
Funds held - Directly Managed - Variable Return
|
|
Total
|
|
Funds held - Directly Managed - Fair Value Option
|
|
Funds held - Directly Managed - Variable Return
|
|
Total
|
Short-term and fixed maturity investments, at amortized cost
|
$
|
106,938
|
|
|
$
|
859,403
|
|
|
$
|
966,341
|
|
|
$
|
185,859
|
|
|
$
|
940,194
|
|
|
$
|
1,126,053
|
|
Net unrealized gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value - fair value option accounting
|
9,693
|
|
|
—
|
|
|
9,693
|
|
|
5,438
|
|
|
—
|
|
|
5,438
|
|
Change in fair value - embedded derivative accounting
|
—
|
|
|
84,229
|
|
|
84,229
|
|
|
—
|
|
|
41,854
|
|
|
41,854
|
|
Short-term and fixed maturity investments within funds held - directly managed, at fair value
|
$
|
116,631
|
|
|
$
|
943,632
|
|
|
$
|
1,060,263
|
|
|
$
|
191,297
|
|
|
$
|
982,048
|
|
|
$
|
1,173,345
|
|
Refer to the sections above for details of the short-term and fixed maturity investments within our funds held - directly managed portfolios.
Funds Held by Reinsured Companies
Funds held by reinsured companies, where we received a fixed crediting rate, are carried at cost on our consolidated balance sheets. As of December 31, 2020 and 2019, we had funds held by reinsured companies of $635.8 million and $475.7 million, respectively. The increase related to $204.2 million of additional funds held balances related to the AXA Group transaction.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Net Investment Income
Major categories of net investment income for the years ended December 31, 2020, 2019 and 2018 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Fixed maturity investments
|
|
$
|
198,988
|
|
|
$
|
217,886
|
|
|
$
|
178,213
|
|
Short-term investments and cash and cash equivalents
|
|
4,843
|
|
|
15,609
|
|
|
11,692
|
|
Funds held
|
|
33,920
|
|
|
22,580
|
|
|
11,640
|
|
Funds held – directly managed
|
|
34,563
|
|
|
38,173
|
|
|
37,623
|
|
Investment income from fixed maturities and cash and cash equivalents
|
|
272,314
|
|
|
294,248
|
|
|
239,168
|
|
Equity investments
|
|
19,240
|
|
|
16,671
|
|
|
5,397
|
|
Other investments
|
|
27,153
|
|
|
11,792
|
|
|
26,214
|
|
|
|
|
|
|
|
|
Investment income from equities and other investments
|
|
46,393
|
|
|
28,463
|
|
|
31,611
|
|
Gross investment income
|
|
318,707
|
|
|
322,711
|
|
|
270,779
|
|
Investment expenses
|
|
(15,890)
|
|
|
(14,440)
|
|
|
(9,081)
|
|
Net investment income
|
|
$
|
302,817
|
|
|
$
|
308,271
|
|
|
$
|
261,698
|
|
Net Realized and Unrealized Gains (Losses)
Components of net realized and unrealized gains (losses) for the years ended December 31, 2020, 2019 and 2018 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Net realized gains (losses) on sale:
|
|
|
|
|
|
|
Gross realized gains on fixed maturity securities, AFS
|
|
$
|
26,313
|
|
|
$
|
4,844
|
|
|
$
|
27
|
|
Gross realized losses on fixed maturity securities, AFS
|
|
(7,801)
|
|
|
(905)
|
|
|
(90)
|
|
Decrease in allowance for expected credit losses on fixed maturity securities, AFS
|
|
170
|
|
|
—
|
|
|
—
|
|
Net realized gains (losses) on fixed maturity securities, trading
|
|
126,945
|
|
|
81,011
|
|
|
(27,408)
|
|
Net realized gains (losses) on fixed maturity securities in funds held - directly managed
|
|
8,798
|
|
|
1,495
|
|
|
(3,940)
|
|
Net realized gains (losses) on equity investments
|
|
24,282
|
|
|
(374)
|
|
|
4,016
|
|
Net realized investment gains on investment derivatives
|
|
144
|
|
—
|
|
|
—
|
|
Total net realized gains (losses) on sale
|
|
178,851
|
|
|
86,071
|
|
|
(27,395)
|
|
Net unrealized gains (losses):
|
|
|
|
|
|
|
Fixed maturity securities, trading
|
|
101,022
|
|
|
341,130
|
|
|
(159,594)
|
|
Fixed maturity securities in funds held - directly managed
|
|
50,837
|
|
|
88,053
|
|
|
(46,257)
|
|
Equity investments
|
|
(25,752)
|
|
|
55,359
|
|
|
(9,831)
|
|
Other investments
|
|
1,336,343
|
|
|
441,702
|
|
|
(164,455)
|
|
Investment derivatives
|
|
718
|
|
|
(349)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net unrealized gains (losses)
|
|
1,463,168
|
|
|
925,895
|
|
|
(380,137)
|
|
Net realized and unrealized gains (losses)
|
|
$
|
1,642,019
|
|
|
$
|
1,011,966
|
|
|
$
|
(407,532)
|
|
The gross realized gains and losses on AFS investments included in the table above resulted from sales of $2.0 billion, $302.9 million and $11.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.
The unrealized gains for 2020 primarily comprised unrealized gains of $1.2 billion in the hedge fund managed by AnglePoint. These unrealized gains were driven by strong performance in equity markets across multiple sectors, including consumer discretionary, communication services, information technology and consumer staples.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Reconciliation to the Consolidated Statements of Comprehensive Income
The following table provides a reconciliation of the gross realized gains and losses and credit recoveries (losses) on our AFS fixed maturity debt securities that arose during the years ended December 31, 2020, 2019 and 2018 within our continuing and discontinued operations and the offsetting reclassification adjustments included within our consolidated statements of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included within continuing operations:
|
|
|
|
|
|
Gross realized gains on fixed maturity securities, AFS
|
$
|
26,313
|
|
|
$
|
4,844
|
|
|
$
|
27
|
|
Gross realized losses on fixed maturity securities, AFS
|
(7,801)
|
|
|
(905)
|
|
|
(90)
|
|
Tax effect
|
(1,623)
|
|
|
—
|
|
|
—
|
|
Included within discontinued operations:
|
|
|
|
|
|
Gross realized gains on fixed maturity securities, AFS
|
1,374
|
|
|
12
|
|
|
—
|
|
Gross realized losses on fixed maturity securities, AFS
|
(120)
|
|
|
(57)
|
|
|
—
|
|
Tax effect
|
(110)
|
|
|
—
|
|
|
—
|
|
Total reclassification adjustment for net realized gains (losses) included in net earnings
|
$
|
18,033
|
|
|
$
|
3,894
|
|
|
$
|
(63)
|
|
Included within continuing operations:
|
|
|
|
|
|
Credit recoveries (losses) on fixed maturity securities, AFS
|
$
|
170
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Tax effect
|
3
|
|
|
—
|
|
|
—
|
|
Included within discontinued operations:
|
|
|
|
|
|
Credit recoveries (losses) on fixed maturity securities, AFS
|
329
|
|
|
—
|
|
|
—
|
|
Tax effect
|
7
|
|
|
—
|
|
|
—
|
|
Total reclassification adjustment for change in allowance for credit losses recognized in net earnings
|
$
|
509
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restricted Assets
We utilize trust accounts to collateralize business with our (re)insurance counterparties. We are also required to maintain investments and cash and cash equivalents on deposit with regulatory authorities and Lloyd's to support our (re)insurance operations. The investments and cash and cash equivalents on deposit are available to settle (re)insurance liabilities. Collateral generally takes the form of assets held in trust, letters of credit or funds held. The assets used as collateral are primarily highly rated fixed maturity securities. The carrying value of our restricted assets, including restricted cash of $472.0 million and $346.9 million, as of December 31, 2020 and 2019, respectively, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Collateral in trust for third party agreements
|
|
$
|
4,924,866
|
|
|
$
|
4,103,847
|
|
Assets on deposit with regulatory authorities
|
|
131,283
|
|
|
309,659
|
|
Collateral for secured letter of credit facilities
|
|
104,627
|
|
|
132,670
|
|
Funds at Lloyd's (1)
|
|
260,914
|
|
|
639,316
|
|
|
|
$
|
5,421,690
|
|
|
$
|
5,185,492
|
|
(1) Our businesses include three Lloyd's syndicates as at December 31, 2020. Lloyd's determines the required capital principally through the annual business plan of each syndicate. This capital is referred to as "Funds at Lloyd's" and will be drawn upon in the event that a syndicate has a loss that cannot be funded from other sources. We also utilize unsecured letters of credit for Funds at Lloyd's, as described in Note 15 - "Debt Obligations and Credit Facilities".
7. DERIVATIVES AND HEDGING INSTRUMENTS
Foreign Currency Hedging of Net Investments in Foreign Operations
We use foreign currency forward exchange rate contracts in qualifying hedging relationships to hedge the foreign currency exchange rate risk associated with certain of our net investments in foreign operations. As of December 31, 2020 and 2019, we had foreign currency forward exchange rate contracts in place which we had designated as hedges of our net investments in foreign operations.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents the gross notional amounts and estimated fair values recorded within other assets and liabilities related to our qualifying foreign currency forward exchange rate contracts as of December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
Fair Value
|
|
|
|
Fair Value
|
|
|
Gross Notional Amount
|
|
Assets
|
|
Liabilities
|
|
Gross Notional Amount
|
|
Assets
|
|
Liabilities
|
Foreign currency forward - AUD
|
|
$
|
73,852
|
|
|
$
|
13
|
|
|
$
|
5,060
|
|
|
$
|
64,620
|
|
|
$
|
52
|
|
|
$
|
2,033
|
|
Foreign currency forward - EUR
|
|
217,168
|
|
|
205
|
|
|
8,889
|
|
|
112,284
|
|
|
246
|
|
|
1,635
|
|
Foreign currency forward - GBP
|
|
312,671
|
|
|
951
|
|
|
14,998
|
|
|
318,387
|
|
|
344
|
|
|
7,784
|
|
Total qualifying hedges
|
|
$
|
603,691
|
|
|
$
|
1,169
|
|
|
$
|
28,947
|
|
|
$
|
495,291
|
|
|
$
|
642
|
|
|
$
|
11,452
|
|
The following table presents the net gains and losses deferred in the cumulative translation adjustment ("CTA") account, which is a component of AOCI, in shareholders' equity, relating to our foreign currency forward exchange rate contracts for the years ended December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gains (Losses) Deferred in AOCI
|
|
|
2020
|
|
2019
|
|
2018
|
Foreign currency forward - AUD
|
|
$
|
(6,792)
|
|
|
$
|
(722)
|
|
|
$
|
3,438
|
|
Foreign currency forward - EUR
|
|
(15,026)
|
|
|
1,817
|
|
|
1,000
|
|
Foreign currency forward - GBP
|
|
(8,457)
|
|
|
(16,423)
|
|
|
—
|
|
Total qualifying hedges
|
|
$
|
(30,275)
|
|
|
$
|
(15,328)
|
|
|
$
|
4,438
|
|
Non-derivative Hedging Instruments of Net Investments in Foreign Operations
From time to time, we may also use non-derivative instruments such as foreign currency denominated borrowings under our credit facilities to hedge certain of our net investments in foreign operations in designated qualifying non-derivative hedging arrangements. While there were no outstanding foreign currency denominated borrowings under our credit facilities as of December 31, 2020 and 2019, there was a net gain of $3.1 million deferred in the CTA account in AOCI relating to qualifying non-derivative hedging instruments for the year ended December 31, 2018.
Derivatives Not Designated or Not Qualifying as Net Investments in Hedging Instruments
From time to time, we may also utilize foreign currency forward contracts as part of our overall foreign currency risk management strategy or to obtain exposure to a particular financial market, as well as for yield enhancement in non-qualifying hedging relationships. We may also utilize equity call option instruments or other derivatives either to obtain exposure to a particular equity instrument or for yield enhancement in non-qualifying hedging relationships.
Foreign Currency Forward Contracts
The following tables present the gross notional amounts and estimated fair values recorded within other assets and other liabilities related to our non-qualifying foreign currency forward exchange rate hedging relationships as of December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
|
|
Fair Value
|
|
|
|
Fair Value
|
|
|
Gross Notional Amount
|
|
Assets
|
|
Liabilities
|
|
Gross Notional Amount
|
|
Assets
|
|
Liabilities
|
Foreign currency forward - AUD
|
|
$
|
28,848
|
|
|
$
|
882
|
|
|
$
|
2,847
|
|
|
$
|
913
|
|
|
$
|
839
|
|
|
$
|
892
|
|
Foreign currency forward - CAD
|
|
64,224
|
|
|
10
|
|
|
1,764
|
|
|
66,266
|
|
|
10
|
|
|
1,482
|
|
Foreign currency forward - EUR
|
|
43,531
|
|
|
1,782
|
|
|
41
|
|
|
74,444
|
|
|
507
|
|
|
1,440
|
|
Foreign currency forward - GBP
|
|
2,731
|
|
|
161
|
|
|
404
|
|
|
11,940
|
|
|
13
|
|
|
292
|
|
Total non-qualifying hedges
|
|
$
|
139,334
|
|
|
$
|
2,835
|
|
|
$
|
5,056
|
|
|
$
|
153,563
|
|
|
$
|
1,369
|
|
|
$
|
4,106
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents the amounts of the net gains and losses included in earnings related to our non-qualifying foreign currency forward exchange rate contracts during the years ended December 31, 2020, 2019, and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) on non-qualifying hedges charged to earnings
|
|
|
2020
|
|
2019
|
|
2018
|
Foreign currency forward - AUD
|
|
$
|
(2,388)
|
|
|
$
|
1,523
|
|
|
$
|
4,958
|
|
Foreign currency forward - CAD
|
|
(879)
|
|
|
(2,079)
|
|
|
9,311
|
|
Foreign currency forward - EUR
|
|
1,871
|
|
|
1,759
|
|
|
2,296
|
|
Foreign currency forward - GBP
|
|
(1,558)
|
|
|
12,004
|
|
|
15,078
|
|
Net gains (losses) on non-qualifying hedges
|
|
$
|
(2,954)
|
|
|
$
|
13,207
|
|
|
$
|
31,643
|
|
Investments in Call Options on Equities
During the years ended December 31, 2020, 2019, and 2018, we recorded unrealized gains (losses) of less than $(0.1) million, $0.5 million and $(9.4) million, respectively, in net earnings on the call options on equities that we had purchased in 2018 at a cost of $10.0 million. These call options on equities had a fair value of less than $0.1 million as of December 31, 2019 and expired without being exercised during the year ended December 31, 2020.
Forward Interest Rate Swaps
In 2019, we entered into a forward interest rate swap, with a notional amount of AUD$120.0 million, to partially mitigate the risk associated with declining interest rates until the completion of the Munich Re transaction which closed on July 1, 2020, as described in Note 4 - "Significant New Business".
During the year ended December 31, 2020, we recorded unrealized gains included within net earnings of $0.8 million on the forward interest rate swap. This forward interest rate swap was terminated on April 7, 2020, for an inception-to-date net realized gain of $0.5 million. The carrying value of the forward interest rate swap, recorded in other liabilities as of December 31, 2019, was $0.3 million.
Credit Default Swaps, Futures and Currency Forward Contracts
From time to time we may also utilize (i) credit default swaps to both hedge and replicate credit exposure, (ii) government bond futures contracts for interest rate management, and (iii) foreign currency forward contracts for currency hedging, to collectively manage credit and duration risk, as well as for yield enhancement on some of our fixed income portfolios.
The following table presents the gross notional amounts and estimated fair values recorded within other assets and other liabilities related to our credit default swaps, government bond futures contracts and currency forward contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
Fair Value
|
|
|
Gross Notional Amount
|
|
Assets
|
|
Liabilities
|
|
|
|
|
|
|
|
Futures contracts - long positions
|
|
$
|
34,502
|
|
|
$
|
32
|
|
|
$
|
5
|
|
Futures contracts - short positions
|
|
(32,316)
|
|
|
6
|
|
|
121
|
|
Currency forward contracts - long positions - USD
|
|
1,428
|
|
|
—
|
|
|
13
|
|
Currency forward contracts - short positions - USD
|
|
(3,233)
|
|
|
60
|
|
|
—
|
|
Currency forward contracts - long positions - GBP
|
|
1,278
|
|
|
19
|
|
|
—
|
|
Currency forward contracts - short positions - GBP
|
|
(4,418)
|
|
|
12
|
|
|
—
|
|
Total
|
|
$
|
(2,759)
|
|
|
$
|
129
|
|
|
$
|
139
|
|
The following table presents the amounts of the net gains included in earnings related to our credit default swaps, government bond futures contracts and currency forward contracts:
|
|
|
|
|
|
|
|
|
2020
|
Credit default swaps
|
$
|
181
|
|
|
|
Futures contracts
|
(127)
|
|
|
|
Currency forward contracts
|
572
|
|
|
|
Total net gains
|
$
|
626
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We did not utilize any credit default swaps, government bond futures contracts and currency forward contracts during the years ended December 31, 2019 and 2018.
8. REINSURANCE BALANCES RECOVERABLE ON PAID AND UNPAID LOSSES
The following tables provide the total reinsurance balances recoverable on paid and unpaid losses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
Non-life
Run-off
|
|
|
|
StarStone
|
|
|
|
Total
|
Recoverable from reinsurers on unpaid:
|
|
|
|
|
|
|
|
|
|
|
Outstanding losses
|
|
$
|
938,231
|
|
|
|
|
$
|
263,638
|
|
|
|
|
$
|
1,201,869
|
|
IBNR
|
|
508,082
|
|
|
|
|
139,761
|
|
|
|
|
647,843
|
|
ULAE
|
|
16,688
|
|
|
|
|
—
|
|
|
|
|
16,688
|
|
Fair value adjustments - acquired companies
|
|
(14,014)
|
|
|
|
|
(1,339)
|
|
|
|
|
(15,353)
|
|
Fair value adjustments - fair value option
|
|
(21,427)
|
|
|
|
|
—
|
|
|
|
|
(21,427)
|
|
Total reinsurance reserves recoverable
|
|
1,427,560
|
|
|
|
|
402,060
|
|
|
|
|
1,829,620
|
|
Paid losses recoverable
|
|
172,309
|
|
|
|
|
87,234
|
|
|
|
|
259,543
|
|
Total
|
|
$
|
1,599,869
|
|
|
|
|
$
|
489,294
|
|
|
|
|
$
|
2,089,163
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Consolidated Balance Sheet:
|
|
|
|
|
|
|
|
|
|
|
Reinsurance balances recoverable on paid and unpaid losses
|
|
$
|
1,079,039
|
|
|
|
|
$
|
489,294
|
|
|
|
|
$
|
1,568,333
|
|
Reinsurance balances recoverable on paid and unpaid losses - fair value option
|
|
520,830
|
|
|
|
|
—
|
|
|
|
|
520,830
|
|
Total
|
|
$
|
1,599,869
|
|
|
|
|
$
|
489,294
|
|
|
|
|
$
|
2,089,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
Non-life
Run-off
|
|
Atrium
|
|
StarStone
|
|
|
|
Total
|
Recoverable from reinsurers on unpaid:
|
|
|
|
|
|
|
|
|
|
|
Outstanding losses
|
|
$
|
972,293
|
|
|
$
|
9,011
|
|
|
$
|
264,131
|
|
|
|
|
$
|
1,245,435
|
|
IBNR
|
|
673,059
|
|
|
19,286
|
|
|
93,185
|
|
|
|
|
785,530
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustments - acquired companies
|
|
(13,652)
|
|
|
519
|
|
|
(2,122)
|
|
|
|
|
(15,255)
|
|
Fair value adjustments - fair value option
|
|
(88,086)
|
|
|
—
|
|
|
—
|
|
|
|
|
(88,086)
|
|
Total reinsurance reserves recoverable
|
|
1,543,614
|
|
|
28,816
|
|
|
355,194
|
|
|
|
|
1,927,624
|
|
Paid losses recoverable
|
|
181,375
|
|
|
1,541
|
|
|
70,594
|
|
|
|
|
253,510
|
|
Total
|
|
$
|
1,724,989
|
|
|
$
|
30,357
|
|
|
$
|
425,788
|
|
|
|
|
$
|
2,181,134
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Consolidated Balance Sheet:
|
|
|
|
|
|
|
|
|
|
|
Reinsurance balances recoverable on paid and unpaid losses
|
|
$
|
1,029,471
|
|
|
$
|
30,357
|
|
|
$
|
425,788
|
|
|
|
|
$
|
1,485,616
|
|
Reinsurance balances recoverable on paid and unpaid losses - fair value option
|
|
695,518
|
|
|
—
|
|
|
—
|
|
|
|
|
695,518
|
|
Total
|
|
$
|
1,724,989
|
|
|
$
|
30,357
|
|
|
$
|
425,788
|
|
|
|
|
$
|
2,181,134
|
|
Our (re)insurance run-off subsidiaries and assumed portfolios, prior to acquisition, used retrocessional agreements to reduce their exposure to the risk of (re)insurance assumed. On an annual basis, both Atrium (classified as held-for-sale as of December 31, 2020) and StarStone purchased a tailored outwards reinsurance program designed to manage their risk profiles. The majority of Atrium’s and StarStone's third-party reinsurance is with highly rated reinsurers or is collateralized by pledged assets or letters of credit.
The fair value adjustments, determined on acquisition of (re)insurance subsidiaries, are based on the estimated timing of loss and LAE recoveries and an assumed interest rate equivalent to a risk free rate for securities with similar duration to the acquired reinsurance balances recoverable on paid and unpaid losses plus a spread for credit risk, and are amortized over the estimated recovery period, as adjusted for accelerations in timing of payments as a result of commutation settlements. The determination of the fair value adjustments on the retroactive
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
reinsurance contracts for which we have elected the fair value option is described in Note 12 - "Fair Value Measurements".
As of December 31, 2020 and 2019, we had reinsurance balances recoverable on paid and unpaid losses of $2.1 billion and $2.2 billion, respectively. The decrease of $92.0 million was primarily due to the Hannover Re transaction, cash collections and the classification of Atrium as held-for-sale at December 31, 2020, partially offset by increases due to the retrocession to Enhanzed Re as discussed in Note 21 - "Related Party Transactions"
Top Ten Reinsurers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
Non-life
Run-off
|
|
|
|
StarStone
|
|
|
|
Total
|
|
% of
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Top 10 reinsurers
|
$
|
1,036,676
|
|
|
|
|
$
|
327,917
|
|
|
|
|
$
|
1,364,593
|
|
|
65.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Other reinsurers > $1 million
|
539,428
|
|
|
|
|
158,174
|
|
|
|
|
697,602
|
|
|
33.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Other reinsurers < $1 million
|
23,765
|
|
|
|
|
3,203
|
|
|
|
|
26,968
|
|
|
1.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
1,599,869
|
|
|
|
|
$
|
489,294
|
|
|
|
|
$
|
2,089,163
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
Non-life
Run-off
|
|
Atrium
|
|
StarStone
|
|
|
|
Total
|
|
% of
Total
|
Top 10 reinsurers
|
$
|
1,154,110
|
|
|
$
|
22,051
|
|
|
$
|
295,443
|
|
|
|
|
$
|
1,471,604
|
|
|
67.4
|
%
|
Other reinsurers > $1 million
|
551,636
|
|
|
7,761
|
|
|
129,335
|
|
|
|
|
688,732
|
|
|
31.6
|
%
|
Other reinsurers < $1 million
|
19,243
|
|
|
545
|
|
|
1,010
|
|
|
|
|
20,798
|
|
|
1.0
|
%
|
Total
|
$
|
1,724,989
|
|
|
$
|
30,357
|
|
|
$
|
425,788
|
|
|
|
|
$
|
2,181,134
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
Information regarding top ten reinsurers:
|
|
|
|
Number of top 10 reinsurers rated A- or better
|
7
|
|
|
8
|
|
Number of top 10 non-rated reinsurers (1)
|
3
|
|
|
2
|
|
|
|
|
|
Reinsurers rated A- or better in top 10
|
$
|
863,819
|
|
|
$
|
1,199,479
|
|
Non-rated reinsurers in top 10 (1)
|
500,774
|
|
|
272,125
|
|
Total top 10 reinsurance recoverables
|
$
|
1,364,593
|
|
|
$
|
1,471,604
|
|
|
|
|
|
Single reinsurers that represent 10% or more of total reinsurance balance recoverables as of December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
Hannover Ruck SE (2)
|
$
|
—
|
|
|
$
|
259,077
|
|
Lloyd's Syndicates (3)
|
$
|
331,118
|
|
|
$
|
396,246
|
|
Michigan Catastrophic Claims Association(4)
|
$
|
229,374
|
|
|
$
|
—
|
|
(1) The reinsurance balances recoverable from the three and two non-rated top 10 reinsurers as of December 31, 2020 and 2019, respectively, was comprised of:
•$229.4 million and $190.8 million as of December 31, 2020 and December 31, 2019 respectively, due from a U.S. state backed reinsurer that is supported by assessments on active auto writers operating within the state;
•$73.8 million and $81.4 million as of December 31, 2020 and December 31, 2019 respectively, due from a reinsurer who has provided us with security in the form of pledged assets in trust for the full amount of the recoverable balance; and
•$208.4 million as of December 31, 2020 due from Enhanzed Re, an equity method investee to whom some of our subsidiaries have retroceded their exposures through quota share reinsurance agreements as discussed in Note 21 - "Related Party Transactions". These quota share reinsurance agreements are written on a funds withheld basis with our subsidiaries retaining the retrocession premium consideration, to secure the full amount of the recoverable balances due from Enhanzed Re.
(2) Hannover Ruck SE is rated AA- by Standard & Poor’s and A+ by A.M. Best. The transaction described in Note 4 - "Significant New Business" had the effect of reducing the balances due from this reinsurer to below 10% of the total reinsurance balances recoverable as of December 31, 2020.
(3) Lloyd's Syndicates are rated A+ by Standard & Poor's and A by A.M. Best.
(4) U.S. state backed reinsurer that is supported by assessments on active auto writers operating within the state.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Allowance for Estimated Uncollectible Reinsurance Balances Recoverable on Paid and Unpaid Losses
We evaluate and monitor the credit risk related to our reinsurers, and an allowance for estimated uncollectible reinsurance balances recoverable on paid and unpaid losses ("allowance for estimated uncollectible reinsurance") is established for amounts considered potentially uncollectible.
With respect to our process for determining the allowances for estimated uncollectible reinsurance, we adopted ASU 2016-13 and the related amendments on January 1, 2020 and recorded a cumulative effect adjustment of $0.2 million to increase the opening retained earnings on the initial adoption of the guidance. Our allowance for estimated uncollectible reinsurance is derived based on various data sources, multiple key inputs and forecast scenarios. These include the duration of the collection period, credit quality, changes in reinsurer credit standing, default rates specific to the individual reinsurer, the geographical location of the reinsurer, contractual disputes with reinsurers over individual contentious claims, contract language or coverage issues, industry analyst reports and consensus economic forecasts.
To determine the allowance for estimated uncollectible reinsurance, we use the PD and LGD methodology whereby each reinsurer is allocated an appropriate PD percentage based on the expected payout duration by portfolio. This PD percentage is then multiplied by an appropriate LGD percentage to arrive at an overall credit allowance percentage which is then applied to the reinsurance balance recoverable for each reinsurer, net of any specific bad debt provisions, collateral or other contract related offsets, to arrive at the overall allowance for estimated uncollectible reinsurance by reinsurer.
The following tables show our gross and net balances recoverable from our reinsurers as well as the related allowance for estimated uncollectible reinsurance broken down by the credit ratings of our reinsurers. The majority of the allowance for estimated uncollectible reinsurance relates to the Non-life Run-off segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Gross
|
|
Allowance for estimated uncollectible reinsurance
|
|
Net
|
|
Provisions as a
% of Gross
|
Reinsurers rated A- or above
|
$
|
1,464,529
|
|
|
$
|
60,801
|
|
|
$
|
1,403,728
|
|
|
4.2
|
%
|
Reinsurers rated below A-, secured
|
608,999
|
|
|
—
|
|
|
608,999
|
|
|
—
|
%
|
Reinsurers rated below A-, unsecured
|
152,757
|
|
|
76,321
|
|
|
76,436
|
|
|
50.0
|
%
|
Total
|
$
|
2,226,285
|
|
|
$
|
137,122
|
|
|
$
|
2,089,163
|
|
|
6.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
Gross
|
|
Allowance for estimated uncollectible reinsurance
|
|
|
|
Net
|
|
Provisions as a
% of Gross
|
Reinsurers rated A- or above
|
$
|
1,731,270
|
|
|
$
|
43,427
|
|
|
|
|
$
|
1,687,843
|
|
|
2.5
|
%
|
Reinsurers rated below A-, secured
|
463,840
|
|
|
—
|
|
|
|
|
463,840
|
|
|
—
|
%
|
Reinsurers rated below A-, unsecured
|
133,663
|
|
|
104,212
|
|
|
|
|
29,451
|
|
|
78.0
|
%
|
Total
|
$
|
2,328,773
|
|
|
$
|
147,639
|
|
|
|
|
$
|
2,181,134
|
|
|
6.3
|
%
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The table below provides a reconciliation of the beginning and ending allowance for estimated uncollectible reinsurance balances for the years ended December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Allowance for estimated uncollectible reinsurance, beginning of year
|
$
|
147,639
|
|
|
$
|
156,732
|
|
Cumulative effect of change in accounting principle
|
(195)
|
|
|
—
|
|
Effect of exchange rate movement
|
700
|
|
|
(887)
|
|
Current period change in the allowance
|
(381)
|
|
|
2,077
|
|
Write-offs charged against the allowance
|
(9,625)
|
|
|
(9,871)
|
|
Recoveries collected
|
(1,016)
|
|
|
(412)
|
|
Allowance for estimated uncollectible reinsurance, end of year
|
$
|
137,122
|
|
|
$
|
147,639
|
|
We consider a reinsurance recoverable asset to be past due when it is 90 days past due and record a credit allowance when there is reasonable uncertainty about the collectability of a disputed amount during the reporting period. We did not have significant past due balances older than one year for any of the periods presented.
9. DEFERRED CHARGE ASSETS AND DEFERRED GAIN LIABILITIES
Deferred charge assets and deferred gain liabilities relate to retroactive reinsurance policies providing indemnification of losses and LAE with respect to past loss events in the Non-life Run-off segment. For (re)insurance contracts for which we do not elect the fair value option, a deferred charge asset is recorded for the excess, if any, of the estimated ultimate losses payable over the premiums received at the initial measurement; whereas, a deferred gain liability is recorded for the excess, if any, of the premiums received over the estimated ultimate losses payable at the initial measurement. In addition, for retrocessions of losses and LAE reserves that we have assumed through retroactive reinsurance contracts where the retroceded liabilities exceed the retrocession premiums paid, we record the excess as a deferred gain liability which is amortized to earnings over the estimated period during which the losses paid on the assumed retroceded liabilities are recovered from the retrocessionaire. For further information on our deferred charge assets and deferred gain liabilities, refer to Note 2 - "Significant Accounting Policies."
Deferred Charge Assets
Deferred charge assets are included in other assets on our consolidated balance sheets. The following table presents a reconciliation of the deferred charge assets for the years ended December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Beginning carrying value
|
$
|
272,462
|
|
|
$
|
86,585
|
|
|
$
|
80,192
|
|
Recorded during the year
|
11,746
|
|
|
224,504
|
|
|
20,174
|
|
Amortization
|
(45,606)
|
|
|
(38,627)
|
|
|
(13,781)
|
|
|
|
|
|
|
|
Ending carrying value
|
$
|
238,602
|
|
|
$
|
272,462
|
|
|
$
|
86,585
|
|
Deferred charge assets are assessed at each reporting period for impairment. If the asset is determined to be impaired, it is written down in the period in which the determination is made. For the year ended December 31, 2020, we completed our assessment for impairment of deferred charge assets and concluded that there had been no impairment of our carried deferred charge asset balances.
Further information on deferred charges recorded during the years ended December 31, 2020, 2019 and 2018 is included in Note 4 - "Significant New Business."
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Deferred Gain Liabilities
Deferred gain liabilities are included in other liabilities on our consolidated balance sheets. The following table presents a reconciliation of the deferred gain liabilities for the years ended December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
Beginning carrying value
|
$
|
12,875
|
|
|
$
|
—
|
|
|
|
Recorded during the year
|
9,365
|
|
|
13,758
|
|
|
|
Amortization
|
(2,360)
|
|
|
(883)
|
|
|
|
|
|
|
|
|
|
Ending carrying value
|
$
|
19,880
|
|
|
$
|
12,875
|
|
|
|
10. LOSSES AND LOSS ADJUSTMENT EXPENSES
The liability for losses and loss adjustment expenses ("LAE"), also referred to as loss reserves, represents our gross estimates before reinsurance for unpaid reported losses and includes losses that have been incurred but not reported ("IBNR") for our Non-life Run-off, Atrium (classified as held-for-sale as of December 31, 2020) and StarStone segments using a variety of actuarial methods. We recognize an asset for the portion of the liability that we expect to recover from reinsurers. LAE reserves include allocated loss adjustment expenses ("ALAE"), and unallocated loss adjustment expenses ("ULAE"). ALAE are linked to the settlement of an individual claim or loss, whereas ULAE are based on our estimates of future costs to administer the claims. IBNR represents reserves for loss and LAE that have been incurred but not yet reported to us. This includes amounts for unreported claims, development on known claims and reopened claims.
Our loss reserves cover multiple lines of business, including asbestos, environmental, general casualty, workers' compensation/personal accident, marine, aviation and transit, construction defect, professional indemnity/directors and officers, motor, property and other non-life lines of business.
The following tables summarize the liability for losses and LAE by segment and for our other activities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Non-life
Run-off
|
|
|
|
StarStone
|
|
Other
|
|
Total
|
Outstanding losses
|
$
|
4,440,425
|
|
|
|
|
$
|
677,220
|
|
|
$
|
10,204
|
|
|
$
|
5,127,849
|
|
IBNR
|
4,641,500
|
|
|
|
|
615,963
|
|
|
20,040
|
|
|
5,277,503
|
|
Fair value adjustments - acquired companies
|
(142,854)
|
|
|
|
|
(329)
|
|
|
—
|
|
|
(143,183)
|
|
Fair value adjustments - fair value option
|
(54,589)
|
|
|
|
|
—
|
|
|
—
|
|
|
(54,589)
|
|
ULAE
|
350,600
|
|
|
|
|
35,102
|
|
|
—
|
|
|
385,702
|
|
Total
|
$
|
9,235,082
|
|
|
|
|
$
|
1,327,956
|
|
|
$
|
30,244
|
|
|
$
|
10,593,282
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Consolidated Balance Sheet:
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expenses
|
$
|
6,782,162
|
|
|
|
|
$
|
1,327,956
|
|
|
$
|
30,244
|
|
|
$
|
8,140,362
|
|
Loss and loss adjustment expenses, at fair value
|
2,452,920
|
|
|
|
|
—
|
|
|
—
|
|
|
2,452,920
|
|
Total
|
$
|
9,235,082
|
|
|
|
|
$
|
1,327,956
|
|
|
$
|
30,244
|
|
|
$
|
10,593,282
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
Non-life
Run-off
|
|
Atrium
|
|
StarStone
|
|
Other
|
|
Total
|
Outstanding losses
|
$
|
4,407,082
|
|
|
$
|
89,141
|
|
|
$
|
743,830
|
|
|
$
|
9,512
|
|
|
$
|
5,249,565
|
|
IBNR
|
3,945,407
|
|
|
136,543
|
|
|
556,134
|
|
|
13,565
|
|
|
4,651,649
|
|
Fair value adjustments- acquired companies
|
(170,689)
|
|
|
3,700
|
|
|
(522)
|
|
|
—
|
|
|
(167,511)
|
|
Fair value adjustments - fair value option
|
(217,933)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(217,933)
|
|
ULAE
|
331,494
|
|
|
2,288
|
|
|
18,852
|
|
|
—
|
|
|
352,634
|
|
Total
|
$
|
8,295,361
|
|
|
$
|
231,672
|
|
|
$
|
1,318,294
|
|
|
$
|
23,077
|
|
|
$
|
9,868,404
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Consolidated Balance Sheet:
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expenses
|
$
|
5,674,239
|
|
|
$
|
231,672
|
|
|
$
|
1,318,294
|
|
|
$
|
23,077
|
|
|
$
|
7,247,282
|
|
Loss and loss adjustment expenses, at fair value
|
2,621,122
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,621,122
|
|
Total
|
$
|
8,295,361
|
|
|
$
|
231,672
|
|
|
$
|
1,318,294
|
|
|
$
|
23,077
|
|
|
$
|
9,868,404
|
|
The overall increase in the liability for losses and LAE between December 31, 2019 and December 31, 2020 was primarily attributable to the reinsurance transactions completed in 2020, as described in Note 4 - "Significant New Business," net incurred losses and LAE and foreign exchange losses in the year, partially offset by losses paid in the year.
The table below provides a consolidated reconciliation of the beginning and ending liability for losses and LAE.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Balance as of January 1
|
$
|
9,868,404
|
|
|
$
|
9,048,796
|
|
|
$
|
7,100,488
|
|
Less: reinsurance reserves recoverable
|
1,927,624
|
|
|
1,708,272
|
|
|
1,693,028
|
|
Less: net deferred charge assets and gain liabilities on retroactive reinsurance
|
259,587
|
|
|
86,585
|
|
|
80,192
|
|
|
|
|
|
|
|
Less: cumulative effect of change in accounting principle on the determination of the allowance for estimated uncollectible reinsurance balances (1)
|
643
|
|
|
—
|
|
|
—
|
|
Net balance as of January 1
|
7,680,550
|
|
|
7,253,939
|
|
|
5,327,268
|
|
Net incurred losses and LAE:
|
|
|
|
|
|
Current period
|
405,178
|
|
|
580,074
|
|
|
533,081
|
|
Prior periods
|
10,748
|
|
|
34,105
|
|
|
(209,359)
|
|
Total net incurred losses and LAE
|
415,926
|
|
|
614,179
|
|
|
323,722
|
|
Net paid losses:
|
|
|
|
|
|
Current period
|
(71,989)
|
|
|
(179,461)
|
|
|
(176,172)
|
|
Prior periods
|
(1,413,500)
|
|
|
(1,609,009)
|
|
|
(1,158,614)
|
|
Total net paid losses
|
(1,485,489)
|
|
|
(1,788,470)
|
|
|
(1,334,786)
|
|
Effect of exchange rate movement
|
119,663
|
|
|
47,812
|
|
|
(145,243)
|
|
Acquired on purchase of subsidiaries
|
—
|
|
686
|
|
|
1,310,874
|
|
Assumed business
|
2,186,024
|
|
1,586,307
|
|
|
1,772,104
|
|
Ceded business
|
(154,926)
|
|
|
(33,260)
|
|
|
—
|
|
Reclassification to assets and liabilities held-for-sale
|
(216,808)
|
|
|
—
|
|
|
—
|
|
Net balance as of December 31
|
8,544,940
|
|
|
7,681,193
|
|
|
7,253,939
|
|
Plus: reinsurance reserves recoverable (2)
|
1,829,620
|
|
|
1,927,624
|
|
|
1,708,272
|
|
Plus: net deferred charge assets and gain liabilities on retroactive reinsurance
|
218,722
|
|
|
259,587
|
|
|
86,585
|
|
Balance as of December 31
|
$
|
10,593,282
|
|
|
$
|
9,868,404
|
|
|
$
|
9,048,796
|
|
(1) The Company adopted ASU 2016-13 and the related amendments on January 1, 2020. Refer to Note 2 - "Significant Accounting Policies" for further details. This amount excludes $0.4 million related to the adoption impact of ASU 2016-13 on StarStone U.S., which has been classified as a discontinued operation with the related assets and liabilities disclosed as held-for-sale on our consolidated balance sheets.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(2) Net of allowance for estimated uncollectible reinsurance.
The tables below provide the components of net incurred losses and LAE by segment and for our other activities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Non-life
Run-off
|
|
Atrium
|
|
StarStone
|
|
Other
|
|
Total
|
Net losses paid
|
$
|
1,074,901
|
|
|
$
|
73,920
|
|
|
$
|
326,868
|
|
|
$
|
9,800
|
|
|
$
|
1,485,489
|
|
Net change in case and LAE reserves (1)
|
(453,080)
|
|
|
7,245
|
|
|
(95,044)
|
|
|
692
|
|
|
(540,187)
|
|
Net change in IBNR reserves (2)
|
(718,414)
|
|
|
6,661
|
|
|
17,654
|
|
|
6,475
|
|
|
(687,624)
|
|
Increase (reduction) in estimates of net ultimate losses
|
(96,593)
|
|
|
87,826
|
|
|
249,478
|
|
|
16,967
|
|
|
257,678
|
|
|
|
|
|
|
|
|
|
|
|
Increase (reduction) in provisions for unallocated LAE (3)
|
(48,765)
|
|
|
(29)
|
|
|
17,244
|
|
|
—
|
|
|
(31,550)
|
|
Amortization of deferred charge assets and deferred gain liabilities (4)
|
42,640
|
|
|
—
|
|
|
606
|
|
|
—
|
|
|
43,246
|
|
Amortization of fair value adjustments (5)
|
28,667
|
|
|
(571)
|
|
|
(590)
|
|
|
—
|
|
|
27,506
|
|
Changes in fair value - fair value option (6)
|
119,046
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
119,046
|
|
Net incurred losses and LAE
|
$
|
44,995
|
|
|
$
|
87,226
|
|
|
$
|
266,738
|
|
|
$
|
16,967
|
|
|
$
|
415,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
Non-life
Run-off
|
|
Atrium
|
|
StarStone
|
|
Other
|
|
Total
|
Net losses paid
|
$
|
1,247,624
|
|
|
$
|
78,189
|
|
|
$
|
450,835
|
|
|
$
|
11,822
|
|
|
$
|
1,788,470
|
|
Net change in case and LAE reserves (1)
|
(530,891)
|
|
|
3,534
|
|
|
(4,686)
|
|
|
3,460
|
|
|
(528,583)
|
|
Net change in IBNR reserves (2)
|
(812,699)
|
|
|
(4,782)
|
|
|
22,021
|
|
|
756
|
|
|
(794,704)
|
|
Increase (reduction) in estimates of net ultimate losses
|
(95,966)
|
|
|
76,941
|
|
|
468,170
|
|
|
16,038
|
|
|
465,183
|
|
|
|
|
|
|
|
|
|
|
|
Increase (reduction) in provisions for unallocated LAE (3)
|
(57,404)
|
|
|
—
|
|
|
902
|
|
|
—
|
|
|
(56,502)
|
|
Amortization of deferred charge assets and deferred gain liabilities (4)
|
37,744
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
37,744
|
|
Amortization of fair value adjustments (5)
|
50,070
|
|
|
335
|
|
|
168
|
|
|
—
|
|
|
50,573
|
|
Changes in fair value - fair value option (6)
|
117,181
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
117,181
|
|
Net incurred losses and LAE
|
$
|
51,625
|
|
|
$
|
77,276
|
|
|
$
|
469,240
|
|
|
$
|
16,038
|
|
|
$
|
614,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
Non-life
Run-off
|
|
Atrium
|
|
StarStone
|
|
Other
|
|
Total
|
Net losses paid
|
$
|
838,817
|
|
|
$
|
64,506
|
|
|
$
|
427,371
|
|
|
$
|
4,092
|
|
|
$
|
1,334,786
|
|
Net change in case and LAE reserves (1)
|
(547,420)
|
|
|
6,331
|
|
|
63,861
|
|
|
4,808
|
|
|
(472,420)
|
|
Net change in IBNR reserves (2)
|
(565,385)
|
|
|
4,091
|
|
|
46,501
|
|
|
7,999
|
|
|
(506,794)
|
|
Increase (reduction) in estimates of net ultimate losses
|
(273,988)
|
|
|
74,928
|
|
|
537,733
|
|
|
16,899
|
|
|
355,572
|
|
|
|
|
|
|
|
|
|
|
|
Increase (reduction) in provisions for unallocated LAE (3)
|
(65,401)
|
|
|
—
|
|
|
5,613
|
|
|
—
|
|
|
(59,788)
|
|
Amortization of deferred charge assets and deferred gain liabilities (4)
|
13,781
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,781
|
|
Amortization of fair value adjustments (5)
|
12,877
|
|
|
(5,118)
|
|
|
(266)
|
|
|
—
|
|
|
7,493
|
|
Changes in fair value - fair value option (6)
|
6,664
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,664
|
|
Net incurred losses and LAE
|
$
|
(306,067)
|
|
|
$
|
69,810
|
|
|
$
|
543,080
|
|
|
$
|
16,899
|
|
|
$
|
323,722
|
|
(1)Comprises the movement during the year in specific case reserve liabilities as a result of claims settlements or changes advised to us by our policyholders and attorneys, less changes in case reserves recoverable advised by us to our reinsurers as a result of the settlement or movement of assumed claims.
(2)Represents the gross change in our actuarial estimates of IBNR, less amounts recoverable.
(3) Represents the change in the estimate of the total future costs to administer the claims.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(4) Relates to the amortization of deferred charge assets and deferred gain liabilities on retroactive reinsurance contracts.
(5) Relates to the amortization of fair value adjustments associated with the acquisition of companies. .
(6) Represents the changes in the fair value of liabilities related to our assumed retroactive reinsurance agreements for which we have elected the fair value option.
Loss Development Information
Methodology for Establishing Reserves
The liability for losses and LAE includes an amount determined from reported claims and an amount based on historical loss experience and industry statistics for IBNR using a variety of actuarial methods. Our loss reserves cover multiple lines of business, including workers' compensation, general casualty, asbestos and environmental, marine, aviation and transit, construction defects and other non-life lines of business. Our management, through our loss reserving committees, considers the reasonableness of loss reserves recommended by our actuaries, including actual loss development during the year.
Case reserves are recognized for known claims (including the cost of related litigation) when sufficient information has been reported to us to indicate the involvement of a specific insurance policy. We use considerable judgment in estimating losses for reported claims on an individual claim basis based upon our knowledge of the circumstances surrounding the claim, the severity of the injury or damage, the jurisdiction of the occurrence, the potential for ultimate exposure, the type of loss, and our experience with the line of business and policy provisions relating to the particular type of claim. The reserves for unpaid reported losses and LAE are established by management based on reports from brokers, ceding companies and insureds and represent the estimated ultimate cost of events or conditions that have been reported to, or specifically identified, by us. We also consider facts currently known and the current state of the law and coverage litigation.
IBNR reserves are established by management based on actuarially determined estimates of ultimate losses and loss expenses. We use generally accepted actuarial methodologies to estimate ultimate losses and LAE and those estimates are reviewed by management. In addition, the routine settlement of claims, at either below or above the carried advised loss reserve, updates historical loss development information to which actuarial methodologies are applied, often resulting in revised estimates of ultimate liabilities. On an annual basis, independent actuarial firms are retained by management to provide their estimates of ultimate losses and to review the estimates developed by our actuaries.
Within the annual loss reserve studies produced by either our actuaries or independent actuaries, exposures for each subsidiary are separated into homogeneous reserving categories for the purpose of estimating IBNR. Each reserving category contains either direct insurance or assumed reinsurance reserves and groups relatively similar types of risks and exposures (for example, asbestos, environmental, casualty, property) and lines of business written (for example, marine, aviation, non-marine). Based on the exposure characteristics and the nature of available data for each individual reserving category, a number of methodologies are applied. Recorded reserves for each category are selected from the actuarial indications produced by the various methodologies after consideration of exposure characteristics, data limitations and strengths and weaknesses of each method applied. This approach to estimating IBNR has been consistently adopted in the annual loss reserve studies for each period presented.
The estimation of unpaid claim liabilities at any given point in time is subject to a high degree of uncertainty for a number of reasons. A significant amount of time can lapse between the assumption of risk, the occurrence of a loss event, the reporting of the event to an insurance or reinsurance company and the ultimate payment of the claim on the loss event. Our actuarial methodologies include amongst other methodologies industry benchmarking which, under certain actuarial methods, compares the trend of our loss development to that of the industry. To the extent that the trend of our loss development compared to the industry changes in any period, it is likely to have an impact on our estimate of ultimate liabilities. Unpaid claim liabilities for property and casualty exposures in general are impacted by changes in the legal environment, jury awards, medical cost trends and general inflation. Certain estimates for unpaid claim liabilities involve considerable uncertainty due to significant coverage litigation, and it can be unclear whether past claim experience will be representative of future claim experience. Ultimate values for such claims cannot be estimated using reserving techniques that extrapolate losses to an ultimate basis using loss development factors, and the uncertainties surrounding the estimation of unpaid claim liabilities are not likely to be resolved in the near future. In addition, reserves are established to cover loss development related to both known and unasserted claims. Consequently, our subsequent estimates of ultimate losses and LAE, and our liability for losses and LAE, may differ materially from the amounts recorded in our consolidated financial statements.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
These estimates are reviewed regularly and, as experience develops and new information becomes known, the reserves are adjusted as necessary. Such adjustments (i.e. change in ultimate losses), if any, will be recorded in earnings in the period in which they become known. Prior period development arises from changes to loss estimates recognized in the current year that relate to loss reserves established in previous calendar years.
Asbestos and Environmental
In establishing the reserves for losses and LAE related to asbestos and environmental claims, management considers facts currently known and the current state of the law and coverage litigation environment. Liabilities are recognized for known claims (including the cost of related litigation) when sufficient information has been developed to indicate the involvement of a specific insurance policy, and management can reasonably estimate its liability. In addition, reserves have been established to cover additional exposures on both known and unreported claims. Estimates of the reserves are reviewed and updated continually. Developed case law and claim histories are still evolving for such claims, especially because significant uncertainty exists about the outcome of coverage litigation and whether past claim experience will be representative of future claim experience. In view of the changes in the legal and tort environment that affect the development of such claims, the uncertainties inherent in valuing asbestos and environmental claims are not likely to be resolved in the near future. Ultimate values for such claims cannot be estimated using traditional reserving techniques and there are significant uncertainties in estimating the amount of our potential losses for these claims. There can be no assurance that the reserves established by us will be adequate or will not be adversely affected by the development of other latent exposures.
The net liability for unpaid losses and LAE as of December 31, 2020 and 2019 included $1.9 billion and $2.1 billion, respectively, which represented an estimate of the net ultimate liability for asbestos and environmental claims. The gross liability for such claims as of December 31, 2020 and 2019 was $2.1 billion and $2.3 billion, respectively. For the years ended December 31, 2020 and 2019, our reserves for asbestos and environmental liabilities decreased by $178.2 million and increased by $419.9 million on a gross basis, respectively, and decreased by $227.2 million and increased by $374.7 million on a net basis, respectively. The decrease in 2020 was primarily due to net paid losses while the increase in 2019 was primarily due to acquisition activity, partially offset by net paid losses.
Disclosures of Incurred and Paid Loss Development, IBNR, Claims Counts and Payout Percentages
The loss development tables disclosed below, sets forth our historic incurred and paid loss development by accident year through December 31, 2020, net of reinsurance, as well as the cumulative number of reported claims, IBNR balances, and other supplementary information.
The loss development tables disclosed below are presented as follows:
•Non-Life Run-off - Loss development disclosures have been provided for the 10 latest acquisition years, in addition to disclosures for lines of business with material net losses and LAE reserve balances as of December 31, 2020, within those 10 latest acquisition years, also being provided. The disaggregated lines of business include general casualty, workers’ compensation, motor and professional indemnity and directors and officers.
•StarStone - All the lines of business related to the StarStone segment have been included within the loss development disclosures below, namely, casualty, marine, property, aerospace and workers’ compensation. Following our sale of StarStone U.S. to Core Specialty which was completed on November 30, 2020, the loss development disclosures presented for all the individual lines of business within the StarStone segment have been restated to exclude the historical incurred and paid loss development related to StarStone U.S.
Incurred and Paid Loss Development and IBNR Disclosures
For each acquisition year and/or line of business for which incurred losses and allocated loss adjustment expenses, net of reinsurance tables have been provided below, the disclosure approach and format adopted reflects the following:
•The incurred loss development tables include both reported case reserves and IBNR liabilities, as well as cumulative paid losses;
•Both the incurred and cumulative paid loss development tables include allocated LAE (i.e. claims handling costs allocated to specific individual claims) but exclude unallocated LAE (i.e. the costs associated with internal claims staff and third party administrators as well as consultants that cannot be allocated to specific individual claims);
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
•The fair value adjustments related to business acquisitions are excluded from the loss development tables, however the undiscounted incurred losses, cumulative paid losses and allocated LAE related to business acquisitions are included in the loss development tables;
•The fair value adjustments related to retroactive reinsurance agreements for which we have elected the fair value option are excluded from the loss development tables, however the undiscounted incurred losses, cumulative paid losses and allocated LAE related to retroactive reinsurance agreements for which we have elected the fair value option are included in the loss development tables;
•The amounts relating to the amortization of deferred charge assets and deferred gain liabilities are excluded from the loss development tables;
•In the incurred loss development tables, the incurred effect of agreeing a commutation or policy buyback is included in the period in which the commutation or policy buyback is contractually agreed. We reflect the net incurred loss development arising from a commutation or policy buyback in the fiscal year in which a commutation or policy buyback is contractually agreed, and the net incurred loss development is allocated to the appropriate accident year. The claim will generally have been adjusted throughout its lifetime and the amounts recorded in prior years (which is considered supplementary information) remain unchanged in our loss development tables, such that the incurred amount that we recognize in the year in which a commutation or policy buyback is contractually agreed represents the effect of the commutation or policy buyback settlement compared to the carried net loss and LAE reserve balance in the prior year. We do not recast prior years to remove commuted or bought back claims, since this practice would eliminate any historical favorable or adverse development we may have experienced on the commuted loss and LAE reserves. Reserves that have been commuted or bought back are not adjusted in future years but the commuted or bought back value remains in our total incurred losses;
•In the cumulative paid losses tables, we reflect the amount of the commutation or policy buyback settlements in the year in which they are actually paid or received, and the net payment is allocated to the appropriate accident year. The claim or recoverable may have recorded payments or receipts throughout its lifetime and amounts recorded in prior years (which is considered supplementary information) remain unchanged in our loss development tables, such that the amounts paid or received that we recognize in the year in which a commutation or policy buyback is paid or received represents the amount actually paid or received. We do not recast prior years to remove payments or receipts related to commutations or policy buybacks, since we consider commutations and policy buybacks a key component of our business and are reflective of our ability to effectively manage acquired losses and LAE liabilities. Payments relating to commutations and policy buybacks are not adjusted in future years but the payments remain in our total cumulative paid losses;
•The amounts included within the loss development tables for the years ended December 31, 2011 through to December 31, 2019 (and in the case of StarStone, from April 1, 2014 its acquisition date through to December 31, 2019), as well as the historical average annual percentage payout ratios as of December 31, 2020, are presented as supplementary information and are therefore unaudited;
•All data presented within the loss development tables is net of reinsurance recoveries, excluding provisions for uncollectible reinsurance recoverables;
•All the incurred and paid loss activity presented within the loss development tables provided below, exclude intercompany cessions. Upon the sale of StarStone U.S. to Core Specialty on November 30, 2020, the incurred and paid loss development activity related to the cessions from StarStone U.S. to our other subsidiaries were no longer eliminated on consolidation and have been included within the loss development tables presented below;
•The IBNR reserves included within each incurred loss development table by accident year, reflect the net IBNR recorded as of December 31, 2020, including expected development on reported losses;
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
•For the Non-life Run-off segment loss development tables, all information for both acquisitions and retroactive reinsurance agreements is presented prospectively. As the loss reserves are effectively re-underwritten at the date that they are acquired or assumed, we believe that the historical loss development prior to their acquisition is not relevant with respect to our own experience managing these acquired loss reserves. In addition, the information required to prepare the loss development disclosures on a retrospective basis is not always available to us and a mixed presentation approach would result in loss development tables that are not entirely reflective of the actual loss development of the acquired loss reserves;
•For the Non-life Run-off segment we have also presented the net incurred and paid losses and ALAE information by calendar year as well as IBNR and claim counts for accident years older than 10 years on a single row within the loss development tables. This presentation differs from the typical approach where only the net outstanding losses and LAE reserves are presented as a reconciling item at the bottom of the loss development tables. The additional detailed disclosures are provided on a voluntary basis and the inclusion of the disclosures is to provide additional information to the users of our financial statements and to also enable the reconciliation of our total loss reserves by acquisition year and by significant line of business;
•For the StarStone segment loss development tables, all information has been presented on a prospective basis from the date of our acquisition of StarStone, which was effective on April 1, 2014. Providing pre-acquisition incurred and paid losses by accident year for years prior to 2014 was determined to be impracticable due to significant data limitations; and
•Following our sale of StarStone U.S. to Core Specialty which was completed on November 30, 2020, the loss development disclosures presented below for all the individual lines of business within the StarStone segment have been restated to exclude the historical incurred and paid loss development related to StarStone U.S.
The historical amounts disclosed within the loss development tables for all the acquisition years and lines of business presented below are on a constant-currency basis, which is achieved by using constant foreign exchange rates between periods in the loss development tables, and translating prior period amounts denominated in currencies other than the U.S. dollar, which is our reporting currency, using the closing exchange rates as of December 31, 2020.
The impact of this exchange rate conversion is to show the change between periods exclusive of the effect of exchange rate fluctuations, which would otherwise distort the change in incurred losses and the cash flow patterns associated with those incurred losses shown within the loss development tables. The change in net incurred losses shown within the loss development tables will, however, differ from other U.S. GAAP disclosures of incurred current and prior period reserve development amounts, which include the effect of exchange rate fluctuations.
Establishing an estimate for loss reserves involves various assumptions and judgments, therefore, the information contained within the loss development disclosures only allows readers or users of our consolidated financial statements to understand, at the summary level presented in the development tables, the change over time in our reported incurred loss estimates as well as the nature and patterns of the cash flows associated with those estimates. We, therefore, believe that the information provided within the loss development tables disclosed below is of limited use for independent analysis or application of standard actuarial estimations, and any results obtained from doing so should be interpreted with caution.
Cumulative Number of Reported Claims
Reported claim counts, on a cumulative basis, are provided as supplemental information to each incurred loss development table by accident year. We measure claim frequency information on an individual claim count basis within each of our segments as follows:
•Non-Life Run-off - The claim frequency information for the exposures included within our Non-life Run-off lines of business includes direct and assumed open and closed claims by accident year at the claimant level. Reported claims that are closed without a payment are included within our cumulative number of reported claims because we typically incur claim adjustment expenses on them prior to their closure. The claim count numbers exclude counts related to claims within policy deductibles where the insured is responsible for the payment of losses within the deductible layer. Individual claim counts related to certain assumed reinsurance contracts such as excess-of-loss and quota share treaties are not available to us, and the losses arising from these treaties have been treated as single claims for the purposes of determining
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
claim counts. Therefore, each treaty year within the reinsurance contract is deemed a single claim because the detailed underlying individual claim information is generally not reported to us by our cedants; and
•StarStone - The claim frequency information is determined at the claimant level for the exposures within the lines of business related to these segments. Our claims system assigns a unique claim identifier to each reported claim we receive. Each unique claim identifier is deemed to be a single claim, irrespective of whether the claim remains open or has been closed with or without payment. For certain insurance facilities and business produced or managed by managing general agents, coverholders and third party administrators where the underlying claims data is reported to us in an aggregated format, the information necessary to provide cumulative claims frequency is not available. In such cases, we typically record a “block” claim in our system. This also applies to a small amount of assumed reinsurance business that we write where, similarly, the underlying claims data is reported to us in an aggregated format. In such instances, each assumed reinsurance contract is deemed a single claim.
Our reported claim frequency information is subject to the following inherent limitations when analyzing our loss experience and severity:
•Claim counts are presented only on a reported and not on an ultimate basis. Therefore, reported claim counts include open claims which have outstanding reserves but exclude IBNR claims. As such the reported claims are consistent with reported losses, which can be calculated by subtracting IBNR losses from incurred losses. However, the reported claim counts are inconsistent with the losses in the incurred loss development tables, which include IBNR losses, and to losses in the paid loss development tables, which exclude outstanding reserves;
•Reported claim counts have not been adjusted for ceded reinsurance, which may distort any measures of frequency or severity;
•For lines of business that have a mix of primary and excess layer exposures, such as our general casualty and workers’ compensation lines of business, the reported claim counts may fluctuate from period to period between exposure layers, thereby distorting any measure of frequency and severity; and
•The use of our reported claim frequency information to project ultimate loss payouts by disaggregated disclosure category or line of business may not be as meaningful as claim count information related to individual contracts at a more granular level.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Payout Percentages
•Non-life Run-off - The annual percentage payout disclosures for our Non-life Run-off segment are based on the payout of incurred claims by age, net of reinsurance. For our Non-life Run-off segment, claims aging reflects the number of years that have lapsed since the original acquisition of the related net liability for losses and LAE reserves to the date the claim is paid. There may be occasions where, due to our claims management strategies (including commutations and policy buy-backs) or due to the timing of claims payments relative to the associated recovery, the cash received from reinsurance recoveries is greater than the cash paid out to our claimants, (i.e. a net recovery rather than a net payout for a particular calendar year), thereby resulting in a negative annual percentage payout for that calendar year.
•StarStone - The average annual percentage payout disclosures for our StarStone segment are based on the payout of incurred claims by age, net of reinsurance.
Non-Life Run-off Segment
The table below provides a reconciliation of the beginning and ending reserves for losses and LAE for the Non-life Run-off segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Balance as of January 1
|
$
|
8,295,361
|
|
|
$
|
7,540,662
|
|
|
$
|
5,949,472
|
|
Less: reinsurance reserves recoverable
|
1,543,614
|
|
|
1,366,123
|
|
|
1,377,485
|
|
Less: net deferred charge assets and gain liabilities on retroactive reinsurance
|
259,587
|
|
|
86,585
|
|
|
80,192
|
|
Plus: cumulative effect of change in accounting principal on allowance for estimated uncollectible reinsurance (1)
|
703
|
|
|
—
|
|
|
—
|
|
Net balance as of January 1
|
6,492,863
|
|
|
6,087,954
|
|
|
4,491,795
|
|
Net incurred losses and LAE:
|
|
|
|
|
|
Current period
|
30,165
|
|
|
123,559
|
|
|
12,451
|
|
Prior periods
|
14,830
|
|
|
(71,934)
|
|
|
(318,518)
|
|
Total net incurred losses and LAE
|
44,995
|
|
|
51,625
|
|
|
(306,067)
|
|
Net paid losses:
|
|
|
|
|
|
Current period
|
(9,990)
|
|
|
(64,820)
|
|
|
(5)
|
|
Prior periods
|
(1,064,911)
|
|
|
(1,182,804)
|
|
|
(838,812)
|
|
Total net paid losses
|
(1,074,901)
|
|
|
(1,247,624)
|
|
|
(838,817)
|
|
Effect of exchange rate movement
|
94,745
|
|
|
46,472
|
|
|
(132,632)
|
|
Acquired on purchase of subsidiaries
|
—
|
|
|
686
|
|
|
1,111,839
|
|
Assumed business
|
2,186,024
|
|
|
1,586,307
|
|
|
1,761,836
|
|
Ceded business
|
(154,926)
|
|
|
(33,260)
|
|
|
—
|
|
Net balance as of December 31
|
7,588,800
|
|
|
6,492,160
|
|
|
6,087,954
|
|
Plus: reinsurance reserves recoverable(2)
|
1,427,560
|
|
|
1,543,614
|
|
|
1,366,123
|
|
Plus: net deferred charge assets and gain liabilities on retroactive reinsurance
|
218,722
|
|
|
259,587
|
|
|
86,585
|
|
Balance as of December 31
|
$
|
9,235,082
|
|
|
$
|
8,295,361
|
|
|
$
|
7,540,662
|
|
(1) The Company adopted ASU 2016-13 and the related amendments on January 1, 2020. Refer to Note 2 - "Significant Accounting Policies" for further details.
(2) Net of allowance for estimated uncollectible reinsurance.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Net incurred losses and LAE in the Non-life Run-off segment were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Prior
Period
|
|
Current
Period
|
|
Total
|
|
Prior
Period
|
|
Current
Period
|
|
Total
|
|
Prior
Period
|
|
Current
Period
|
|
Total
|
Net losses paid
|
$
|
1,064,911
|
|
|
$
|
9,990
|
|
|
$
|
1,074,901
|
|
|
$
|
1,182,804
|
|
|
$
|
64,820
|
|
|
$
|
1,247,624
|
|
|
$
|
838,812
|
|
|
$
|
5
|
|
|
$
|
838,817
|
|
Net change in case and LAE reserves (1)
|
(449,610)
|
|
|
(3,470)
|
|
|
(453,080)
|
|
|
(553,996)
|
|
|
23,105
|
|
|
(530,891)
|
|
|
(552,124)
|
|
|
4,704
|
|
|
(547,420)
|
|
Net change in IBNR reserves (2)
|
(742,417)
|
|
|
24,003
|
|
|
(718,414)
|
|
|
(847,893)
|
|
|
35,194
|
|
|
(812,699)
|
|
|
(573,127)
|
|
|
7,742
|
|
|
(565,385)
|
|
Increase (reduction) in estimates of net ultimate losses
|
(127,116)
|
|
|
30,523
|
|
|
(96,593)
|
|
|
(219,085)
|
|
|
123,119
|
|
|
(95,966)
|
|
|
(286,439)
|
|
|
12,451
|
|
|
(273,988)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (reduction) in provisions for unallocated LAE (3)
|
(48,407)
|
|
|
(358)
|
|
|
(48,765)
|
|
|
(57,844)
|
|
|
440
|
|
|
(57,404)
|
|
|
(65,401)
|
|
|
—
|
|
|
(65,401)
|
|
Amortization of deferred charge assets and deferred gain liabilities (4)
|
42,640
|
|
|
—
|
|
|
42,640
|
|
|
37,744
|
|
|
—
|
|
|
37,744
|
|
|
13,781
|
|
|
—
|
|
|
13,781
|
|
Amortization of fair value adjustments (5)
|
28,667
|
|
|
—
|
|
|
28,667
|
|
|
50,070
|
|
|
—
|
|
|
50,070
|
|
|
12,877
|
|
|
—
|
|
|
12,877
|
|
Changes in fair value - fair value option (6)
|
119,046
|
|
|
—
|
|
|
119,046
|
|
|
117,181
|
|
|
—
|
|
|
117,181
|
|
|
6,664
|
|
|
—
|
|
|
6,664
|
|
Net incurred losses and LAE
|
$
|
14,830
|
|
|
$
|
30,165
|
|
|
$
|
44,995
|
|
|
$
|
(71,934)
|
|
|
$
|
123,559
|
|
|
$
|
51,625
|
|
|
$
|
(318,518)
|
|
|
$
|
12,451
|
|
|
$
|
(306,067)
|
|
(1)Comprises the movement during the year in specific case reserve liabilities as a result of claims settlements or changes advised to us by our policyholders and attorneys, less changes in case reserves recoverable advised by us to our reinsurers as a result of the settlement or movement of assumed claims.
(2)Represents the gross change in our actuarial estimates of IBNR, less amounts recoverable.
(3) Represents the change in the estimate of the total future costs to administer the claims.
(4) Relates to the amortization of deferred charge assets and deferred gain liabilities on retroactive reinsurance contracts.
(5) Relates to the amortization of fair value adjustments associated with the acquisition of companies.
(6) Represents the changes in the fair value of liabilities related to our assumed retroactive reinsurance agreements for which we have elected the fair value option.
Year Ended December 31, 2020
The following table shows the components of the 2020 reduction in estimates of net ultimate losses related to prior periods by line of business for the Non-life Run-off segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Net losses paid
|
|
Net change in case and LAE reserves
|
|
Net change in IBNR reserves
|
|
Increase (reduction) in estimates of net ultimate losses
|
Asbestos
|
$
|
132,853
|
|
|
$
|
(1,300)
|
|
|
$
|
(150,054)
|
|
|
$
|
(18,501)
|
|
Environmental
|
23,866
|
|
|
(266)
|
|
|
(36,362)
|
|
|
(12,762)
|
|
General Casualty
|
170,502
|
|
|
(68,744)
|
|
|
(127,421)
|
|
|
(25,663)
|
|
Workers' Compensation
|
142,790
|
|
|
(176,927)
|
|
|
(149,198)
|
|
|
(183,335)
|
|
Marine, aviation and transit
|
33,927
|
|
|
(14,458)
|
|
|
(50,558)
|
|
|
(31,089)
|
|
Construction defect
|
27,476
|
|
|
(6,092)
|
|
|
(13,382)
|
|
|
8,002
|
|
Professional indemnity/ Directors & Officers
|
63,878
|
|
|
3,698
|
|
|
(79,181)
|
|
|
(11,605)
|
|
Motor
|
349,366
|
|
|
(106,561)
|
|
|
(95,040)
|
|
|
147,765
|
|
Property
|
71,422
|
|
|
(24,356)
|
|
|
(64,331)
|
|
|
(17,265)
|
|
All Other
|
48,831
|
|
|
(54,604)
|
|
|
23,110
|
|
|
17,337
|
|
Total
|
$
|
1,064,911
|
|
|
$
|
(449,610)
|
|
|
$
|
(742,417)
|
|
|
$
|
(127,116)
|
|
The significant drivers of the 2020 reduction in estimates of net ultimate losses are explained below.
Workers' Compensation - The workers’ compensation line of business experienced a $183.3 million reduction in estimates of net ultimate losses as a result of favorable actual development versus expected development across
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
nearly all our acquired companies and assumed portfolios. We continue to drive favorable loss experience by proactively settling claims for less than the current case reserves. During 2020, we paid net losses of $142.8 million and released case and LAE reserves of $176.9 million. This represents a decline in reported losses of $34.1 million for the year. As a result of the favorable development in our data, our actuarial analyses indicated and resulted in a release of $149.2 million of IBNR reserves, primarily attributed to a settlement of an outwards reinsurance agreement resulting in the reduction in gross ultimate losses inuring to our benefit.
We also continue to actively seek to commute policies in our workers' compensation line of business when possible, and where the commutation of the policy is settled at a level below the carried value of the loss reserves, we record a reduction in our estimates of net ultimate losses. Included in the net paid losses and released case and LAE reserves were 10 commutations that resulted in a net reduction of ultimate losses of $10.8 million.
Marine, aviation and transit - We experienced $31.1 million of favorable development in our marine, aviation and transit line of business. The reduction in net ultimate loss reserves was driven by a number of favorable outcomes on certain large claims from our London based portfolios and better actual than expected experience of reported losses across most reserve segments which led to releases of IBNR reserves as a result of our annual actuarial analyses.
General casualty - Our general casualty line of business experienced $25.7 million in favorable loss development which was the result of better actual than expected claim emergence across several portfolios including a new portfolio acquired in 2020 that underwent its first actuarial analysis by our outside actuarial consultant. To date, we have not experienced adverse social inflation in our general casualty line of business since we are generally proactive in settling claims early for fair value which reduces legal costs for both the defendant and plaintiff.
Motor - The experience in the motor line was adverse by $147.8 million due to higher than expected severity related to a recent assumed loss portfolio transfer transaction. The case reserves were significantly strengthened when we transferred the claim handling to a new third-party administrator with specialist experience in commercial automobile exposures. Along with the new third-party administrator, we have implemented several claim initiatives aimed at reducing defense costs, settling claims earlier, lowering claims severity and increased governance and technical oversight.
Other significant components of the 2020 net incurred losses and LAE include losses related to 2020 net earned premium of $30.2 million, an increase in the fair value of liabilities of $119.0 million related to our assumed retroactive reinsurance agreements for which we have elected the fair value option, primarily due to narrowing credit spreads on corporate bond yields in 2020 and 15 commutations in lines other than workers’ compensation resulting in a decrease of $12.3 million.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Year Ended December 31, 2019
The following table shows the components of the 2019 reduction in estimates of net ultimate losses related to prior periods by line of business for the Non-life Run-off segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
Net losses paid
|
|
Net change in case and LAE reserves
|
|
Net change in IBNR reserves
|
|
Increase (reduction) in estimates of net ultimate losses
|
Asbestos
|
$
|
118,557
|
|
|
$
|
35,003
|
|
|
$
|
(146,749)
|
|
|
$
|
6,811
|
|
Environmental
|
16,899
|
|
|
13,796
|
|
|
(15,707)
|
|
|
14,988
|
|
General Casualty
|
175,044
|
|
|
(89,968)
|
|
|
(91,818)
|
|
|
(6,742)
|
|
Workers' Compensation
|
208,961
|
|
|
(156,435)
|
|
|
(188,944)
|
|
|
(136,418)
|
|
Marine, aviation and transit
|
82,058
|
|
|
(77,958)
|
|
|
(24,508)
|
|
|
(20,408)
|
|
Construction defect
|
32,078
|
|
|
(8,313)
|
|
|
(25,025)
|
|
|
(1,260)
|
|
Professional indemnity/ Directors & Officers
|
103,413
|
|
|
(36,986)
|
|
|
(104,984)
|
|
|
(38,557)
|
|
Motor
|
276,563
|
|
|
(134,127)
|
|
|
(179,887)
|
|
|
(37,451)
|
|
Property
|
94,093
|
|
|
(73,259)
|
|
|
(7,358)
|
|
|
13,476
|
|
All Other
|
75,138
|
|
|
(25,749)
|
|
|
(62,913)
|
|
|
(13,524)
|
|
Total
|
$
|
1,182,804
|
|
|
$
|
(553,996)
|
|
|
$
|
(847,893)
|
|
|
$
|
(219,085)
|
|
The significant drivers of the 2019 reduction in estimates of net ultimate losses are explained below.
Workers' Compensation - A $136.4 million reduction in estimates of net ultimate losses in our workers' compensation line of business arose across multiple portfolios, where reported loss development was generally significantly less than expected development. The lower than expected actual development was driven by significant proactive settlement activity on individual claimants where we were able to settle claims lower than the case reserve estimates. For example, in two of our portfolios we observed favorable reported loss development, where we paid $39.3 million in loss payments to release a corresponding $53.6 million of associated case reserves for $14.3 million in favorable reported loss development. These settlement activities and the favorable actual loss development versus expected loss development, led to a change in the actuarial assumptions in the annual reserve study that reflect this favorable loss development.
We also continue to actively seek to commute policies in our workers' compensation line of business when possible, and where the commutation of the policy is settled at a level below the carried value of the loss reserves, we record a reduction in our estimates of net ultimate losses. During 2019, we completed 6 commutations across several workers' compensation portfolios that contributed to a $6.1 million reduction in estimates of net ultimate losses.
Professional Indemnity/Directors & Officers - A $38.6 million reduction in estimates of net ultimate losses in our professional indemnity/directors’ & officers’ line of business arose based on the annual actuarial analysis which reflected the better than expected loss development during 2019. As part of the reserve analysis, an in-depth review of recently acquired portfolios’ ceded reinsurance programs led to an increase in the ceded reinsurance asset of $13.5 million, which is a reduction in net ultimate losses.
Asbestos - A $6.8 million increase in estimates of net ultimate losses in our asbestos line of business arose primarily due to changes in our actuarial assumptions related to dismissal rates. During 2019, the number of new defendants and filed claims was less than expected, but this was offset by a lowering of the dismissal rate. In asbestos, the dismissal rates are extremely high as many of the claims do not have merit against the insured. However, we have seen a trend in both US and UK exposure of the dismissal rate decreasing in the range of 2 to 3 percentage points.
Similar to workers’ compensation business, during 2019, we completed 6 commutations across several portfolios that contributed to a $9.8 million reduction in estimates of net ultimate losses.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Other - All other line of business changes in estimates of net ultimate losses were primarily due to the application of our reserving methodologies, favorable actual versus expected loss development and proactive claim management.
Other significant components of the 2019 net incurred losses and LAE include losses related to 2019 net earned premium of $123.6 million and an increase in the fair value of liabilities of $117.2 million related to our assumed retroactive reinsurance agreements for which we have elected the fair value option, primarily due to narrowing credit spreads on corporate bond yields in 2019.
Year Ended December 31, 2018
The following table shows the components of the 2018 reduction in estimates of net ultimate losses related to prior periods by line of business for the Non-life Run-off segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
Net losses paid
|
|
Net change in case and LAE reserves
|
|
Net change in IBNR reserves
|
|
Increase (reduction) in estimates of net ultimate losses
|
Asbestos
|
$
|
108,248
|
|
|
$
|
(21,535)
|
|
|
$
|
(151,662)
|
|
|
$
|
(64,949)
|
|
Environmental
|
21,273
|
|
|
479
|
|
|
(7,599)
|
|
|
14,153
|
|
General Casualty
|
141,624
|
|
|
(115,240)
|
|
|
(60,828)
|
|
|
(34,444)
|
|
Workers' Compensation
|
139,226
|
|
|
(178,138)
|
|
|
(115,648)
|
|
|
(154,560)
|
|
Marine, aviation and transit
|
67,831
|
|
|
(44,200)
|
|
|
(21,188)
|
|
|
2,443
|
|
Construction defect
|
22,182
|
|
|
(7,257)
|
|
|
(33,146)
|
|
|
(18,221)
|
|
Professional indemnity/ Directors & Officers
|
161,797
|
|
|
(11,159)
|
|
|
(130,957)
|
|
|
19,681
|
|
Motor
|
104,182
|
|
|
(109,962)
|
|
|
(34,215)
|
|
|
(39,995)
|
|
Property
|
22,178
|
|
|
(24,271)
|
|
|
(11,497)
|
|
|
(13,590)
|
|
All Other
|
50,271
|
|
|
(40,841)
|
|
|
(6,387)
|
|
|
3,043
|
|
Total
|
$
|
838,812
|
|
|
$
|
(552,124)
|
|
|
$
|
(573,127)
|
|
|
$
|
(286,439)
|
|
The significant drivers of the 2018 reduction in estimates of net ultimate losses are explained below.
Workers' Compensation - The $154.6 million reduction in estimates of net ultimate losses in our workers' compensation line of business arose across multiple portfolios, where reported incurred loss development was generally significantly less than expected. When actual development is less than expected for a sustained period of time across a significant volume of exposures, an updated actuarial analysis tends to indicate reductions in IBNR reserves. Updates to actuarial analysis, factoring in the less-than-expected reported incurred loss development for the year, is the primary driver of the reduction to our Workers' Compensation net ultimate loss estimates.
For certain of our portfolios, the lower than expected actual development was driven by significant proactive settlement activity on individual claimants where we were able to close open claims earlier than was indicated by our original payout patterns, and in other portfolios, based on the review of recent loss development activity we revised our actuarial development "tail factor" assumption, which led to a reduction in net ultimate losses. For example, in one portfolio we observed favorable incurred loss development, primarily relating to accident years 1995 through 2005 where we paid $22.7 million in loss payments to release a corresponding $37.0 million of associated case reserves for $14.3 million in favorable incurred loss development.
For recently acquired portfolios of workers' compensation business, we have utilized our subsidiary, Paladin Managed Care Services ("Paladin"), to assist us in reviewing claims. Paladin generally produces savings related to medical expense liabilities over and above savings achieved by prior vendors of such services, and the savings lead to actual development that is less than expected, thereby driving reductions to the estimates of net ultimate losses. In one particular program, our claims personnel pursued a proactive strategy of settling with numerous workers' compensation claimants whose injuries arose in recent accident years. For this portfolio, the claims team reduced the open inventory of claims by 78% during 2018. This reduction in exposure, when incorporated into an updated
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
actuarial analysis, led to a reduction in our estimate of ultimate net losses of $30.2 million, primarily relating to accident years 2010 through 2014.
We also continue to actively seek commutations on policies when possible, and where the commutation of the policy is settled at a level below the carried value of the loss reserves, we record a reduction in our estimates of net ultimate losses. During 2018, we completed 7 commutations across several portfolios that contributed to an $11.2 million the reduction in estimates of net ultimate losses.
Asbestos - The $64.9 million reduction in estimates of net ultimate losses in our asbestos line of business arose primarily due to one asbestos portfolio where lower than expected volume of claims reported and a lower than expected severity on claims settled in the period, when projected to net ultimate losses through actuarial methodologies, resulted in a significant reduction in estimates of net ultimate losses. The volume of claims reported was 3% less than expected and the average cost per claim was 5% less than expected. Across our other asbestos portfolios, we completed 8 commutations and 2 policy buy-backs contributing to a $9.5 million reduction in estimates of net ultimate losses.
Other - All other line of business changes in estimates of net ultimate losses were primarily due to the application of our reserving methodologies, favorable actual versus expected loss development, claim management and commutations.
Disclosures of Incurred and Paid Loss Development, IBNR, Claims Counts and Payout Percentages
The following tables provide a breakdown of gross and net losses and LAE reserves, consisting of Outstanding Loss Reserve ("OLR") and IBNR by line of business and adjustments for fair value resulting from business combinations, adjustments for where we elected the fair value option, deferred charge assets and ULAE, as of December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Gross
|
|
Net
|
|
OLR
|
|
IBNR
|
|
Total
|
|
OLR
|
|
IBNR
|
|
Total
|
|
(in thousands of U.S. dollars)
|
Asbestos
|
$
|
544,438
|
|
|
$
|
1,234,101
|
|
|
$
|
1,778,539
|
|
|
$
|
464,102
|
|
|
$
|
1,122,021
|
|
|
$
|
1,586,123
|
|
Environmental
|
184,783
|
|
|
118,111
|
|
|
302,894
|
|
|
164,709
|
|
|
100,339
|
|
|
265,048
|
|
General casualty
|
610,437
|
|
|
1,279,991
|
|
|
1,890,428
|
|
|
492,039
|
|
|
1,247,662
|
|
|
1,739,701
|
|
Workers' compensation/personal accident
|
1,087,324
|
|
|
918,238
|
|
|
2,005,562
|
|
|
912,068
|
|
|
776,941
|
|
|
1,689,009
|
|
Marine, aviation and transit
|
271,469
|
|
|
73,081
|
|
|
344,550
|
|
|
229,464
|
|
|
56,414
|
|
|
285,878
|
|
Construction defect
|
23,380
|
|
|
85,578
|
|
|
108,958
|
|
|
23,109
|
|
|
83,039
|
|
|
106,148
|
|
Professional indemnity/Directors & Officers
|
764,768
|
|
|
336,705
|
|
|
1,101,473
|
|
|
526,333
|
|
|
307,349
|
|
|
833,682
|
|
Motor
|
619,682
|
|
|
355,044
|
|
|
974,726
|
|
|
451,097
|
|
|
283,576
|
|
|
734,673
|
|
Property
|
116,398
|
|
|
35,832
|
|
|
152,230
|
|
|
97,826
|
|
|
34,182
|
|
|
132,008
|
|
Other
|
217,746
|
|
|
204,819
|
|
|
422,565
|
|
|
141,448
|
|
|
121,895
|
|
|
263,343
|
|
|
$
|
4,440,425
|
|
|
$
|
4,641,500
|
|
|
$
|
9,081,925
|
|
|
$
|
3,502,195
|
|
|
$
|
4,133,418
|
|
|
$
|
7,635,613
|
|
Fair value adjustments
|
|
|
|
|
(142,854)
|
|
|
|
|
|
|
(128,841)
|
|
Fair value adjustments - fair value option
|
|
|
|
|
(54,589)
|
|
|
|
|
|
|
(33,163)
|
|
Net deferred charge assets and gains on retroactive reinsurance
|
|
|
|
|
—
|
|
|
|
|
|
|
(218,722)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ULAE
|
|
|
|
|
350,600
|
|
|
|
|
|
|
333,913
|
|
Total
|
|
|
|
|
$
|
9,235,082
|
|
|
|
|
|
|
$
|
7,588,800
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
Gross
|
|
Net
|
|
OLR
|
|
IBNR
|
|
Total
|
|
OLR
|
|
IBNR
|
|
Total
|
|
(in thousands of U.S. dollars)
|
Asbestos
|
$
|
542,681
|
|
|
$
|
1,373,678
|
|
|
$
|
1,916,359
|
|
|
$
|
490,117
|
|
|
$
|
1,271,982
|
|
|
$
|
1,762,099
|
|
Environmental
|
187,165
|
|
|
156,121
|
|
|
343,286
|
|
|
173,878
|
|
|
142,351
|
|
|
316,229
|
|
General casualty
|
501,863
|
|
|
489,129
|
|
|
990,992
|
|
|
399,396
|
|
|
421,426
|
|
|
820,822
|
|
Workers' compensation/personal accident
|
1,270,530
|
|
|
977,808
|
|
|
2,248,338
|
|
|
963,578
|
|
|
751,074
|
|
|
1,714,652
|
|
Marine, aviation and transit
|
290,067
|
|
|
121,577
|
|
|
411,644
|
|
|
244,611
|
|
|
100,135
|
|
|
344,746
|
|
Construction defect
|
29,772
|
|
|
98,312
|
|
|
128,084
|
|
|
29,245
|
|
|
94,888
|
|
|
124,133
|
|
Professional indemnity/Directors & Officers
|
693,760
|
|
|
265,490
|
|
|
959,250
|
|
|
485,478
|
|
|
170,926
|
|
|
656,404
|
|
Motor
|
480,668
|
|
|
233,806
|
|
|
714,474
|
|
|
317,829
|
|
|
165,543
|
|
|
483,372
|
|
Property
|
140,620
|
|
|
63,604
|
|
|
204,224
|
|
|
122,010
|
|
|
56,450
|
|
|
178,460
|
|
Other
|
269,956
|
|
|
165,882
|
|
|
435,838
|
|
|
208,647
|
|
|
97,573
|
|
|
306,220
|
|
|
$
|
4,407,082
|
|
|
$
|
3,945,407
|
|
|
$
|
8,352,489
|
|
|
$
|
3,434,789
|
|
|
$
|
3,272,348
|
|
|
$
|
6,707,137
|
|
Fair value adjustments
|
|
|
|
|
(170,689)
|
|
|
|
|
|
|
(157,036)
|
|
Fair value adjustments - fair value option
|
|
|
|
|
(217,933)
|
|
|
|
|
|
|
(129,848)
|
|
Net deferred charge assets and gain liabilities on retroactive reinsurance
|
|
|
|
|
—
|
|
|
|
|
|
|
(259,587)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ULAE
|
|
|
|
|
331,494
|
|
|
|
|
|
|
331,494
|
|
Total
|
|
|
|
|
$
|
8,295,361
|
|
|
|
|
|
|
$
|
6,492,160
|
|
In addition to the breakdown of our Non-life Run-off reserves by line of business we also monitor our reserves by acquisition year. The acquisition year is the year in which the net reserves were acquired via a business acquisition or assumed via a retroactive reinsurance agreement. By analyzing the loss development tables by acquisition year on a prospective basis, the impact of the take-on positions from year to year does not distort the loss development tables.
The following table provides a summary of our net loss reserves, prior to provisions for bad debt, fair value adjustments, deferred charge assets and deferred gain liabilities and ULAE as of December 31, 2020, by year of acquisition and by significant line of business:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition Year
|
|
|
2010 and Prior
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
2017
|
2018
|
2019
|
2020
|
Total
|
Asbestos
|
$
|
142,028
|
|
$
|
—
|
|
$
|
—
|
|
$
|
7,767
|
|
$
|
—
|
|
$
|
—
|
|
$
|
407,958
|
|
$
|
726,901
|
|
$
|
1,105
|
|
$
|
277,947
|
|
$
|
—
|
|
$
|
1,563,706
|
|
Environmental
|
42,356
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
89,865
|
|
22,891
|
|
11,203
|
|
95,072
|
|
—
|
|
261,387
|
|
General casualty
|
52,582
|
|
13,270
|
|
9,983
|
|
16,696
|
|
31,610
|
|
34,704
|
|
3,727
|
|
44,551
|
|
228,419
|
|
218,995
|
|
1,077,908
|
|
1,732,445
|
|
Workers' compensation/personal accident
|
42,908
|
|
125,649
|
|
—
|
|
48,207
|
|
—
|
|
287,653
|
|
219,157
|
|
53,659
|
|
322,737
|
|
387,438
|
|
199,864
|
|
1,687,272
|
|
Marine, aviation and transit
|
8,760
|
|
2,747
|
|
—
|
|
(188)
|
|
10,592
|
|
1,616
|
|
32
|
|
77,321
|
|
106,431
|
|
56,709
|
|
19,848
|
|
283,868
|
|
Construction defect
|
43
|
|
—
|
|
—
|
|
—
|
|
—
|
|
36,258
|
|
14,289
|
|
18,836
|
|
—
|
|
36,709
|
|
—
|
|
106,135
|
|
Professional indemnity/Directors & Officers
|
7,539
|
|
9,564
|
|
23,210
|
|
—
|
|
20,942
|
|
—
|
|
76,314
|
|
—
|
|
331,676
|
|
130,906
|
|
232,934
|
|
833,085
|
|
Motor
|
12,452
|
|
201
|
|
276
|
|
—
|
|
1,465
|
|
13,147
|
|
—
|
|
3,710
|
|
260,797
|
|
17,899
|
|
422,321
|
|
732,268
|
|
Property
|
3,301
|
|
161
|
|
7,008
|
|
—
|
|
18,165
|
|
3,880
|
|
465
|
|
(114)
|
|
47,270
|
|
39,286
|
|
10,887
|
|
130,309
|
|
All Other
|
17,473
|
|
854
|
|
2,696
|
|
4,260
|
|
9,676
|
|
6,959
|
|
23,582
|
|
94,499
|
|
18,222
|
|
78,474
|
|
—
|
|
256,695
|
|
Total
|
$
|
329,442
|
|
$
|
152,446
|
|
$
|
43,173
|
|
$
|
76,742
|
|
$
|
92,450
|
|
$
|
384,217
|
|
$
|
835,389
|
|
$
|
1,042,254
|
|
$
|
1,327,860
|
|
$
|
1,339,435
|
|
$
|
1,963,762
|
|
$
|
7,587,170
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The table below reconciles the net loss reserves, prior to provisions for bad debt, fair value adjustments, deferred charge assets and deferred gain liabilities and ULAE as of December 31, 2020, by significant line of business to the line of business table presented above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
Total Net Reserves per all Acquisition Years
|
|
Provision for Bad Debt
|
|
Total Net Reserves
|
Asbestos
|
|
$
|
1,563,706
|
|
|
$
|
22,417
|
|
|
$
|
1,586,123
|
|
Environmental
|
|
261,387
|
|
|
3,661
|
|
|
265,048
|
|
General casualty
|
|
1,732,445
|
|
|
7,256
|
|
|
1,739,701
|
|
Workers' compensation/personal accident
|
|
1,687,272
|
|
|
1,737
|
|
|
1,689,009
|
|
Marine, aviation and transit
|
|
283,868
|
|
|
2,010
|
|
|
285,878
|
|
Construction defect
|
|
106,135
|
|
|
13
|
|
|
106,148
|
|
Professional indemnity/Directors & Officers
|
|
833,085
|
|
|
597
|
|
|
833,682
|
|
Motor
|
|
732,268
|
|
|
2,405
|
|
|
734,673
|
|
Property
|
|
130,309
|
|
|
1,699
|
|
|
132,008
|
|
All Other
|
|
256,695
|
|
|
6,648
|
|
|
263,343
|
|
Total
|
|
$
|
7,587,170
|
|
|
$
|
48,443
|
|
|
$
|
7,635,613
|
|
Loss development tables have been provided for acquisition years 2011 through 2020. In addition, for the acquisition years presented, we have also provided additional loss development tables for lines of business within those acquisition years which had net loss reserve balances that were deemed to be significant as of December 31, 2020 as follows:
•General casualty - 2018, 2019 and 2020 acquisition years;
•Workers' compensation - 2015, 2016, 2018 and 2019 acquisition years;
•Motor - 2018 and 2020 acquisition years; and
•Professional indemnity and directors and officers - 2018 and 2020 acquisition years.
Our Non-life Run-off segment is unique within the insurance industry in that legacy reserves are continuously being acquired and added to this segment through business acquisitions or through retroactive reinsurance agreements. Accordingly, it would not be appropriate to extrapolate redundancies or deficiencies into the future from the loss development tables provided below. Acquired and assumed reserves arising from business acquisitions and retroactive reinsurance agreements are presented on a full prospective basis.
The following tables set forth information about incurred and paid loss development, total IBNR reserves and cumulative loss frequency related to our 2011 through 2020 acquisition years within the Non-Life Run-off segment as of December 31, 2020. In addition, we have also presented loss development tables for the significant lines of business within certain acquisition years. The information related to incurred and paid loss development for the years ended December 31, 2011 through 2019 is presented as supplementary information and is therefore unaudited.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
For the Years Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
2011 (unaudited)
|
2012 (unaudited)
|
2013 (unaudited)
|
2014 (unaudited)
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
597,263
|
|
$
|
621,819
|
|
$
|
589,004
|
|
$
|
489,877
|
|
$
|
426,777
|
|
$
|
375,227
|
|
$
|
319,423
|
|
$
|
274,136
|
|
$
|
261,234
|
|
$
|
240,808
|
|
$
|
229,458
|
|
|
$
|
17,493
|
|
112,837
|
|
2011
|
—
|
|
102
|
|
36
|
|
45
|
|
54
|
|
61
|
|
71
|
|
79
|
|
86
|
|
93
|
|
100
|
|
|
—
|
|
19
|
|
2012
|
—
|
|
|
122
|
|
11
|
|
10
|
|
10
|
|
10
|
|
17
|
|
18
|
|
17
|
|
17
|
|
|
—
|
|
7
|
|
2013
|
—
|
|
|
|
23
|
|
43
|
|
15
|
|
15
|
|
15
|
|
15
|
|
15
|
|
15
|
|
|
—
|
|
16
|
|
2014
|
—
|
|
|
|
|
1
|
|
3
|
|
3
|
|
3
|
|
18
|
|
15
|
|
14
|
|
|
2
|
|
14
|
|
2015
|
—
|
|
|
|
|
|
—
|
|
(2)
|
|
(2)
|
|
32
|
|
24
|
|
19
|
|
|
—
|
|
1
|
|
2016
|
—
|
|
|
|
|
|
|
2
|
|
(139)
|
|
(111)
|
|
(99)
|
|
(88)
|
|
|
7
|
|
2
|
|
2017
|
—
|
|
|
|
|
|
|
|
—
|
|
21
|
|
15
|
|
17
|
|
|
1
|
|
2
|
|
2018
|
—
|
|
|
|
|
|
|
|
|
7
|
|
8
|
|
8
|
|
|
1
|
|
1
|
|
2019
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
2
|
|
|
1
|
|
1
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
1
|
|
1
|
|
|
$
|
597,263
|
|
|
|
|
|
|
|
|
|
|
$
|
229,564
|
|
|
$
|
17,506
|
|
112,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
For The Years Ended December 31,
|
|
|
|
Accident Year
|
|
2011 (unaudited)
|
2012 (unaudited)
|
2013 (unaudited)
|
2014 (unaudited)
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
|
|
2010 and Prior
|
|
$
|
58,934
|
|
$
|
98,969
|
|
$
|
90,711
|
|
$
|
24,238
|
|
$
|
19,370
|
|
$
|
27,563
|
|
$
|
19,697
|
|
$
|
31,108
|
|
$
|
56,741
|
|
$
|
77,051
|
|
|
|
|
2011
|
|
27
|
|
36
|
|
46
|
|
54
|
|
61
|
|
71
|
|
79
|
|
86
|
|
93
|
|
100
|
|
|
|
|
2012
|
|
|
6
|
|
10
|
|
10
|
|
10
|
|
10
|
|
17
|
|
17
|
|
17
|
|
17
|
|
|
|
|
2013
|
|
|
|
6
|
|
11
|
|
15
|
|
15
|
|
15
|
|
15
|
|
15
|
|
15
|
|
|
|
|
2014
|
|
|
|
|
1
|
|
3
|
|
3
|
|
3
|
|
4
|
|
7
|
|
7
|
|
|
|
|
2015
|
|
|
|
|
|
(1)
|
|
(2)
|
|
(2)
|
|
2
|
|
11
|
|
18
|
|
|
|
|
2016
|
|
|
|
|
|
|
2
|
|
(153)
|
|
(125)
|
|
(114)
|
|
(105)
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
—
|
|
3
|
|
6
|
|
10
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
1
|
|
4
|
|
5
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
77,118
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
152,446
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
For the Years Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
2012 (unaudited)
|
2013 (unaudited)
|
2014 (unaudited)
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
326,229
|
|
|
$
|
328,419
|
|
$
|
321,295
|
|
$
|
312,510
|
|
$
|
297,081
|
|
$
|
286,660
|
|
$
|
277,778
|
|
$
|
269,004
|
|
$
|
263,472
|
|
$
|
252,318
|
|
|
$
|
10,889
|
|
47,773
|
|
2011
|
1,487
|
|
|
1,466
|
|
1,336
|
|
1,182
|
|
1,095
|
|
1,072
|
|
1,049
|
|
1,032
|
|
1,032
|
|
1,032
|
|
|
—
|
|
5
|
|
2012
|
55
|
|
|
81
|
|
49
|
|
363
|
|
344
|
|
406
|
|
397
|
|
167
|
|
167
|
|
167
|
|
|
—
|
|
6
|
|
2013
|
—
|
|
|
|
946
|
|
119
|
|
427
|
|
433
|
|
421
|
|
136
|
|
136
|
|
136
|
|
|
—
|
|
5
|
|
2014
|
(60)
|
|
|
|
|
2,991
|
|
3,108
|
|
1,552
|
|
1,300
|
|
1,195
|
|
1,146
|
|
1,068
|
|
|
1
|
|
7
|
|
2015
|
—
|
|
|
|
|
|
729
|
|
1,517
|
|
739
|
|
739
|
|
739
|
|
739
|
|
|
—
|
|
5
|
|
2016
|
(485)
|
|
|
|
|
|
|
67
|
|
1,266
|
|
1,113
|
|
1,059
|
|
445
|
|
|
37
|
|
2
|
|
2017
|
—
|
|
|
|
|
|
|
|
75
|
|
167
|
|
100
|
|
100
|
|
|
—
|
|
4
|
|
2018
|
(59)
|
|
|
|
|
|
|
|
|
—
|
|
154
|
|
74
|
|
|
4
|
|
1
|
|
2019
|
(123)
|
|
|
|
|
|
|
|
|
|
274
|
|
145
|
|
|
11
|
|
4
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
164
|
|
|
—
|
|
3
|
|
|
$
|
327,044
|
|
|
|
|
|
|
|
|
|
|
$
|
256,388
|
|
|
$
|
10,942
|
|
47,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
For The Years Ended December 31,
|
|
|
|
Accident Year
|
|
|
2012 (unaudited)
|
2013 (unaudited)
|
2014 (unaudited)
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
|
|
2010 and Prior
|
|
|
$
|
3,194
|
|
$
|
70,440
|
|
$
|
112,966
|
|
$
|
144,553
|
|
$
|
169,781
|
|
$
|
180,270
|
|
$
|
194,011
|
|
$
|
204,482
|
|
$
|
209,656
|
|
|
|
|
2011
|
|
|
120
|
|
496
|
|
742
|
|
866
|
|
928
|
|
990
|
|
1,032
|
|
1,032
|
|
1,032
|
|
|
|
|
2012
|
|
|
31
|
|
49
|
|
49
|
|
52
|
|
167
|
|
167
|
|
167
|
|
167
|
|
167
|
|
|
|
|
2013
|
|
|
|
109
|
|
119
|
|
136
|
|
136
|
|
136
|
|
136
|
|
136
|
|
136
|
|
|
|
|
2014
|
|
|
|
|
67
|
|
224
|
|
459
|
|
675
|
|
864
|
|
989
|
|
1,053
|
|
|
|
|
2015
|
|
|
|
|
|
112
|
|
117
|
|
739
|
|
739
|
|
739
|
|
739
|
|
|
|
|
2016
|
|
|
|
|
|
|
3
|
|
56
|
|
98
|
|
98
|
|
98
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
13
|
|
43
|
|
100
|
|
100
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
—
|
|
30
|
|
34
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
18
|
|
36
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
213,215
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
43,173
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
For the Years Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
2013 (unaudited)
|
2014 (unaudited)
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
320,974
|
|
|
|
$
|
349,297
|
|
$
|
354,585
|
|
$
|
361,812
|
|
$
|
356,522
|
|
$
|
340,248
|
|
$
|
326,851
|
|
$
|
313,347
|
|
$
|
314,497
|
|
|
$
|
16,353
|
|
56,441
|
|
2011
|
96,929
|
|
|
|
102,288
|
|
100,482
|
|
100,243
|
|
95,848
|
|
87,913
|
|
86,403
|
|
85,919
|
|
81,616
|
|
|
2,700
|
|
11,185
|
|
2012
|
131,119
|
|
|
|
127,323
|
|
121,364
|
|
118,085
|
|
114,772
|
|
110,045
|
|
107,853
|
|
108,025
|
|
105,564
|
|
|
1,831
|
|
10,423
|
|
2013
|
13,062
|
|
|
|
90,739
|
|
91,634
|
|
88,920
|
|
85,791
|
|
81,732
|
|
80,036
|
|
80,091
|
|
79,174
|
|
|
1,073
|
|
5,656
|
|
2014
|
—
|
|
|
|
|
4,514
|
|
3,714
|
|
3,425
|
|
16,800
|
|
16,225
|
|
16,304
|
|
16,269
|
|
|
55
|
|
174
|
|
2015
|
—
|
|
|
|
|
|
265
|
|
280
|
|
982
|
|
329
|
|
250
|
|
237
|
|
|
42
|
|
2
|
|
2016
|
—
|
|
|
|
|
|
|
103
|
|
71
|
|
70
|
|
69
|
|
69
|
|
|
1
|
|
1
|
|
2017
|
—
|
|
|
|
|
|
|
|
30
|
|
13
|
|
13
|
|
13
|
|
|
—
|
|
1
|
|
2018
|
—
|
|
|
|
|
|
|
|
|
22
|
|
17
|
|
18
|
|
|
—
|
|
1
|
|
2019
|
—
|
|
|
|
|
|
|
|
|
|
13
|
|
15
|
|
|
—
|
|
1
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
61
|
|
|
4
|
|
1
|
|
|
$
|
562,084
|
|
|
|
|
|
|
|
|
|
|
$
|
597,533
|
|
|
$
|
22,059
|
|
83,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
For The Years Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
2013 (unaudited)
|
2014 (unaudited)
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
$
|
74,418
|
|
$
|
134,409
|
|
$
|
186,762
|
|
$
|
222,891
|
|
$
|
229,942
|
|
$
|
243,755
|
|
$
|
249,023
|
|
$
|
258,436
|
|
|
|
|
2011
|
|
|
|
30,323
|
|
52,455
|
|
63,952
|
|
70,498
|
|
75,055
|
|
77,290
|
|
79,112
|
|
73,282
|
|
|
|
|
2012
|
|
|
|
33,361
|
|
59,095
|
|
74,663
|
|
86,916
|
|
92,445
|
|
96,780
|
|
99,781
|
|
98,096
|
|
|
|
|
2013
|
|
|
|
17,022
|
|
37,653
|
|
52,638
|
|
62,876
|
|
68,866
|
|
71,487
|
|
74,556
|
|
74,472
|
|
|
|
|
2014
|
|
|
|
|
993
|
|
1,747
|
|
2,256
|
|
15,804
|
|
15,959
|
|
16,123
|
|
16,164
|
|
|
|
|
2015
|
|
|
|
|
|
43
|
|
102
|
|
112
|
|
165
|
|
190
|
|
191
|
|
|
|
|
2016
|
|
|
|
|
|
|
34
|
|
64
|
|
65
|
|
66
|
|
67
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
9
|
|
13
|
|
13
|
|
13
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
13
|
|
17
|
|
18
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
8
|
|
15
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
520,791
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
76,742
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
For the Years Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
2014 (unaudited)
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
142,341
|
|
|
|
|
$
|
133,678
|
|
$
|
123,973
|
|
$
|
155,274
|
|
$
|
142,256
|
|
$
|
141,058
|
|
$
|
145,889
|
|
$
|
144,874
|
|
|
$
|
6,454
|
|
12,014
|
|
2011
|
74,248
|
|
|
|
|
129,149
|
|
154,394
|
|
134,137
|
|
136,257
|
|
137,806
|
|
139,997
|
|
135,181
|
|
|
10,057
|
|
6,228
|
|
2012
|
141,597
|
|
|
|
|
147,347
|
|
178,577
|
|
187,062
|
|
179,745
|
|
165,821
|
|
162,740
|
|
160,769
|
|
|
10,449
|
|
6,393
|
|
2013
|
86,920
|
|
|
|
|
76,313
|
|
95,125
|
|
83,564
|
|
88,189
|
|
90,387
|
|
88,391
|
|
90,951
|
|
|
8,947
|
|
3,173
|
|
2014
|
—
|
|
|
|
|
13,802
|
|
9,554
|
|
14,506
|
|
7,438
|
|
6,590
|
|
6,954
|
|
7,098
|
|
|
1,708
|
|
1,112
|
|
2015
|
—
|
|
|
|
|
|
33,549
|
|
15,553
|
|
20,741
|
|
18,929
|
|
17,206
|
|
17,090
|
|
|
72
|
|
183
|
|
2016
|
—
|
|
|
|
|
|
|
330
|
|
1,108
|
|
4,594
|
|
771
|
|
724
|
|
|
89
|
|
45
|
|
2017
|
—
|
|
|
|
|
|
|
|
5,078
|
|
3,893
|
|
8,200
|
|
8,463
|
|
|
24
|
|
37
|
|
2018
|
—
|
|
|
|
|
|
|
|
|
6
|
|
5
|
|
82
|
|
|
—
|
|
19
|
|
2019
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
—
|
|
10
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
6
|
|
|
$
|
445,106
|
|
|
|
|
|
|
|
|
|
|
$
|
565,232
|
|
|
$
|
37,800
|
|
29,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
For The Years Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
2014 (unaudited)
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
$
|
36,509
|
|
$
|
82,699
|
|
$
|
103,197
|
|
$
|
118,857
|
|
$
|
120,309
|
|
$
|
121,847
|
|
$
|
127,622
|
|
|
|
|
2011
|
|
|
|
|
84,031
|
|
109,675
|
|
110,575
|
|
113,701
|
|
120,155
|
|
123,335
|
|
123,364
|
|
|
|
|
2012
|
|
|
|
|
47,495
|
|
90,307
|
|
120,910
|
|
130,001
|
|
130,105
|
|
133,900
|
|
133,026
|
|
|
|
|
2013
|
|
|
|
|
21,752
|
|
40,817
|
|
48,223
|
|
56,941
|
|
65,073
|
|
65,625
|
|
66,225
|
|
|
|
|
2014
|
|
|
|
|
1,462
|
|
2,504
|
|
3,293
|
|
3,989
|
|
6,147
|
|
6,660
|
|
6,654
|
|
|
|
|
2015
|
|
|
|
|
|
1,741
|
|
4,308
|
|
11,566
|
|
13,371
|
|
13,417
|
|
13,473
|
|
|
|
|
2016
|
|
|
|
|
|
|
20
|
|
556
|
|
558
|
|
561
|
|
559
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
537
|
|
1,541
|
|
1,238
|
|
1,778
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
5
|
|
5
|
|
81
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
472,782
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
92,450
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
1,003,949
|
|
|
|
|
|
$
|
933,328
|
|
$
|
640,324
|
|
$
|
594,466
|
|
$
|
564,502
|
|
$
|
521,598
|
|
$
|
505,379
|
|
|
$
|
49,461
|
|
13,557
|
|
2011
|
124,727
|
|
|
|
|
|
137,429
|
|
131,303
|
|
129,657
|
|
128,155
|
|
128,672
|
|
126,764
|
|
|
14,306
|
|
5,587
|
|
2012
|
179,136
|
|
|
|
|
|
187,488
|
|
197,895
|
|
201,017
|
|
194,277
|
|
193,553
|
|
192,426
|
|
|
18,110
|
|
4,885
|
|
2013
|
229,590
|
|
|
|
|
|
189,838
|
|
196,582
|
|
199,983
|
|
189,737
|
|
185,101
|
|
184,590
|
|
|
13,855
|
|
4,699
|
|
2014
|
144,392
|
|
|
|
|
|
143,193
|
|
137,668
|
|
142,937
|
|
137,541
|
|
152,478
|
|
147,567
|
|
|
7,413
|
|
7,783
|
|
2015
|
23,750
|
|
|
|
|
|
70,276
|
|
69,322
|
|
66,152
|
|
64,974
|
|
69,465
|
|
73,256
|
|
|
6,959
|
|
10,997
|
|
2016
|
—
|
|
|
|
|
|
|
14,872
|
|
13,141
|
|
13,440
|
|
14,576
|
|
12,868
|
|
|
2,178
|
|
14,283
|
|
2017
|
—
|
|
|
|
|
|
|
|
4,095
|
|
4,527
|
|
5,277
|
|
6,860
|
|
|
345
|
|
3,534
|
|
2018
|
—
|
|
|
|
|
|
|
|
|
3,055
|
|
1,889
|
|
1,805
|
|
|
985
|
|
400
|
|
2019
|
—
|
|
|
|
|
|
|
|
|
|
1,838
|
|
1,873
|
|
|
1,831
|
|
51
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
1,951
|
|
|
1,962
|
|
3
|
|
|
$
|
1,705,544
|
|
|
|
|
|
|
|
|
|
|
$
|
1,255,339
|
|
|
$
|
117,405
|
|
65,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
|
For The Years Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
|
$
|
32,819
|
|
$
|
83,350
|
|
$
|
134,737
|
|
$
|
166,983
|
|
$
|
195,205
|
|
$
|
220,984
|
|
|
|
|
2011
|
|
|
|
|
|
33,827
|
|
55,115
|
|
71,023
|
|
86,397
|
|
98,000
|
|
105,178
|
|
|
|
|
2012
|
|
|
|
|
|
52,728
|
|
94,831
|
|
119,520
|
|
142,358
|
|
158,620
|
|
168,213
|
|
|
|
|
2013
|
|
|
|
|
|
46,761
|
|
89,930
|
|
120,509
|
|
145,788
|
|
159,767
|
|
164,215
|
|
|
|
|
2014
|
|
|
|
|
|
30,747
|
|
64,475
|
|
91,016
|
|
109,451
|
|
125,619
|
|
133,094
|
|
|
|
|
2015
|
|
|
|
|
|
20,653
|
|
38,709
|
|
46,668
|
|
51,994
|
|
59,963
|
|
63,181
|
|
|
|
|
2016
|
|
|
|
|
|
|
5,603
|
|
7,371
|
|
8,687
|
|
9,861
|
|
10,321
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
2,321
|
|
3,925
|
|
4,767
|
|
5,047
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
567
|
|
862
|
|
820
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
45
|
|
65
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
871,122
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
384,217
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2015 - Workers' Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
953,178
|
|
|
|
|
|
$
|
868,509
|
|
$
|
569,692
|
|
$
|
518,764
|
|
$
|
490,534
|
|
$
|
449,380
|
|
$
|
434,422
|
|
|
$
|
40,504
|
|
8,605
|
|
2011
|
76,789
|
|
|
|
|
|
73,723
|
|
69,009
|
|
68,013
|
|
66,781
|
|
67,741
|
|
65,825
|
|
|
3,685
|
|
1,241
|
|
2012
|
120,298
|
|
|
|
|
|
110,007
|
|
108,251
|
|
106,625
|
|
100,187
|
|
99,212
|
|
98,733
|
|
|
4,613
|
|
1,809
|
|
2013
|
146,237
|
|
|
|
|
|
124,726
|
|
122,238
|
|
121,010
|
|
113,056
|
|
112,677
|
|
113,414
|
|
|
5,595
|
|
2,386
|
|
2014
|
82,141
|
|
|
|
|
|
86,852
|
|
82,038
|
|
83,095
|
|
78,389
|
|
78,948
|
|
80,307
|
|
|
1,513
|
|
3,686
|
|
2015
|
4,089
|
|
|
|
|
|
18,647
|
|
12,623
|
|
13,488
|
|
12,295
|
|
11,309
|
|
11,337
|
|
|
557
|
|
2,900
|
|
2016
|
—
|
|
|
|
|
|
|
873
|
|
955
|
|
583
|
|
536
|
|
514
|
|
|
52
|
|
38
|
|
2017
|
—
|
|
|
|
|
|
|
|
358
|
|
61
|
|
41
|
|
33
|
|
|
13
|
|
10
|
|
2018
|
—
|
|
|
|
|
|
|
|
|
—
|
|
5
|
|
3
|
|
|
—
|
|
1
|
|
2019
|
—
|
|
|
|
|
|
|
|
|
|
1
|
|
3
|
|
|
1
|
|
1
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
|
$
|
1,382,732
|
|
|
|
|
|
|
|
|
|
|
$
|
804,591
|
|
|
$
|
56,533
|
|
20,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
|
For The Years Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
|
$
|
20,630
|
|
$
|
65,008
|
|
$
|
107,906
|
|
$
|
132,025
|
|
$
|
155,329
|
|
$
|
177,205
|
|
|
|
|
2011
|
|
|
|
|
|
16,032
|
|
30,462
|
|
39,635
|
|
50,470
|
|
55,595
|
|
58,420
|
|
|
|
|
2012
|
|
|
|
|
|
25,103
|
|
52,851
|
|
66,092
|
|
79,367
|
|
88,369
|
|
91,332
|
|
|
|
|
2013
|
|
|
|
|
|
27,737
|
|
55,675
|
|
75,065
|
|
91,559
|
|
100,890
|
|
104,265
|
|
|
|
|
2014
|
|
|
|
|
|
17,824
|
|
38,051
|
|
53,308
|
|
65,561
|
|
72,696
|
|
75,781
|
|
|
|
|
2015
|
|
|
|
|
|
3,034
|
|
5,672
|
|
7,917
|
|
9,169
|
|
9,248
|
|
9,461
|
|
|
|
|
2016
|
|
|
|
|
|
|
134
|
|
363
|
|
417
|
|
447
|
|
452
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
2
|
|
10
|
|
18
|
|
19
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
—
|
|
1
|
|
2
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
—
|
|
1
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
516,938
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
287,653
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
|
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
1,304,938
|
|
|
|
|
|
|
$
|
1,316,544
|
|
$
|
1,346,575
|
|
$
|
1,321,289
|
|
$
|
1,322,161
|
|
$
|
1,361,353
|
|
|
$
|
305,042
|
|
24,449
|
|
2011
|
17,291
|
|
|
|
|
|
|
17,291
|
|
19,920
|
|
19,754
|
|
18,829
|
|
18,609
|
|
|
2,266
|
|
861
|
|
2012
|
13,717
|
|
|
|
|
|
|
13,717
|
|
17,020
|
|
14,765
|
|
12,717
|
|
13,037
|
|
|
1,829
|
|
809
|
|
2013
|
373
|
|
|
|
|
|
|
373
|
|
1,312
|
|
1,237
|
|
1,120
|
|
914
|
|
|
603
|
|
127
|
|
2014
|
391
|
|
|
|
|
|
|
391
|
|
1,380
|
|
1,056
|
|
869
|
|
817
|
|
|
310
|
|
57
|
|
2015
|
—
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2016
|
—
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2017
|
—
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2018
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2019
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
|
$
|
1,336,710
|
|
|
|
|
|
|
|
|
|
|
$
|
1,394,730
|
|
|
$
|
310,050
|
|
26,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
|
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
|
|
$
|
101,098
|
|
$
|
222,703
|
|
$
|
331,218
|
|
$
|
445,770
|
|
$
|
536,987
|
|
|
|
|
2011
|
|
|
|
|
|
|
2,758
|
|
6,647
|
|
8,218
|
|
9,691
|
|
13,098
|
|
|
|
|
2012
|
|
|
|
|
|
|
2,734
|
|
5,206
|
|
6,461
|
|
7,587
|
|
8,492
|
|
|
|
|
2013
|
|
|
|
|
|
|
145
|
|
191
|
|
278
|
|
285
|
|
301
|
|
|
|
|
2014
|
|
|
|
|
|
|
178
|
|
207
|
|
284
|
|
366
|
|
463
|
|
|
|
|
2015
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
2016
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
559,341
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
835,389
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2016 - Workers' Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
|
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
437,457
|
|
|
|
|
|
|
$
|
437,805
|
|
$
|
403,319
|
|
$
|
391,476
|
|
$
|
382,446
|
|
$
|
367,109
|
|
|
$
|
19,015
|
|
9,452
|
|
2011
|
15,376
|
|
|
|
|
|
|
15,376
|
|
16,399
|
|
16,501
|
|
16,327
|
|
16,472
|
|
|
1,374
|
|
469
|
|
2012
|
13,074
|
|
|
|
|
|
|
13,074
|
|
15,465
|
|
13,276
|
|
11,379
|
|
11,256
|
|
|
1,020
|
|
612
|
|
2013
|
—
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2014
|
—
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2015
|
—
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2016
|
—
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2017
|
—
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2018
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2019
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
|
$
|
465,907
|
|
|
|
|
|
|
|
|
|
|
$
|
394,837
|
|
|
$
|
21,409
|
|
10,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
|
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
|
|
$
|
35,518
|
|
$
|
65,264
|
|
$
|
90,599
|
|
$
|
127,081
|
|
$
|
155,433
|
|
|
|
|
2011
|
|
|
|
|
|
|
2,631
|
|
5,871
|
|
7,305
|
|
8,756
|
|
12,130
|
|
|
|
|
2012
|
|
|
|
|
|
|
2,638
|
|
5,028
|
|
6,247
|
|
7,382
|
|
8,117
|
|
|
|
|
2013
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
2014
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
2015
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
2016
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
175,680
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
219,157
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
|
|
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
1,507,609
|
|
|
|
|
|
|
|
$
|
1,433,301
|
|
$
|
1,351,451
|
|
$
|
1,364,113
|
|
$
|
1,349,226
|
|
|
$
|
749,197
|
|
31,566
|
|
2011
|
40,743
|
|
|
|
|
|
|
|
29,274
|
|
25,389
|
|
27,316
|
|
26,942
|
|
|
5,834
|
|
8
|
|
2012
|
43,653
|
|
|
|
|
|
|
|
35,470
|
|
31,238
|
|
29,456
|
|
28,485
|
|
|
3,744
|
|
10
|
|
2013
|
35,671
|
|
|
|
|
|
|
|
30,338
|
|
28,139
|
|
24,707
|
|
29,829
|
|
|
1,860
|
|
11
|
|
2014
|
32,858
|
|
|
|
|
|
|
|
20,315
|
|
16,984
|
|
15,996
|
|
16,342
|
|
|
2,287
|
|
20
|
|
2015
|
8,808
|
|
|
|
|
|
|
|
6,494
|
|
7,002
|
|
6,295
|
|
6,043
|
|
|
234
|
|
8
|
|
2016
|
362
|
|
|
|
|
|
|
|
(4)
|
|
126
|
|
919
|
|
1,074
|
|
|
394
|
|
3
|
|
2017
|
—
|
|
|
|
|
|
|
|
174
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
1
|
|
2018
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2019
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
|
$
|
1,669,704
|
|
|
|
|
|
|
|
|
|
|
$
|
1,457,941
|
|
|
$
|
763,550
|
|
31,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
|
|
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
|
|
|
$
|
85,514
|
|
$
|
175,630
|
|
$
|
257,071
|
|
$
|
334,586
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
4,125
|
|
9,257
|
|
12,971
|
|
15,407
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
10,348
|
|
15,372
|
|
18,605
|
|
21,076
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
9,509
|
|
15,714
|
|
21,280
|
|
25,832
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
6,482
|
|
8,986
|
|
11,559
|
|
12,668
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
1,361
|
|
3,720
|
|
4,687
|
|
5,582
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
(56)
|
|
66
|
|
434
|
|
536
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
4
|
|
—
|
|
—
|
|
—
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
415,687
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
1,042,254
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
|
|
|
|
2018 (unaudited)
|
2019
(unaudited)
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
662,009
|
|
|
|
|
|
|
|
|
$
|
497,101
|
|
$
|
476,164
|
|
$
|
409,505
|
|
|
$
|
50,970
|
|
223,572
|
|
2011
|
164,556
|
|
|
|
|
|
|
|
|
150,408
|
|
150,388
|
|
147,796
|
|
|
16,240
|
|
14,072
|
|
2012
|
232,116
|
|
|
|
|
|
|
|
|
224,955
|
|
224,959
|
|
225,528
|
|
|
29,903
|
|
14,382
|
|
2013
|
272,732
|
|
|
|
|
|
|
|
|
274,377
|
|
268,237
|
|
250,013
|
|
|
35,175
|
|
16,126
|
|
2014
|
419,593
|
|
|
|
|
|
|
|
|
462,858
|
|
439,396
|
|
415,829
|
|
|
38,688
|
|
19,463
|
|
2015
|
365,429
|
|
|
|
|
|
|
|
|
483,489
|
|
480,093
|
|
496,187
|
|
|
62,476
|
|
24,768
|
|
2016
|
173,309
|
|
|
|
|
|
|
|
|
175,428
|
|
178,061
|
|
169,872
|
|
|
36,090
|
|
2,026
|
|
2017
|
207,040
|
|
|
|
|
|
|
|
|
207,190
|
|
205,466
|
|
204,490
|
|
|
55,056
|
|
4,163
|
|
2018
|
315,659
|
|
|
|
|
|
|
|
|
315,659
|
|
285,038
|
|
282,279
|
|
|
53,287
|
|
4,929
|
|
2019
|
—
|
|
|
|
|
|
|
|
|
|
68,271
|
|
68,041
|
|
|
9,762
|
|
1,634
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
|
$
|
2,812,443
|
|
|
|
|
|
|
|
|
|
|
$
|
2,669,540
|
|
|
$
|
387,647
|
|
325,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
|
|
|
|
2018 (unaudited)
|
2019
(unaudited)
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
|
|
|
|
$
|
50,515
|
|
$
|
86,132
|
|
$
|
81,554
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
26,236
|
|
53,151
|
|
65,522
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
31,772
|
|
81,356
|
|
106,297
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
41,544
|
|
96,968
|
|
133,398
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
90,689
|
|
188,721
|
|
235,787
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
95,688
|
|
199,373
|
|
269,559
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
6,854
|
|
63,982
|
|
93,705
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
56
|
|
72,800
|
|
113,770
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
—
|
|
139,815
|
|
191,442
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
39,099
|
|
50,646
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,341,680
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
1,327,860
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2018 - General Casualty
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
|
|
|
|
2018 (unaudited)
|
2019
(unaudited)
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
130,049
|
|
|
|
|
|
|
|
|
$
|
74,102
|
|
$
|
70,937
|
|
$
|
67,933
|
|
|
$
|
4,827
|
|
47,893
|
|
2011
|
18,044
|
|
|
|
|
|
|
|
|
16,554
|
|
16,650
|
|
15,855
|
|
|
151
|
|
1,421
|
|
2012
|
37,454
|
|
|
|
|
|
|
|
|
33,433
|
|
29,123
|
|
29,760
|
|
|
3,270
|
|
1,593
|
|
2013
|
43,301
|
|
|
|
|
|
|
|
|
56,092
|
|
46,596
|
|
46,999
|
|
|
4,352
|
|
1,596
|
|
2014
|
66,562
|
|
|
|
|
|
|
|
|
80,896
|
|
74,947
|
|
68,535
|
|
|
5,802
|
|
2,291
|
|
2015
|
79,191
|
|
|
|
|
|
|
|
|
94,124
|
|
104,790
|
|
109,694
|
|
|
14,188
|
|
3,594
|
|
2016
|
28,825
|
|
|
|
|
|
|
|
|
28,825
|
|
36,585
|
|
36,684
|
|
|
10,075
|
|
253
|
|
2017
|
37,209
|
|
|
|
|
|
|
|
|
37,209
|
|
41,664
|
|
43,174
|
|
|
14,554
|
|
230
|
|
2018
|
39,888
|
|
|
|
|
|
|
|
|
39,888
|
|
40,753
|
|
39,157
|
|
|
11,605
|
|
182
|
|
2019
|
—
|
|
|
|
|
|
|
|
|
|
6,767
|
|
6,187
|
|
|
394
|
|
34
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
|
$
|
480,523
|
|
|
|
|
|
|
|
|
|
|
$
|
463,978
|
|
|
$
|
69,218
|
|
59,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
|
|
|
|
2018 (unaudited)
|
2019
(unaudited)
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
|
|
|
|
$
|
9,164
|
|
$
|
18,817
|
|
$
|
29,840
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
2,349
|
|
7,115
|
|
11,018
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
1,281
|
|
11,453
|
|
14,383
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
10,404
|
|
19,938
|
|
27,717
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
13,766
|
|
27,833
|
|
41,899
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
15,494
|
|
31,535
|
|
49,860
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
—
|
|
14,109
|
|
18,916
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
—
|
|
11,048
|
|
21,130
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
—
|
|
8,879
|
|
17,455
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
2,373
|
|
3,341
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
235,559
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
228,419
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2018 - Workers' Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
|
|
|
|
2018 (unaudited)
|
2019
(unaudited)
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
131,873
|
|
|
|
|
|
|
|
|
$
|
122,831
|
|
$
|
129,280
|
|
$
|
131,775
|
|
|
$
|
39,843
|
|
2,098
|
|
2011
|
29,897
|
|
|
|
|
|
|
|
|
28,685
|
|
29,981
|
|
27,203
|
|
|
9,067
|
|
401
|
|
2012
|
28,749
|
|
|
|
|
|
|
|
|
29,181
|
|
27,676
|
|
26,833
|
|
|
10,597
|
|
468
|
|
2013
|
38,029
|
|
|
|
|
|
|
|
|
38,554
|
|
38,093
|
|
35,212
|
|
|
13,243
|
|
869
|
|
2014
|
65,049
|
|
|
|
|
|
|
|
|
66,346
|
|
57,163
|
|
52,797
|
|
|
17,605
|
|
1,345
|
|
2015
|
38,851
|
|
|
|
|
|
|
|
|
39,379
|
|
35,235
|
|
33,253
|
|
|
13,026
|
|
1,464
|
|
2016
|
44,686
|
|
|
|
|
|
|
|
|
44,686
|
|
38,945
|
|
37,714
|
|
|
15,857
|
|
892
|
|
2017
|
52,360
|
|
|
|
|
|
|
|
|
52,360
|
|
49,156
|
|
45,529
|
|
|
23,004
|
|
998
|
|
2018
|
65,075
|
|
|
|
|
|
|
|
|
65,075
|
|
60,923
|
|
59,768
|
|
|
19,310
|
|
886
|
|
2019
|
—
|
|
|
|
|
|
|
|
|
|
20,889
|
|
21,417
|
|
|
4,445
|
|
383
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
|
$
|
494,569
|
|
|
|
|
|
|
|
|
|
|
$
|
471,501
|
|
|
$
|
165,997
|
|
9,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
|
|
|
|
2018 (unaudited)
|
2019
(unaudited)
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
|
|
|
|
$
|
604
|
|
$
|
11,788
|
|
$
|
21,726
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
2,281
|
|
5,592
|
|
9,418
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
516
|
|
5,508
|
|
7,941
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
1,525
|
|
7,773
|
|
12,280
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
3,260
|
|
14,687
|
|
21,380
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
1,403
|
|
4,355
|
|
9,844
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
—
|
|
3,666
|
|
7,176
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
—
|
|
5,900
|
|
9,088
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
—
|
|
28,725
|
|
34,317
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
13,483
|
|
15,594
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
148,764
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
322,737
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2018 - Motor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
|
|
|
|
2018 (unaudited)
|
2019
(unaudited)
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
43,818
|
|
|
|
|
|
|
|
|
$
|
31,489
|
|
$
|
30,036
|
|
$
|
33,230
|
|
|
$
|
2,599
|
|
1,323
|
|
2011
|
48,231
|
|
|
|
|
|
|
|
|
38,092
|
|
37,707
|
|
36,301
|
|
|
2,031
|
|
1,239
|
|
2012
|
65,427
|
|
|
|
|
|
|
|
|
58,006
|
|
63,786
|
|
59,276
|
|
|
5,862
|
|
1,641
|
|
2013
|
78,456
|
|
|
|
|
|
|
|
|
71,276
|
|
65,012
|
|
55,345
|
|
|
5,744
|
|
683
|
|
2014
|
116,677
|
|
|
|
|
|
|
|
|
103,761
|
|
90,902
|
|
84,459
|
|
|
5,243
|
|
1,260
|
|
2015
|
135,855
|
|
|
|
|
|
|
|
|
133,493
|
|
132,167
|
|
132,165
|
|
|
15,246
|
|
1,510
|
|
2016
|
93,164
|
|
|
|
|
|
|
|
|
95,283
|
|
97,040
|
|
91,600
|
|
|
9,824
|
|
732
|
|
2017
|
100,321
|
|
|
|
|
|
|
|
|
100,471
|
|
99,135
|
|
102,038
|
|
|
16,628
|
|
2,797
|
|
2018
|
180,471
|
|
|
|
|
|
|
|
|
180,471
|
|
157,556
|
|
160,143
|
|
|
21,609
|
|
3,731
|
|
2019
|
—
|
|
|
|
|
|
|
|
|
|
39,757
|
|
39,647
|
|
|
4,955
|
|
1,200
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
|
$
|
862,420
|
|
|
|
|
|
|
|
|
|
|
$
|
794,204
|
|
|
$
|
89,741
|
|
16,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
|
|
|
|
2018 (unaudited)
|
2019
(unaudited)
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
|
|
|
|
$
|
7,460
|
|
$
|
13,722
|
|
$
|
16,655
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
6,060
|
|
12,980
|
|
15,464
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
12,380
|
|
24,433
|
|
31,136
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
11,114
|
|
29,311
|
|
35,186
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
22,393
|
|
49,089
|
|
60,254
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
21,712
|
|
61,928
|
|
84,976
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
6,854
|
|
43,851
|
|
65,287
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
56
|
|
48,661
|
|
73,440
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
—
|
|
86,861
|
|
120,041
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
22,687
|
|
30,968
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
533,407
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
260,797
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2018 - Professional Indemnity/Directors & Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
|
|
|
|
2018 (unaudited)
|
2019
(unaudited)
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
236,568
|
|
|
|
|
|
|
|
|
$
|
137,394
|
|
$
|
147,383
|
|
$
|
143,585
|
|
|
$
|
(3,639)
|
|
56,674
|
|
2011
|
46,512
|
|
|
|
|
|
|
|
|
52,553
|
|
48,884
|
|
51,600
|
|
|
3,185
|
|
3,762
|
|
2012
|
57,937
|
|
|
|
|
|
|
|
|
70,636
|
|
69,641
|
|
74,884
|
|
|
4,399
|
|
3,285
|
|
2013
|
59,457
|
|
|
|
|
|
|
|
|
63,284
|
|
78,933
|
|
76,291
|
|
|
10,543
|
|
3,257
|
|
2014
|
88,173
|
|
|
|
|
|
|
|
|
111,193
|
|
107,411
|
|
114,621
|
|
|
11,523
|
|
3,619
|
|
2015
|
47,337
|
|
|
|
|
|
|
|
|
100,975
|
|
81,272
|
|
85,394
|
|
|
15,074
|
|
3,990
|
|
2016
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2017
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2018
|
—
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2019
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
|
$
|
535,984
|
|
|
|
|
|
|
|
|
|
|
$
|
546,375
|
|
|
$
|
41,085
|
|
74,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
|
|
|
|
2018 (unaudited)
|
2019
(unaudited)
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
|
|
|
|
$
|
29,359
|
|
$
|
54,157
|
|
$
|
28,528
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
13,123
|
|
20,017
|
|
22,250
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
16,382
|
|
23,237
|
|
33,794
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
10,987
|
|
21,919
|
|
34,269
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
22,734
|
|
39,601
|
|
61,024
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
14,245
|
|
26,595
|
|
34,834
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
214,699
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
331,676
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
|
|
|
|
|
2019
(unaudited)
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
652,608
|
|
|
|
|
|
|
|
|
|
$
|
630,171
|
|
$
|
628,495
|
|
|
$
|
272,910
|
|
74,742
|
|
2011
|
49,873
|
|
|
|
|
|
|
|
|
|
40,554
|
|
35,876
|
|
|
8,773
|
|
15,218
|
|
2012
|
73,098
|
|
|
|
|
|
|
|
|
|
54,301
|
|
49,349
|
|
|
12,905
|
|
12,329
|
|
2013
|
112,031
|
|
|
|
|
|
|
|
|
|
93,213
|
|
88,066
|
|
|
29,931
|
|
14,952
|
|
2014
|
137,324
|
|
|
|
|
|
|
|
|
|
137,478
|
|
127,704
|
|
|
53,814
|
|
17,624
|
|
2015
|
179,651
|
|
|
|
|
|
|
|
|
|
188,833
|
|
196,007
|
|
|
80,816
|
|
25,081
|
|
2016
|
253,099
|
|
|
|
|
|
|
|
|
|
295,011
|
|
260,473
|
|
|
118,653
|
|
32,057
|
|
2017
|
116,386
|
|
|
|
|
|
|
|
|
|
116,386
|
|
116,386
|
|
|
116,386
|
|
2
|
|
2018
|
162,744
|
|
|
|
|
|
|
|
|
|
162,744
|
|
162,744
|
|
|
162,744
|
|
2
|
|
2019
|
—
|
|
|
|
|
|
|
|
|
|
54,571
|
|
64,595
|
|
|
6,155
|
|
1,679
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
27,975
|
|
|
5,483
|
|
1,020
|
|
|
$
|
1,736,814
|
|
|
|
|
|
|
|
|
|
|
$
|
1,757,670
|
|
|
$
|
868,570
|
|
194,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
|
|
|
|
|
2019
(unaudited)
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
|
|
|
|
|
$
|
26,817
|
|
$
|
106,195
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
4,786
|
|
8,100
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
6,886
|
|
9,565
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
13,540
|
|
20,906
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
28,188
|
|
47,310
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
33,417
|
|
63,994
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
56,125
|
|
84,592
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
25,595
|
|
55,912
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
21,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
418,235
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
1,339,435
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2019 - General Casualty
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
|
|
|
|
|
2019
(unaudited)
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
12,765
|
|
|
|
|
|
|
|
|
|
$
|
9,788
|
|
$
|
9,994
|
|
|
$
|
1,620
|
|
1,424
|
|
2011
|
12,321
|
|
|
|
|
|
|
|
|
|
9,490
|
|
7,979
|
|
|
3,587
|
|
796
|
|
2012
|
18,107
|
|
|
|
|
|
|
|
|
|
14,471
|
|
13,786
|
|
|
8,214
|
|
1,165
|
|
2013
|
23,750
|
|
|
|
|
|
|
|
|
|
18,230
|
|
20,960
|
|
|
8,897
|
|
313
|
|
2014
|
33,767
|
|
|
|
|
|
|
|
|
|
31,181
|
|
29,341
|
|
|
16,377
|
|
905
|
|
2015
|
58,818
|
|
|
|
|
|
|
|
|
|
45,936
|
|
41,158
|
|
|
18,055
|
|
2,003
|
|
2016
|
48,606
|
|
|
|
|
|
|
|
|
|
64,159
|
|
58,061
|
|
|
32,692
|
|
3,134
|
|
2017
|
32,188
|
|
|
|
|
|
|
|
|
|
32,188
|
|
32,188
|
|
|
32,188
|
|
1
|
|
2018
|
45,010
|
|
|
|
|
|
|
|
|
|
45,010
|
|
45,010
|
|
|
45,010
|
|
1
|
|
2019
|
—
|
|
|
|
|
|
|
|
|
|
1,750
|
|
1,873
|
|
|
510
|
|
225
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
1,118
|
|
|
267
|
|
411
|
|
|
$
|
285,332
|
|
|
|
|
|
|
|
|
|
|
$
|
261,468
|
|
|
$
|
167,417
|
|
10,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
|
|
|
|
|
2019
(unaudited)
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
|
|
|
|
|
$
|
2,230
|
|
$
|
2,894
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
810
|
|
1,869
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
3,326
|
|
6,604
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
3,499
|
|
5,813
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
3,878
|
|
8,155
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
4,421
|
|
5,121
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
4,894
|
|
10,723
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
—
|
|
841
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
42,473
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
218,995
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2019 - Workers' Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
|
|
|
|
|
2019
(unaudited)
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
5,860
|
|
|
|
|
|
|
|
|
|
$
|
4,420
|
|
$
|
4,551
|
|
|
$
|
1,938
|
|
9,869
|
|
2011
|
2,474
|
|
|
|
|
|
|
|
|
|
2,410
|
|
2,409
|
|
|
2,342
|
|
1,082
|
|
2012
|
6,280
|
|
|
|
|
|
|
|
|
|
6,176
|
|
6,176
|
|
|
6,991
|
|
1,640
|
|
2013
|
16,738
|
|
|
|
|
|
|
|
|
|
18,339
|
|
15,980
|
|
|
14,415
|
|
2,897
|
|
2014
|
35,023
|
|
|
|
|
|
|
|
|
|
35,426
|
|
35,556
|
|
|
31,501
|
|
3,410
|
|
2015
|
57,194
|
|
|
|
|
|
|
|
|
|
56,171
|
|
57,314
|
|
|
48,840
|
|
4,802
|
|
2016
|
87,702
|
|
|
|
|
|
|
|
|
|
85,530
|
|
84,862
|
|
|
70,769
|
|
4,829
|
|
2017
|
84,197
|
|
|
|
|
|
|
|
|
|
84,197
|
|
84,197
|
|
|
84,197
|
|
1
|
|
2018
|
117,734
|
|
|
|
|
|
|
|
|
|
117,734
|
|
117,734
|
|
|
117,734
|
|
1
|
|
2019
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
2,045
|
|
|
—
|
|
189
|
|
|
$
|
413,202
|
|
|
|
|
|
|
|
|
|
|
$
|
410,824
|
|
|
$
|
378,727
|
|
28,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
|
|
|
|
|
2019
(unaudited)
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
|
|
|
|
|
$
|
607
|
|
$
|
696
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
22
|
|
23
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
22
|
|
63
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
458
|
|
572
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
3,080
|
|
3,443
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
3,549
|
|
6,325
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
7,337
|
|
12,137
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,386
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
387,438
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
|
|
|
|
|
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
256,228
|
|
|
|
|
|
|
|
|
|
|
$
|
169,601
|
|
|
$
|
91,688
|
|
47
|
|
2011
|
26,488
|
|
|
|
|
|
|
|
|
|
|
26,983
|
|
|
25,162
|
|
36
|
|
2012
|
58,128
|
|
|
|
|
|
|
|
|
|
|
58,241
|
|
|
53,749
|
|
74
|
|
2013
|
68,683
|
|
|
|
|
|
|
|
|
|
|
63,922
|
|
|
47,944
|
|
140
|
|
2014
|
100,054
|
|
|
|
|
|
|
|
|
|
|
102,600
|
|
|
83,249
|
|
201
|
|
2015
|
161,383
|
|
|
|
|
|
|
|
|
|
|
161,352
|
|
|
113,476
|
|
384
|
|
2016
|
210,661
|
|
|
|
|
|
|
|
|
|
|
205,305
|
|
|
120,481
|
|
816
|
|
2017
|
316,751
|
|
|
|
|
|
|
|
|
|
|
342,330
|
|
|
168,832
|
|
1,770
|
|
2018
|
432,590
|
|
|
|
|
|
|
|
|
|
|
575,706
|
|
|
305,471
|
|
3,108
|
|
2019
|
344,495
|
|
|
|
|
|
|
|
|
|
|
343,168
|
|
|
301,463
|
|
1,351
|
|
2020
|
166,946
|
|
|
|
|
|
|
|
|
|
|
168,091
|
|
|
144,090
|
|
1,481
|
|
|
$
|
2,142,407
|
|
|
|
|
|
|
|
|
|
|
$
|
2,217,299
|
|
|
$
|
1,455,605
|
|
9,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
|
|
|
|
|
|
$
|
2,310
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
54
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
601
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
4,283
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
5,975
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
12,253
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
33,985
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
73,001
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
111,871
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
1,509
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
7,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
253,537
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
1,963,762
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2020 - General Casualty
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
|
|
|
|
|
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
43,511
|
|
|
|
|
|
|
|
|
|
|
$
|
43,849
|
|
|
$
|
36,455
|
|
36
|
|
2011
|
26,434
|
|
|
|
|
|
|
|
|
|
|
26,928
|
|
|
25,133
|
|
29
|
|
2012
|
55,478
|
|
|
|
|
|
|
|
|
|
|
55,591
|
|
|
51,130
|
|
60
|
|
2013
|
60,872
|
|
|
|
|
|
|
|
|
|
|
56,111
|
|
|
41,186
|
|
122
|
|
2014
|
87,620
|
|
|
|
|
|
|
|
|
|
|
90,182
|
|
|
71,022
|
|
185
|
|
2015
|
140,583
|
|
|
|
|
|
|
|
|
|
|
139,947
|
|
|
96,032
|
|
280
|
|
2016
|
142,395
|
|
|
|
|
|
|
|
|
|
|
143,156
|
|
|
100,293
|
|
394
|
|
2017
|
142,862
|
|
|
|
|
|
|
|
|
|
|
137,097
|
|
|
112,135
|
|
439
|
|
2018
|
141,803
|
|
|
|
|
|
|
|
|
|
|
138,267
|
|
|
133,942
|
|
316
|
|
2019
|
202,521
|
|
|
|
|
|
|
|
|
|
|
201,174
|
|
|
179,284
|
|
388
|
|
2020
|
83,021
|
|
|
|
|
|
|
|
|
|
|
82,598
|
|
|
77,737
|
|
338
|
|
|
$
|
1,127,100
|
|
|
|
|
|
|
|
|
|
|
$
|
1,114,900
|
|
|
$
|
924,349
|
|
2,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
|
|
|
|
|
|
$
|
522
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
54
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
601
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
3,258
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
5,983
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
10,230
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
9,125
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
4,149
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
400
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
203
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
2,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,992
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
1,077,908
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2020 - Motor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
|
|
|
|
|
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
—
|
|
2011
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
2012
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
2013
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
2014
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
2015
|
2,397
|
|
|
|
|
|
|
|
|
|
|
3,018
|
|
|
603
|
|
19
|
|
2016
|
48,505
|
|
|
|
|
|
|
|
|
|
|
42,420
|
|
|
2,779
|
|
221
|
|
2017
|
154,070
|
|
|
|
|
|
|
|
|
|
|
185,445
|
|
|
38,279
|
|
1,099
|
|
2018
|
250,028
|
|
|
|
|
|
|
|
|
|
|
397,413
|
|
|
145,623
|
|
2,204
|
|
2019
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
2020
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
|
$
|
455,000
|
|
|
|
|
|
|
|
|
|
|
$
|
628,296
|
|
|
$
|
187,284
|
|
3,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
2,012
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
24,804
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
68,712
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
110,447
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205,975
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
422,321
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Business Acquired and Contracts Incepting in the Year Ended December 31, 2020 - Professional Indemnity/Directors & Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
Accident Year
|
Total Net Reserves Acquired
|
|
|
|
|
|
|
|
|
|
2020
|
|
IBNR
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
4,680
|
|
|
|
|
|
|
|
|
|
|
$
|
4,678
|
|
|
$
|
4,679
|
|
1
|
|
2011
|
44
|
|
|
|
|
|
|
|
|
|
|
44
|
|
|
44
|
|
3
|
|
2012
|
2,593
|
|
|
|
|
|
|
|
|
|
|
2,593
|
|
|
2,584
|
|
4
|
|
2013
|
7,791
|
|
|
|
|
|
|
|
|
|
|
7,791
|
|
|
6,745
|
|
6
|
|
2014
|
11,949
|
|
|
|
|
|
|
|
|
|
|
11,949
|
|
|
11,947
|
|
4
|
|
2015
|
16,120
|
|
|
|
|
|
|
|
|
|
|
16,120
|
|
|
15,769
|
|
4
|
|
2016
|
16,259
|
|
|
|
|
|
|
|
|
|
|
16,216
|
|
|
16,053
|
|
9
|
|
2017
|
17,212
|
|
|
|
|
|
|
|
|
|
|
17,206
|
|
|
16,906
|
|
41
|
|
2018
|
25,323
|
|
|
|
|
|
|
|
|
|
|
25,290
|
|
|
19,209
|
|
115
|
|
2019
|
99,460
|
|
|
|
|
|
|
|
|
|
|
99,350
|
|
|
92,944
|
|
135
|
|
2020
|
34,548
|
|
|
|
|
|
|
|
|
|
|
34,757
|
|
|
30,144
|
|
79
|
|
|
$
|
235,979
|
|
|
|
|
|
|
|
|
|
|
$
|
235,994
|
|
|
$
|
217,024
|
|
401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
Accident Year
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
2010 and Prior
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
1,025
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
475
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
410
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
1,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,060
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
232,934
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Annual Historical Duration of Claims
The following is unaudited supplementary information, which presents the annual percentage payout since the year of acquisition, by year of acquisition and significant line of business within each acquisition year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Percentage Payout of Incurred Losses since Year of Acquisition, Net of Reinsurance
|
Year of Acquisition
|
Year 1
|
Year 2
|
Year 3
|
Year 4
|
Year 5
|
Year 6
|
Year 7
|
Year 8
|
Year 9
|
Year 10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 - All lines of business
|
25.68
|
%
|
17.45
|
%
|
(3.59)
|
%
|
(28.95)
|
%
|
(2.12)
|
%
|
3.57
|
%
|
(3.49)
|
%
|
4.99
|
%
|
11.18
|
%
|
8.86
|
%
|
2012 - All lines of business
|
1.30
|
%
|
26.42
|
%
|
16.71
|
%
|
12.48
|
%
|
10.00
|
%
|
4.47
|
%
|
5.48
|
%
|
4.17
|
%
|
2.12
|
%
|
|
2013 - All lines of business
|
25.96
|
%
|
21.67
|
%
|
15.93
|
%
|
11.01
|
%
|
6.15
|
%
|
3.89
|
%
|
2.24
|
%
|
0.32
|
%
|
|
|
2014 - All lines of business
|
33.84
|
%
|
24.15
|
%
|
11.11
|
%
|
8.07
|
%
|
3.74
|
%
|
1.65
|
%
|
1.10
|
%
|
|
|
|
2015 - All lines of business
|
17.33
|
%
|
17.09
|
%
|
12.84
|
%
|
9.80
|
%
|
7.69
|
%
|
4.65
|
%
|
|
|
|
|
2015 - Workers' compensation
|
13.72
|
%
|
17.09
|
%
|
12.73
|
%
|
9.73
|
%
|
6.71
|
%
|
4.27
|
%
|
|
|
|
|
2016 - All lines of business
|
7.67
|
%
|
9.18
|
%
|
7.99
|
%
|
8.41
|
%
|
6.86
|
%
|
|
|
|
|
|
2016 - Workers' Compensation
|
10.33
|
%
|
8.96
|
%
|
7.09
|
%
|
9.89
|
%
|
8.22
|
%
|
|
|
|
|
|
2017 - All lines of business
|
8.04
|
%
|
7.64
|
%
|
6.71
|
%
|
6.11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 - All lines of business
|
12.86
|
%
|
25.40
|
%
|
12.00
|
%
|
|
|
|
|
|
|
|
2018 - General Casualty
|
11.31
|
%
|
21.69
|
%
|
17.77
|
%
|
|
|
|
|
|
|
|
2018 - Workers' Compensation
|
2.03
|
%
|
19.49
|
%
|
10.03
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 - Professional Indemnity/Directors & Officers
|
19.55
|
%
|
14.40
|
%
|
5.34
|
%
|
|
|
|
|
|
|
|
2018 - Motor
|
11.08
|
%
|
38.47
|
%
|
17.61
|
%
|
|
|
|
|
|
|
|
2019 - All lines of business
|
11.11
|
%
|
12.68
|
%
|
|
|
|
|
|
|
|
|
2019 - General Casualty
|
8.82
|
%
|
7.43
|
%
|
|
|
|
|
|
|
|
|
2019 - Workers' Compensation
|
3.67
|
%
|
2.02
|
%
|
|
|
|
|
|
|
|
|
2020 - All lines of business
|
11.43
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 - General Casualty
|
3.32
|
%
|
|
|
|
|
|
|
|
|
|
2020 - Motor
|
32.78
|
%
|
|
|
|
|
|
|
|
|
|
2020 - Professional Indemnity/Directors & Officers
|
1.30
|
%
|
|
|
|
|
|
|
|
|
|
The negative payout percentages in the table above for years 3, 4, 5, and 7 within the 2011 year of acquisition were primarily due to ceded paid losses exceeding the assumed paid losses as a result of commutations completed with several reinsurers covering the exposures assumed by one of our reinsurance subsidiaries that we acquired in 2011. For the specific years referenced above, we collected more paid recoveries from our reinsurers than the losses we paid on the assumed exposures, and as such, the calculated annual payout percentages were negative.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Atrium (Classified as held-for-sale as of December 31, 2020)
The table below provides a reconciliation of the beginning and ending liability for losses and LAE for the years ended December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Balance as of January 1
|
$
|
231,672
|
|
|
$
|
241,284
|
|
|
$
|
240,873
|
|
Less: reinsurance reserves recoverable
|
28,816
|
|
|
38,768
|
|
|
40,531
|
|
|
|
|
|
|
|
Less: cumulative effect of change in accounting principal on allowance for estimated uncollectible reinsurance (1)
|
851
|
|
|
—
|
|
|
—
|
|
Net balance as of January 1
|
202,005
|
|
|
202,516
|
|
|
200,342
|
|
Net incurred losses and LAE:
|
|
|
|
|
|
Current period
|
93,471
|
|
|
85,027
|
|
|
83,627
|
|
Prior periods
|
(6,245)
|
|
|
(7,751)
|
|
|
(13,817)
|
|
Total net incurred losses and LAE
|
87,226
|
|
|
77,276
|
|
|
69,810
|
|
Net paid losses:
|
|
|
|
|
|
Current period
|
(33,724)
|
|
|
(34,617)
|
|
|
(35,537)
|
|
Prior periods
|
(40,196)
|
|
|
(43,572)
|
|
|
(28,969)
|
|
Total net paid losses
|
(73,920)
|
|
|
(78,189)
|
|
|
(64,506)
|
|
Effect of exchange rate movement
|
1,497
|
|
|
1,253
|
|
|
(3,130)
|
|
Reclassification to assets and liabilities held-for-sale
|
(216,808)
|
|
|
—
|
|
|
—
|
|
Net balance as of December 31
|
—
|
|
|
202,856
|
|
|
202,516
|
|
Plus: reinsurance reserves recoverable (2)
|
—
|
|
|
28,816
|
|
|
38,768
|
|
Balance as of December 31
|
$
|
—
|
|
|
$
|
231,672
|
|
|
$
|
241,284
|
|
(1) The Company adopted ASU 2016-13 and the related amendments on January 1, 2020. Refer to Note 2 - "Significant Accounting Policies" for further details.
(2) Net of allowance for estimated uncollectible reinsurance.
Net incurred losses and LAE in the Atrium segment for the years ended December 31, 2020, December 31, 2019 and 2018 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Prior
Period
|
|
Current
Period
|
|
Total
|
|
Prior
Period
|
|
Current
Period
|
|
Total
|
|
Prior
Period
|
|
Current
Period
|
|
Total
|
Net losses paid
|
$
|
40,196
|
|
|
$
|
33,724
|
|
|
$
|
73,920
|
|
|
$
|
43,572
|
|
|
$
|
34,617
|
|
|
$
|
78,189
|
|
|
$
|
28,969
|
|
|
$
|
35,537
|
|
|
$
|
64,506
|
|
Net change in case and LAE reserves(1)
|
(14,145)
|
|
|
21,390
|
|
|
7,245
|
|
|
(13,278)
|
|
|
16,812
|
|
|
3,534
|
|
|
(10,161)
|
|
|
16,492
|
|
|
6,331
|
|
Net change in IBNR reserves(2)
|
(31,773)
|
|
|
38,434
|
|
|
6,661
|
|
|
(38,380)
|
|
|
33,598
|
|
|
(4,782)
|
|
|
(27,507)
|
|
|
31,598
|
|
|
4,091
|
|
Increase (reduction) in estimates of net ultimate losses
|
(5,722)
|
|
|
93,548
|
|
|
87,826
|
|
|
(8,086)
|
|
|
85,027
|
|
|
76,941
|
|
|
(8,699)
|
|
|
83,627
|
|
|
74,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (reduction) in provisions for unallocated LAE (3)
|
48
|
|
|
(77)
|
|
|
(29)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Amortization of fair value adjustments (4)
|
(571)
|
|
|
—
|
|
|
(571)
|
|
|
335
|
|
|
—
|
|
|
335
|
|
|
(5,118)
|
|
|
—
|
|
|
(5,118)
|
|
Net incurred losses and LAE
|
$
|
(6,245)
|
|
|
$
|
93,471
|
|
|
$
|
87,226
|
|
|
$
|
(7,751)
|
|
|
$
|
85,027
|
|
|
$
|
77,276
|
|
|
$
|
(13,817)
|
|
|
$
|
83,627
|
|
|
$
|
69,810
|
|
(1)Comprises the movement during the year in specific case reserve liabilities as a result of claims settlements or changes advised to us by our policyholders and attorneys, less changes in case reserves recoverable advised by us to our reinsurers as a result of the settlement or movement of assumed claims.
(2)Represents the gross change in our actuarial estimates of IBNR, less amounts recoverable.
(3) Represents the change in the estimate of the total future costs to administer the claims.
(4) Relates to the amortization of fair value adjustments associated with the acquisition of companies.
The increase in net incurred losses and LAE of $10.0 million in 2020 was primarily driven by $18.4 million of losses related to the COVID-19 pandemic, primarily from accident and health business, partially offset by overall improved loss experience, within other lines of business and lower catastrophe activity on the business we write.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table provides a breakdown of the gross and net losses and LAE reserves by line of business and the fair value adjustments recorded on the acquired gross and net losses and LAE reserves and ULAE as of December 31, 2019 for the Atrium segment. The breakdown as of December 31, 2020 has not been disclosed below since we have classified the Atrium segment as held-for-sale as discussed in Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations."
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
Gross
|
|
Net
|
|
OLR
|
|
IBNR
|
|
Total
|
|
OLR
|
|
IBNR
|
|
Total
|
|
(in thousands of U.S. dollars)
|
Marine, Aviation and Transit
|
$
|
24,668
|
|
|
$
|
34,156
|
|
|
$
|
58,824
|
|
|
$
|
21,012
|
|
|
$
|
24,829
|
|
|
$
|
45,841
|
|
Binding Authorities
|
31,507
|
|
|
54,039
|
|
|
85,546
|
|
|
29,590
|
|
|
51,984
|
|
|
81,574
|
|
Reinsurance
|
18,385
|
|
|
29,533
|
|
|
47,918
|
|
|
16,209
|
|
|
23,338
|
|
|
39,547
|
|
Accident and Health
|
5,460
|
|
|
7,880
|
|
|
13,340
|
|
|
4,735
|
|
|
7,469
|
|
|
12,204
|
|
Non-Marine Direct and Facultative
|
9,121
|
|
|
10,935
|
|
|
20,056
|
|
|
8,584
|
|
|
9,637
|
|
|
18,221
|
|
Total
|
$
|
89,141
|
|
|
$
|
136,543
|
|
|
$
|
225,684
|
|
|
$
|
80,130
|
|
|
$
|
117,257
|
|
|
$
|
197,387
|
|
Fair value adjustments
|
|
|
|
|
3,700
|
|
|
|
|
|
|
3,181
|
|
ULAE
|
|
|
|
|
2,288
|
|
|
|
|
|
|
2,288
|
|
Total
|
|
|
|
|
$
|
231,672
|
|
|
|
|
|
|
$
|
202,856
|
|
StarStone
The table below provides a reconciliation of the beginning and ending liability for losses and LAE for the years ended December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Balance as of January 1
|
$
|
1,318,294
|
|
|
$
|
1,247,989
|
|
|
$
|
910,143
|
|
Less: reinsurance reserves recoverable
|
355,194
|
|
|
303,381
|
|
|
275,012
|
|
|
|
|
|
|
|
Less: cumulative effect of change in accounting principal on allowance for estimated uncollectible reinsurance (1)
|
495
|
|
|
—
|
|
|
—
|
|
Net balance as of January 1
|
962,605
|
|
|
944,608
|
|
|
635,131
|
|
Net incurred losses and LAE:
|
|
|
|
|
|
Current period
|
263,562
|
|
|
354,884
|
|
|
422,191
|
|
Prior periods
|
3,176
|
|
|
114,356
|
|
|
120,889
|
|
Total net incurred losses and LAE
|
266,738
|
|
|
469,240
|
|
|
543,080
|
|
Net paid losses:
|
|
|
|
|
|
Current period
|
(26,831)
|
|
|
(75,458)
|
|
|
(137,390)
|
|
Prior periods
|
(300,037)
|
|
|
(375,377)
|
|
|
(289,981)
|
|
Total net paid losses
|
(326,868)
|
|
|
(450,835)
|
|
|
(427,371)
|
|
Effect of exchange rate movement
|
23,421
|
|
|
87
|
|
|
(9,481)
|
|
Acquired on purchase of subsidiaries
|
—
|
|
|
—
|
|
|
192,981
|
|
Assumed business
|
—
|
|
|
—
|
|
|
10,268
|
|
Ceded business
|
—
|
|
|
—
|
|
|
—
|
|
Net balance as of December 31
|
925,896
|
|
|
963,100
|
|
|
944,608
|
|
Plus: reinsurance reserves recoverable (2)
|
402,060
|
|
|
355,194
|
|
|
303,381
|
|
Balance as of December 31
|
$
|
1,327,956
|
|
|
$
|
1,318,294
|
|
|
$
|
1,247,989
|
|
(1) The Company adopted ASU 2016-13 and the related amendments on January 1, 2020. Refer to Note 2 - "Significant Accounting Policies" for further details.
(2) Net of allowance for estimated uncollectible reinsurance.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Net incurred losses and LAE in the StarStone segment for the years ended December 31, 2020, December 31, 2019 and 2018 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Prior
Period
|
|
Current
Period
|
|
Total
|
|
Prior
Period
|
|
Current
Period
|
|
Total
|
|
Prior
Period
|
|
Current
Period
|
|
Total
|
Net losses paid
|
$
|
300,037
|
|
|
$
|
26,831
|
|
|
$
|
326,868
|
|
|
$
|
375,377
|
|
|
$
|
75,458
|
|
|
$
|
450,835
|
|
|
$
|
289,981
|
|
|
$
|
137,390
|
|
|
$
|
427,371
|
|
Net change in case and LAE reserves (1)
|
(130,502)
|
|
|
35,458
|
|
|
(95,044)
|
|
|
(95,183)
|
|
|
90,497
|
|
|
(4,686)
|
|
|
(77,821)
|
|
|
141,682
|
|
|
63,861
|
|
Net change in IBNR reserves (2)
|
(165,909)
|
|
|
183,563
|
|
|
17,654
|
|
|
(163,340)
|
|
|
185,361
|
|
|
22,021
|
|
|
(87,963)
|
|
|
134,464
|
|
|
46,501
|
|
Increase in estimates of net ultimate losses
|
3,626
|
|
|
245,852
|
|
|
249,478
|
|
|
116,854
|
|
|
351,316
|
|
|
468,170
|
|
|
124,197
|
|
|
413,536
|
|
|
537,733
|
|
Increase (reduction) in provisions for unallocated LAE (3)
|
(466)
|
|
|
17,710
|
|
|
17,244
|
|
|
(2,666)
|
|
|
3,568
|
|
|
902
|
|
|
(3,042)
|
|
|
8,655
|
|
|
5,613
|
|
Amortization of deferred charge assets and deferred gain liabilities (4)
|
606
|
|
|
—
|
|
|
606
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Amortization of fair value adjustments (5)
|
(590)
|
|
|
—
|
|
|
(590)
|
|
|
168
|
|
|
—
|
|
|
168
|
|
|
(266)
|
|
|
—
|
|
|
(266)
|
|
Net incurred losses and LAE
|
$
|
3,176
|
|
|
$
|
263,562
|
|
|
$
|
266,738
|
|
|
$
|
114,356
|
|
|
$
|
354,884
|
|
|
$
|
469,240
|
|
|
$
|
120,889
|
|
|
$
|
422,191
|
|
|
$
|
543,080
|
|
(1)Comprises the movement during the year in specific case reserve liabilities as a result of claims settlements or changes advised to us by our policyholders and attorneys, less changes in case reserves recoverable advised by us to our reinsurers as a result of the settlement or movement of assumed claims.
(2) Represents the gross change in our actuarial estimates of IBNR, less amounts recoverable.
(3) Represents the change in the estimate of the total future costs to administer the claims.
(4) Relates to the amortization of deferred charge assets and deferred gain liabilities on retroactive reinsurance contracts.
(5) Relates to the amortization of fair value adjustments associated with the acquisition of companies.
The decrease in net incurred losses and LAE of $202.5 million in 2020 was mainly driven by our strategy to exit certain lines of business in 2019 and StarStone International being placed into an orderly run-off in 2020; partially offset by $52.8 million of losses relating to the COVID-19 pandemic. The decrease in net incurred losses and LAE of $73.8 million in 2019 was primarily driven by our strategy to exit certain lines of business.
Disclosures of Incurred and Paid Loss Development, IBNR, Claims Counts and Payout Percentages
The following tables provide a breakdown of the gross and net losses and LAE reserves by line of business and the fair value adjustments recorded on the acquired gross and net losses and LAE reserves and ULAE as of December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Gross
|
|
Net
|
|
OLR
|
|
IBNR
|
|
Total
|
|
OLR
|
|
IBNR
|
|
Total
|
|
(in thousands of U.S. dollars)
|
Casualty
|
$
|
115,295
|
|
|
$
|
276,941
|
|
|
$
|
392,236
|
|
|
$
|
98,721
|
|
|
$
|
232,433
|
|
|
$
|
331,154
|
|
Marine
|
142,631
|
|
|
174,015
|
|
|
316,646
|
|
|
119,628
|
|
|
132,482
|
|
|
252,110
|
|
Property
|
322,735
|
|
|
117,240
|
|
|
439,975
|
|
|
141,089
|
|
|
81,459
|
|
|
222,548
|
|
Aerospace
|
84,515
|
|
|
36,178
|
|
|
120,693
|
|
|
42,100
|
|
|
18,240
|
|
|
60,340
|
|
Workers' Compensation
|
12,044
|
|
|
11,589
|
|
|
23,633
|
|
|
12,044
|
|
|
11,589
|
|
|
23,633
|
|
Total
|
$
|
677,220
|
|
|
$
|
615,963
|
|
|
$
|
1,293,183
|
|
|
$
|
413,582
|
|
|
$
|
476,203
|
|
|
$
|
889,785
|
|
Fair value adjustments
|
|
|
|
|
(329)
|
|
|
|
|
|
|
1,010
|
|
ULAE
|
|
|
|
|
35,102
|
|
|
|
|
|
|
35,101
|
|
Total
|
|
|
|
|
$
|
1,327,956
|
|
|
|
|
|
|
$
|
925,896
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
Gross
|
|
Net
|
|
OLR
|
|
IBNR
|
|
Total
|
|
OLR
|
|
IBNR
|
|
Total
|
|
(in thousands of U.S. dollars)
|
Casualty
|
$
|
121,945
|
|
|
$
|
210,969
|
|
|
$
|
332,914
|
|
|
$
|
108,543
|
|
|
$
|
204,800
|
|
|
$
|
313,343
|
|
Marine
|
189,355
|
|
|
161,379
|
|
|
350,734
|
|
|
158,252
|
|
|
128,242
|
|
|
286,494
|
|
Property
|
341,677
|
|
|
131,596
|
|
|
473,273
|
|
|
150,559
|
|
|
87,653
|
|
|
238,212
|
|
Aerospace
|
75,764
|
|
|
32,325
|
|
|
108,089
|
|
|
47,256
|
|
|
22,389
|
|
|
69,645
|
|
Workers' Compensation
|
15,089
|
|
|
19,865
|
|
|
34,954
|
|
|
15,089
|
|
|
19,865
|
|
|
34,954
|
|
Total
|
$
|
743,830
|
|
|
$
|
556,134
|
|
|
$
|
1,299,964
|
|
|
$
|
479,699
|
|
|
$
|
462,949
|
|
|
$
|
942,648
|
|
Fair value adjustments
|
|
|
|
|
(522)
|
|
|
|
|
|
|
1,600
|
|
ULAE
|
|
|
|
|
18,852
|
|
|
|
|
|
|
18,852
|
|
Total
|
|
|
|
|
$
|
1,318,294
|
|
|
|
|
|
|
$
|
963,100
|
|
The following tables set forth information about incurred and paid loss development, total IBNR reserves and cumulative loss frequency related to all the individual lines of business within the StarStone segment as of December 31, 2020. The information related to incurred and paid loss development for the years ended December 31, 2014 through 2019 is presented as supplementary information and is therefore unaudited. The information within the tables below is presented on a prospective basis from the date of our acquisition of StarStone on April 1, 2014 since providing pre-acquisition incurred and paid losses by accident year for years prior to 2014 was determined to be impracticable due to significant data limitations. Following our sale of StarStone U.S. to Core Specialty, which was completed on November 30, 2020, the incurred and paid loss development tables presented below for all of the individual lines of business within the StarStone segment have been restated to exclude the historical incurred and paid loss development related to StarStone U.S.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Casualty
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
For The Years Ended December 31,
|
|
Accident Year
|
2014 (unaudited)
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
IBNR(1)
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
100,449
|
|
$
|
101,217
|
|
$
|
101,444
|
|
$
|
101,801
|
|
$
|
102,539
|
|
$
|
102,317
|
|
$
|
102,661
|
|
|
$
|
19
|
|
4,322
|
2011
|
16,244
|
|
18,740
|
|
19,681
|
|
19,103
|
|
27,703
|
|
27,859
|
|
28,027
|
|
|
429
|
|
2,962
|
2012
|
39,797
|
|
33,853
|
|
30,788
|
|
28,482
|
|
33,511
|
|
36,159
|
|
37,072
|
|
|
3,418
|
|
3,521
|
2013
|
51,458
|
|
47,304
|
|
54,282
|
|
53,493
|
|
56,145
|
|
63,323
|
|
67,638
|
|
|
9,044
|
|
4,821
|
2014
|
66,094
|
|
67,141
|
|
67,461
|
|
66,559
|
|
66,585
|
|
75,513
|
|
72,097
|
|
|
10,495
|
|
4,863
|
2015
|
|
76,470
|
|
82,050
|
|
81,685
|
|
92,904
|
|
99,425
|
|
101,191
|
|
|
13,037
|
|
4,323
|
2016
|
|
|
92,406
|
|
95,726
|
|
111,020
|
|
135,670
|
|
128,139
|
|
|
25,293
|
|
3,825
|
2017
|
|
|
|
100,585
|
|
135,743
|
|
161,288
|
|
166,472
|
|
|
34,822
|
|
3,899
|
2018
|
|
|
|
|
87,781
|
|
101,381
|
|
106,014
|
|
|
39,329
|
|
2,929
|
2019
|
|
|
|
|
|
42,595
|
|
59,902
|
|
|
23,758
|
|
2,581
|
2020
|
|
|
|
|
|
|
98,738
|
|
|
72,789
|
|
1,582
|
|
|
|
|
|
|
Total
|
$
|
967,951
|
|
|
$
|
232,433
|
|
39,628
|
|
(1) Total of IBNR plus expected development on reported losses.
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
For The Years Ended December 31,
|
|
|
|
Accident Year
|
2014 (unaudited)
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
|
|
2010 and Prior
|
$
|
99,643
|
|
$
|
101,181
|
|
$
|
101,326
|
|
$
|
101,712
|
|
$
|
101,783
|
|
$
|
101,813
|
|
$
|
101,886
|
|
|
|
|
2011
|
12,394
|
|
15,941
|
|
18,354
|
|
18,760
|
|
27,385
|
|
27,401
|
|
27,426
|
|
|
|
|
2012
|
13,336
|
|
20,634
|
|
22,746
|
|
23,711
|
|
32,644
|
|
32,666
|
|
32,706
|
|
|
|
|
2013
|
16,373
|
|
22,131
|
|
35,799
|
|
38,866
|
|
42,123
|
|
48,898
|
|
52,333
|
|
|
|
|
2014
|
4,318
|
|
16,141
|
|
27,043
|
|
36,802
|
|
46,654
|
|
49,571
|
|
51,949
|
|
|
|
|
2015
|
|
6,439
|
|
21,503
|
|
36,971
|
|
50,598
|
|
69,948
|
|
75,875
|
|
|
|
|
2016
|
|
|
4,206
|
|
32,864
|
|
59,074
|
|
76,175
|
|
92,223
|
|
|
|
|
2017
|
|
|
|
7,712
|
|
41,896
|
|
87,902
|
|
114,062
|
|
|
|
|
2018
|
|
|
|
|
18,747
|
|
34,762
|
|
54,000
|
|
|
|
|
2019
|
|
|
|
|
|
4,721
|
|
26,235
|
|
|
|
|
2020
|
|
|
|
|
|
|
8,102
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
636,797
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
331,154
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The reconciliation of incurred and paid loss development to the liability for unpaid losses and LAE as presented in the tables above for the year ended December 31, 2020 is set forth below:
|
|
|
|
|
|
|
2020
|
Liabilities for unpaid losses and allocated LAE, net of reinsurance
|
$
|
331,154
|
|
Reinsurance recoverable on unpaid losses
|
61,082
|
|
Gross liability for unpaid losses and LAE before unallocated loss adjustment expenses and fair value adjustments
|
$
|
392,236
|
|
The following is unaudited supplementary information for average annual historical duration of claims:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance
|
|
Year 1
|
Year 2
|
Year 3
|
Year 4
|
Year 5
|
Year 6
|
Year 7
|
Year 8
|
Year 9
|
Year 10
|
Casualty
|
7.72
|
%
|
20.87
|
%
|
17.53
|
%
|
15.99
|
%
|
9.96
|
%
|
4.35
|
%
|
7.85
|
%
|
9.00
|
%
|
0.06
|
%
|
0.08
|
%
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Marine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
For The Years Ended December 31,
|
|
Accident Year
|
2014 (unaudited)
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
IBNR(1)
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
50,395
|
|
$
|
47,336
|
|
$
|
47,194
|
|
$
|
47,287
|
|
$
|
47,175
|
|
$
|
47,213
|
|
$
|
46,828
|
|
|
$
|
62
|
|
3,037
|
2011
|
29,890
|
|
28,190
|
|
27,767
|
|
27,824
|
|
28,162
|
|
27,956
|
|
28,075
|
|
|
229
|
|
1,966
|
2012
|
48,204
|
|
52,010
|
|
51,710
|
|
50,435
|
|
51,231
|
|
49,176
|
|
48,706
|
|
|
307
|
|
2,431
|
2013
|
63,442
|
|
55,981
|
|
53,783
|
|
54,790
|
|
58,209
|
|
64,399
|
|
63,323
|
|
|
926
|
|
2,202
|
2014
|
50,959
|
|
54,370
|
|
49,449
|
|
56,049
|
|
51,642
|
|
51,062
|
|
49,676
|
|
|
1,003
|
|
3,944
|
2015
|
|
70,492
|
|
70,160
|
|
80,196
|
|
81,864
|
|
83,646
|
|
80,438
|
|
|
1,612
|
|
5,606
|
2016
|
|
|
80,830
|
|
83,187
|
|
88,459
|
|
88,023
|
|
89,309
|
|
|
4,150
|
|
6,658
|
2017
|
|
|
|
125,976
|
|
158,450
|
|
166,304
|
|
162,629
|
|
|
7,959
|
|
8,352
|
2018
|
|
|
|
|
164,461
|
|
164,042
|
|
161,831
|
|
|
16,444
|
|
10,123
|
2019
|
|
|
|
|
|
152,423
|
|
158,919
|
|
|
39,463
|
|
7,015
|
2020
|
|
|
|
|
|
|
84,427
|
|
|
60,327
|
|
2,703
|
|
|
|
|
|
|
Total
|
$
|
974,161
|
|
|
$
|
132,482
|
|
54,037
|
(1) Total of IBNR plus expected development on reported losses.
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
For The Years Ended December 31,
|
|
|
|
Accident Year
|
2014 (unaudited)
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
|
|
2010 and Prior
|
$
|
44,212
|
|
$
|
46,360
|
|
$
|
46,464
|
|
$
|
46,470
|
|
$
|
46,563
|
|
$
|
46,682
|
|
$
|
46,709
|
|
|
|
|
2011
|
24,599
|
|
25,686
|
|
26,688
|
|
26,942
|
|
27,057
|
|
27,082
|
|
27,285
|
|
|
|
|
2012
|
38,570
|
|
42,787
|
|
44,681
|
|
45,498
|
|
45,951
|
|
46,178
|
|
47,452
|
|
|
|
|
2013
|
29,436
|
|
38,880
|
|
43,027
|
|
45,575
|
|
47,698
|
|
57,539
|
|
62,037
|
|
|
|
|
2014
|
11,037
|
|
25,306
|
|
33,076
|
|
37,594
|
|
43,323
|
|
44,727
|
|
44,740
|
|
|
|
|
2015
|
|
10,234
|
|
30,143
|
|
50,376
|
|
56,557
|
|
59,918
|
|
62,401
|
|
|
|
|
2016
|
|
|
11,669
|
|
41,875
|
|
58,438
|
|
73,778
|
|
76,534
|
|
|
|
|
2017
|
|
|
|
23,986
|
|
68,233
|
|
107,787
|
|
125,335
|
|
|
|
|
2018
|
|
|
|
|
40,698
|
|
103,930
|
|
129,632
|
|
|
|
|
2019
|
|
|
|
|
|
33,196
|
|
84,414
|
|
|
|
|
2020
|
|
|
|
|
|
|
15,512
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
722,051
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
252,110
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The reconciliation of incurred and paid loss development to the liability for unpaid losses and LAE as presented in the tables above for the year ended December 31, 2020 is set forth below:
|
|
|
|
|
|
|
2020
|
Liabilities for unpaid losses and allocated LAE, net of reinsurance
|
$
|
252,110
|
|
Reinsurance recoverable on unpaid losses
|
64,536
|
|
Gross liability for unpaid losses and LAE before unallocated loss adjustment expenses and fair value adjustments
|
$
|
316,646
|
|
The following is unaudited supplementary information for average annual historical duration of claims:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance
|
|
Year 1
|
Year 2
|
Year 3
|
Year 4
|
Year 5
|
Year 6
|
Year 7
|
Year 8
|
Year 9
|
Year 10
|
Marine
|
18.17
|
%
|
30.97
|
%
|
19.08
|
%
|
9.99
|
%
|
5.02
|
%
|
2.46
|
%
|
3.48
|
%
|
2.04
|
%
|
0.99
|
%
|
0.39
|
%
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
|
For The Years Ended December 31,
|
|
Accident Year
|
|
2014 (unaudited)
|
|
2015 (unaudited)
|
|
2016 (unaudited)
|
|
2017 (unaudited)
|
|
2018 (unaudited)
|
|
2019 (unaudited)
|
|
2020
|
|
IBNR(1)
|
|
Cumulative Number of Claims
|
2010 and Prior
|
|
$
|
190,649
|
|
|
$
|
188,537
|
|
|
$
|
187,286
|
|
|
$
|
187,846
|
|
|
$
|
188,778
|
|
|
$
|
189,079
|
|
|
$
|
190,667
|
|
|
$
|
13
|
|
|
4,485
|
2011
|
|
91,712
|
|
|
90,272
|
|
|
90,328
|
|
|
90,018
|
|
|
89,918
|
|
|
90,259
|
|
|
90,406
|
|
|
88
|
|
|
1,635
|
2012
|
|
66,137
|
|
|
62,119
|
|
|
61,243
|
|
|
62,177
|
|
|
59,201
|
|
|
59,463
|
|
|
58,247
|
|
|
133
|
|
|
1,516
|
2013
|
|
78,501
|
|
|
65,608
|
|
|
65,394
|
|
|
64,521
|
|
|
62,711
|
|
|
61,114
|
|
|
61,383
|
|
|
152
|
|
|
1,955
|
2014
|
|
59,390
|
|
|
44,130
|
|
|
43,631
|
|
|
44,081
|
|
|
41,968
|
|
|
41,226
|
|
|
40,612
|
|
|
794
|
|
|
2,125
|
2015
|
|
|
|
75,514
|
|
|
73,946
|
|
|
67,944
|
|
|
67,733
|
|
|
68,678
|
|
|
69,314
|
|
|
1,377
|
|
|
11,435
|
2016
|
|
|
|
|
|
83,622
|
|
|
91,680
|
|
|
92,038
|
|
|
91,956
|
|
|
94,450
|
|
|
1,361
|
|
|
14,167
|
2017
|
|
|
|
|
|
|
|
152,172
|
|
|
169,673
|
|
|
181,855
|
|
|
171,673
|
|
|
4,429
|
|
|
14,553
|
2018
|
|
|
|
|
|
|
|
|
|
161,507
|
|
|
172,640
|
|
|
174,137
|
|
|
11,123
|
|
|
11,891
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
116,634
|
|
|
117,009
|
|
|
22,609
|
|
|
6,166
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,147
|
|
|
39,380
|
|
|
1,338
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,139,045
|
|
|
$
|
81,459
|
|
|
71,266
|
(1) Total of IBNR plus expected development on reported losses.
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
|
|
For The Years Ended December 31,
|
|
|
|
|
Accident Year
|
|
2014 (unaudited)
|
|
2015 (unaudited)
|
|
2016 (unaudited)
|
|
2017 (unaudited)
|
|
2018 (unaudited)
|
|
2019 (unaudited)
|
|
2020
|
|
|
|
|
2010 and Prior
|
|
$
|
183,649
|
|
|
$
|
186,876
|
|
|
$
|
187,040
|
|
|
$
|
187,264
|
|
|
$
|
187,285
|
|
|
$
|
187,300
|
|
|
$
|
188,080
|
|
|
|
|
|
2011
|
|
87,937
|
|
|
89,149
|
|
|
89,662
|
|
|
89,894
|
|
|
89,894
|
|
|
89,940
|
|
|
90,110
|
|
|
|
|
|
2012
|
|
48,322
|
|
|
52,442
|
|
|
54,681
|
|
|
55,672
|
|
|
55,895
|
|
|
58,099
|
|
|
58,100
|
|
|
|
|
|
2013
|
|
31,000
|
|
|
46,556
|
|
|
51,431
|
|
|
53,548
|
|
|
59,756
|
|
|
60,916
|
|
|
61,060
|
|
|
|
|
|
2014
|
|
5,517
|
|
|
18,945
|
|
|
31,854
|
|
|
34,869
|
|
|
36,461
|
|
|
37,609
|
|
|
39,681
|
|
|
|
|
|
2015
|
|
|
|
8,756
|
|
|
25,890
|
|
|
52,799
|
|
|
61,347
|
|
|
62,237
|
|
|
62,826
|
|
|
|
|
|
2016
|
|
|
|
|
|
23,803
|
|
|
54,188
|
|
|
72,244
|
|
|
81,904
|
|
|
83,577
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
34,961
|
|
|
96,151
|
|
|
137,569
|
|
|
146,340
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
60,944
|
|
|
93,275
|
|
|
126,763
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
19,461
|
|
|
52,637
|
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
916,497
|
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
|
$
|
222,548
|
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The reconciliation of incurred and paid loss development to the liability for unpaid losses and LAE as presented in the tables above for the year ended December 31, 2020 is set forth below:
|
|
|
|
|
|
|
2020
|
Liabilities for unpaid losses and allocated LAE, net of reinsurance
|
$
|
222,548
|
|
Reinsurance recoverable on unpaid losses
|
217,427
|
|
Gross liability for unpaid losses and LAE before unallocated loss adjustment expenses and fair value adjustments
|
$
|
439,975
|
|
The following is unaudited supplementary information for average annual historical duration of claims:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance
|
|
Year 1
|
Year 2
|
Year 3
|
Year 4
|
Year 5
|
Year 6
|
Year 7
|
Year 8
|
Year 9
|
Year 10
|
Property
|
19.10
|
%
|
28.75
|
%
|
26.40
|
%
|
8.35
|
%
|
2.47
|
%
|
2.69
|
%
|
1.55
|
%
|
1.01
|
%
|
0.02
|
%
|
0.30
|
%
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Aerospace
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
For The Years Ended December 31,
|
|
Accident Year
|
2014 (unaudited)
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
IBNR(1)
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
18,439
|
|
$
|
18,083
|
|
$
|
18,393
|
|
$
|
18,906
|
|
$
|
18,962
|
|
$
|
18,759
|
|
$
|
18,693
|
|
|
$
|
36
|
|
622
|
|
2011
|
58,748
|
|
57,226
|
|
57,653
|
|
58,084
|
|
59,578
|
|
58,677
|
|
58,299
|
|
|
96
|
|
2,179
|
|
2012
|
55,293
|
|
55,087
|
|
55,870
|
|
55,823
|
|
57,044
|
|
56,771
|
|
56,907
|
|
|
186
|
|
2,375
|
|
2013
|
71,930
|
|
69,976
|
|
70,255
|
|
74,733
|
|
77,222
|
|
76,774
|
|
78,673
|
|
|
297
|
|
2,538
|
|
2014
|
65,227
|
|
53,457
|
|
53,533
|
|
52,471
|
|
54,534
|
|
48,757
|
|
45,978
|
|
|
485
|
|
2,867
|
|
2015
|
|
64,550
|
|
67,846
|
|
70,903
|
|
71,624
|
|
69,612
|
|
69,879
|
|
|
1,070
|
|
2,962
|
|
2016
|
|
|
35,923
|
|
43,371
|
|
46,832
|
|
43,991
|
|
42,954
|
|
|
1,463
|
|
2,925
|
|
2017
|
|
|
|
28,816
|
|
33,623
|
|
54,980
|
|
52,590
|
|
|
2,193
|
|
3,381
|
|
2018
|
|
|
|
|
58,573
|
|
54,969
|
|
54,831
|
|
|
3,491
|
|
3,390
|
|
2019
|
|
|
|
|
|
45,401
|
|
45,784
|
|
|
5,148
|
|
2,028
|
|
2020
|
|
|
|
|
|
|
8,732
|
|
|
3,775
|
|
357
|
|
|
|
|
|
|
|
Total
|
$
|
533,320
|
|
|
$
|
18,240
|
|
25,624
|
|
(1) Total of IBNR plus expected development on reported losses
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
For The Years Ended December 31,
|
|
|
|
Accident Year
|
2014
(unaudited)
|
2015 (unaudited)
|
2016 (unaudited)
|
2017 (unaudited)
|
2018 (unaudited)
|
2019 (unaudited)
|
2020
|
|
|
|
2010 and Prior
|
$
|
15,391
|
|
$
|
16,530
|
|
$
|
17,141
|
|
$
|
18,209
|
|
$
|
18,480
|
|
$
|
18,535
|
|
$
|
18,538
|
|
|
|
|
2011
|
53,785
|
|
55,133
|
|
55,817
|
|
56,394
|
|
56,954
|
|
57,482
|
|
57,483
|
|
|
|
|
2012
|
45,618
|
|
49,009
|
|
51,787
|
|
53,271
|
|
54,415
|
|
55,160
|
|
55,290
|
|
|
|
|
2013
|
50,725
|
|
59,639
|
|
63,226
|
|
68,574
|
|
72,573
|
|
73,309
|
|
73,923
|
|
|
|
|
2014
|
17,297
|
|
31,192
|
|
38,494
|
|
40,749
|
|
43,857
|
|
43,858
|
|
43,868
|
|
|
|
|
2015
|
|
31,417
|
|
50,844
|
|
59,342
|
|
62,522
|
|
64,811
|
|
65,630
|
|
|
|
|
2016
|
|
|
11,001
|
|
30,516
|
|
35,884
|
|
37,909
|
|
37,933
|
|
|
|
|
2017
|
|
|
|
9,000
|
|
26,857
|
|
44,582
|
|
46,134
|
|
|
|
|
2018
|
|
|
|
|
24,979
|
|
39,531
|
|
43,284
|
|
|
|
|
2019
|
|
|
|
|
|
23,294
|
|
30,210
|
|
|
|
|
2020
|
|
|
|
|
|
|
687
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
472,980
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
60,340
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The reconciliation of incurred and paid loss development to the liability for unpaid losses and LAE as presented in the tables above for the year ended December 31, 2020 is set forth below:
|
|
|
|
|
|
|
2020
|
Liabilities for unpaid losses and allocated LAE, net of reinsurance
|
$
|
60,340
|
|
Reinsurance recoverable on unpaid losses
|
60,353
|
|
Gross liability for unpaid losses and LAE before unallocated loss adjustment expenses and fair value adjustments
|
$
|
120,693
|
|
The following is unaudited supplementary information for average annual historical duration of claims:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance
|
|
Year 1
|
Year 2
|
Year 3
|
Year 4
|
Year 5
|
Year 6
|
Year 7
|
Year 8
|
Year 9
|
Year 10
|
Aerospace
|
32.80
|
%
|
29.84
|
%
|
15.40
|
%
|
4.61
|
%
|
4.31
|
%
|
2.22
|
%
|
1.93
|
%
|
1.12
|
%
|
0.48
|
%
|
0.01
|
%
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Workers' Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2020
|
|
For The Years Ended December 31,
|
|
Accident Year
|
2014
(unaudited)
|
2015
(unaudited)
|
2016
(unaudited)
|
2017
(unaudited)
|
2018
(unaudited)
|
2019
(unaudited)
|
2020
|
|
IBNR(1)
|
Cumulative Number of Claims
|
2010 and Prior
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
—
|
|
2011
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2012
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2013
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
1
|
|
1
|
|
|
—
|
|
—
|
|
2014
|
10,145
|
|
11,179
|
|
11,889
|
|
10,180
|
|
9,867
|
|
9,666
|
|
9,372
|
|
|
500
|
|
137
|
|
2015
|
|
35,735
|
|
36,078
|
|
32,567
|
|
30,742
|
|
29,757
|
|
28,768
|
|
|
1,870
|
|
259
|
|
2016
|
|
|
40,912
|
|
35,179
|
|
37,703
|
|
38,739
|
|
36,293
|
|
|
2,847
|
|
277
|
|
2017
|
|
|
|
28,188
|
|
29,931
|
|
22,900
|
|
23,320
|
|
|
3,888
|
|
295
|
|
2018
|
|
|
|
|
15,100
|
|
14,814
|
|
14,490
|
|
|
2,484
|
|
161
|
|
2019
|
|
|
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2020
|
|
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
Total
|
$
|
112,244
|
|
|
$
|
11,589
|
|
1,129
|
|
(1) Total of IBNR plus expected development on reported losses.
|
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
For The Years Ended December 31,
|
|
|
|
Accident Year
|
2014
(unaudited)
|
2015
(unaudited)
|
2016
(unaudited)
|
2017
(unaudited)
|
2018
(unaudited)
|
2019
(unaudited)
|
2020
|
|
|
|
2010 and Prior
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
2011
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
2012
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
2013
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
1
|
|
1
|
|
|
|
|
2014
|
969,000
|
|
3,951
|
|
6,031
|
|
7,430
|
|
7,957
|
|
8,201
|
|
8,503
|
|
|
|
|
2015
|
|
4,135
|
|
13,126
|
|
19,785
|
|
22,952
|
|
24,301
|
|
25,032
|
|
|
|
|
2016
|
|
|
5,170
|
|
15,229
|
|
22,940
|
|
27,632
|
|
29,539
|
|
|
|
|
2017
|
|
|
|
3,560
|
|
10,436
|
|
14,600
|
|
16,520
|
|
|
|
|
2018
|
|
|
|
|
2,574
|
|
6,431
|
|
9,016
|
|
|
|
|
2019
|
|
|
|
|
|
—
|
|
—
|
|
|
|
|
2020
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
88,611
|
|
|
|
|
Total outstanding liabilities for unpaid losses and LAE, net of reinsurance
|
$
|
23,633
|
|
|
|
|
The reconciliation of incurred and paid loss development to the liability for unpaid losses and LAE as presented in the tables above for the year ended December 31, 2020 is set forth below:
|
|
|
|
|
|
|
2020
|
Liabilities for unpaid losses and allocated LAE, net of reinsurance
|
$
|
23,633
|
|
Reinsurance recoverable on unpaid losses
|
—
|
|
Gross liability for unpaid losses and LAE before unallocated loss adjustment expenses and fair value adjustments
|
$
|
23,633
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following is unaudited supplementary information for average annual historical duration of claims:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance
|
|
Year 1
|
Year 2
|
Year 3
|
Year 4
|
Year 5
|
Year 6
|
Year 7
|
Year 8
|
Year 9
|
Year 10
|
Workers' compensation
|
14.40
|
%
|
29.38
|
%
|
20.46
|
%
|
11.77
|
%
|
5.19
|
%
|
2.57
|
%
|
1.61
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
11. DEFENDANT ASBESTOS AND ENVIRONMENTAL LIABILITIES
We acquired DCo LLC ("DCo") on December 30, 2016, and Morse TEC on October 30, 2019. These companies hold liabilities associated with personal injury asbestos claims and environmental claims arising from their legacy manufacturing operations. Defendant asbestos liabilities on our consolidated balance sheets include amounts for loss payments and defense costs for pending and future asbestos-related claims, determined using standard actuarial techniques for asbestos exposures. Defendant environmental liabilities include estimated clean-up costs associated with the acquired companies' former operations based on engineering reports.
Insurance balances recoverable on our consolidated balance sheets include estimated insurance recoveries relating to these liabilities. The recorded asset represents our assessment of the capacity of the insurance agreements to indemnify our subsidiaries for the anticipated defense and loss payments for pending claims and projected future claims. The recognition of these recoveries is based on an assessment of the right to recover under the respective contracts and on the financial strength of the insurers. The recorded asset does not represent the limits of our insurance coverage, but rather the amount we would expect to recover if the accrued and projected loss and defense costs were paid in full.
Included within insurance balances recoverable and defendant asbestos and environmental liabilities are the fair value adjustments that were initially recognized upon acquisition. These fair value adjustments are amortized in proportion to the actual payout of claims and recoveries. The carrying value of the asbestos and environmental liabilities, insurance recoveries, future estimated expenses and the fair value adjustments related to DCo and Morse TEC as of December 31, 2020 and 2019 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Defendant asbestos and environmental liabilities:
|
|
|
|
Defendant asbestos liabilities
|
$
|
913,276
|
|
|
$
|
1,100,593
|
|
Defendant environmental liabilities
|
12,572
|
|
|
10,279
|
|
Estimated future expenses
|
42,510
|
|
|
51,637
|
|
Fair value adjustments
|
(262,029)
|
|
|
(314,824)
|
|
Defendant asbestos and environmental liabilities
|
706,329
|
|
|
847,685
|
|
|
|
|
|
Insurance balances recoverable:
|
|
|
|
Insurance recoveries related to defendant asbestos liabilities (net of allowance: 2020 - $4,824)
|
310,602
|
|
|
549,593
|
|
Fair value adjustments
|
(60,950)
|
|
|
(100,738)
|
|
Insurance balances recoverable
|
249,652
|
|
|
448,855
|
|
|
|
|
|
Net liabilities relating to defendant asbestos and environmental exposures
|
$
|
456,677
|
|
|
$
|
398,830
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The table below provides a consolidated reconciliation of the beginning and ending liability for defendant asbestos and environmental exposures for the years ended December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Balance as of January 1
|
847,685
|
|
|
203,320
|
|
|
219,164
|
|
Less: Insurance balances recoverable
|
448,855
|
|
|
135,808
|
|
|
122,326
|
|
Plus: Cumulative effect of change in accounting principle on the determination of the allowance for estimated uncollectible insurance balances (1)
|
3,167
|
|
|
—
|
|
|
—
|
|
Net balance as of January 1
|
401,997
|
|
|
67,512
|
|
|
96,838
|
|
Total net recoveries (paid claims)
|
153,964
|
|
|
(10,434)
|
|
|
(6,351)
|
|
Amounts recorded in other income (expense):
|
|
|
|
|
|
Change in estimate of net ultimate liabilities
|
(103,166)
|
|
|
(4,263)
|
|
|
(23,221)
|
|
Reduction in estimated future expenses
|
(9,126)
|
|
|
(3,274)
|
|
|
—
|
|
Amortization of fair value adjustments
|
13,008
|
|
|
13,500
|
|
|
246
|
|
Total other expense (income)
|
(99,284)
|
|
|
5,963
|
|
|
(22,975)
|
|
Acquired on purchase of subsidiaries
|
—
|
|
|
335,789
|
|
|
—
|
|
Net balance as of December 31
|
456,677
|
|
|
398,830
|
|
|
67,512
|
|
Plus: Insurance balances recoverable (2)
|
249,652
|
|
|
448,855
|
|
|
135,808
|
|
Balance as of December 31
|
706,329
|
|
|
847,685
|
|
|
203,320
|
|
(1) The Company adopted ASU 2016-13 and the related amendments on January 1, 2020. Refer to Note 1 - "Significant Accounting Policies" for further details.
(2) Net of allowance for estimated uncollectible insurance balances.
Total other income from our defendant asbestos and environmental liabilities companies was $99.3 million for the year ended December 31, 2020 and was driven by a reduction in the actuarially estimated ultimate net liabilities as a result of a lower than expected number of asbestos claims filed against us; lower than expected paid indemnity and defense costs; the collection of disputed insurance recoveries that were carried on our balance sheet at $166.7 million, net of fair value adjustments, for consideration of $179.6 million; and recovery of $19.3 million on insurance payments previously written-off prior to our acquisition of the companies.
Methodologies for determining liabilities
Defendant Asbestos Liabilities
We review, on an ongoing basis, our own experience in handling asbestos-related claims and trends affecting asbestos-related claims in the U.S. tort system generally, for the purposes of assessing the value of pending asbestos-related claims and the number and value of those that may be asserted in the future, as well as potential recoveries from our insurance carriers with respect to such claims and defense costs. The actuarial analysis for these asbestos-related exposures utilizes data resulting from the claim review process, including input from national coordinating counsel and local counsel, and includes the development of an estimate of the potential value of asbestos-related claims asserted but not yet resolved as well as the number and potential value of asbestos-related claims not yet asserted. In developing the estimate of liability for potential future claims, the actuarial analysis projects the potential number of future claims based on our historical claim filings and epidemiological studies. The actuarial analysis also utilizes assumptions based on our historical proportion of claims resolved without payment, historical claim resolution costs for those claims that result in a payment, and historical defense costs. The liabilities are then estimated by multiplying the pending and projected future claim filings by projected payments rates and average claim resolution amounts and then adding an estimate for defense costs.
We determine, based on the factors described above, including the actuarial analysis, that their best estimate of the aggregate liability both for asbestos-related claims asserted but not yet resolved and potential asbestos-related claims not yet asserted, including estimated defense costs, was $913.3 million and $1.1 billion as of December 31, 2020 and 2019, respectively.
Defendant Environmental Liabilities
As a result of our acquisition of DCo and Morse TEC, we have been identified by the United States Environmental Protection Agency and certain U.S. state environmental agencies and private parties as potentially responsible parties ("PRP") at various hazardous waste disposal sites under the Comprehensive Environmental
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Response, Compensation and Liability Act ("Superfund") and equivalent U.S. state laws. The PRPs may currently be liable for the cost of clean-up and other remedial activities at 22 such sites. Responsibility for clean-up and other remedial activities at a Superfund site is typically shared among PRPs based on an allocation formula.
We have a liability for defendant environmental liabilities of $12.6 million and $10.3 million as of December 31, 2020 and 2019, respectively. The estimate for defendant environmental liabilities is based on information available to us, including an estimate of the allocation of liability among PRPs, the probability that other PRPs will pay the cost apportioned to them, currently available information from PRPs and/or federal or state environmental agencies concerning the scope of contamination and estimated remediation and consulting costs, and remediation alternatives.
Allowance for Estimated Uncollectible Insurance Balances Recoverable on Defendant Asbestos Liabilities
We evaluate and monitor the credit risk related to our insurers and an allowance for estimated uncollectible insurance balances recoverable on our defendant asbestos liabilities ("allowance for estimated uncollectible insurance") is established for amounts considered potentially uncollectible. To determine the allowance for estimated uncollectible insurance, we use the inputs and methodologies as described in Note 8 - "Reinsurance Balances Recoverable on Paid and Unpaid Losses" above.
The table below provides a reconciliation of the beginning and ending allowance for estimated uncollectible insurance balances related to our defendant asbestos liabilities, for the years ended December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
2020
|
2019
|
Allowance for estimated uncollectible insurance balances, beginning of year
|
$
|
3,818
|
|
$
|
—
|
|
Cumulative effect of change in accounting principle
|
3,167
|
|
—
|
|
Current period change in the allowance
|
(2,161)
|
|
3,818
|
|
|
|
|
|
|
|
Allowance for estimated uncollectible insurance balances, end of year
|
$
|
4,824
|
|
$
|
3,818
|
|
During the year ended December 31, 2020, we did not have any write-offs charged against the allowance for estimated uncollectible insurance or any recoveries of amounts previously written off.
We did not have significant non-disputed past due balances receivable from our insurers related to our defendant asbestos liabilities, that were older than one year for any of the periods presented. Any balances that are part of ongoing legal activity are estimated to be recovered at the level of our recorded asset which is consistent with our legal advice and past collection experience.
12. FAIR VALUE MEASUREMENTS
Fair Value Hierarchy
Fair value is defined as the price at which to sell an asset or transfer a liability (i.e. the "exit price") in an orderly transaction between market participants. We use a fair value hierarchy that gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. The hierarchy is broken down into three levels as follows:
•Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments.
•Level 2 - Valuations based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.
•Level 3 - Valuations based on unobservable inputs where there is little or no market activity. Unadjusted third party pricing sources or management's assumptions and internal valuation models may be used to determine the fair values.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In addition, certain of our other investments are measured at fair value using net asset value ("NAV") per share (or its equivalent) as a practical expedient and have not been classified within the fair value hierarchy above. We have categorized our assets and liabilities that are recorded at fair value on a recurring basis among levels based on the observability of inputs, or at fair value using NAV per share (or its equivalent) as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant
Other Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Fair Value Based on NAV as Practical Expedient
|
|
Total Fair
Value
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
Short-term and Fixed maturity investments:
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency
|
|
$
|
—
|
|
|
$
|
951,048
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
951,048
|
|
U.K. government
|
|
—
|
|
|
51,082
|
|
|
—
|
|
|
—
|
|
|
51,082
|
|
Other government
|
|
—
|
|
|
502,153
|
|
|
—
|
|
|
—
|
|
|
502,153
|
|
Corporate
|
|
—
|
|
|
5,686,732
|
|
|
—
|
|
|
—
|
|
|
5,686,732
|
|
Municipal
|
|
—
|
|
|
162,669
|
|
|
—
|
|
|
—
|
|
|
162,669
|
|
Residential mortgage-backed
|
|
—
|
|
|
553,945
|
|
|
—
|
|
|
—
|
|
|
553,945
|
|
Commercial mortgage-backed
|
|
—
|
|
|
854,090
|
|
|
—
|
|
|
—
|
|
|
854,090
|
|
Asset-backed
|
|
—
|
|
|
557,460
|
|
|
—
|
|
|
—
|
|
|
557,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
9,319,179
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,319,179
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets included within funds held - directly managed
|
|
—
|
|
|
14,627
|
|
|
—
|
|
|
—
|
|
|
14,627
|
|
|
|
|
|
|
|
|
|
|
|
|
Equities:
|
|
|
|
|
|
|
|
|
|
|
Publicly traded equity investments
|
|
$
|
229,167
|
|
|
$
|
31,600
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
260,767
|
|
Exchange-traded funds
|
|
311,287
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
311,287
|
|
Privately held equity investments
|
|
—
|
|
|
—
|
|
|
274,741
|
|
|
—
|
|
|
274,741
|
|
|
|
$
|
540,454
|
|
|
$
|
31,600
|
|
|
$
|
274,741
|
|
|
$
|
—
|
|
|
$
|
846,795
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge funds
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,638,339
|
|
|
$
|
2,638,339
|
|
Fixed income funds
|
|
—
|
|
|
285,837
|
|
|
—
|
|
|
266,704
|
|
|
552,541
|
|
Equity funds
|
|
—
|
|
|
5,073
|
|
|
—
|
|
|
185,694
|
|
|
190,767
|
|
Private equity funds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
363,103
|
|
|
363,103
|
|
|
|
|
|
|
|
|
|
|
|
|
CLO equities
|
|
—
|
|
|
128,083
|
|
|
—
|
|
|
—
|
|
|
128,083
|
|
CLO equity funds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
166,523
|
|
|
166,523
|
|
Private credit funds
|
|
—
|
|
|
—
|
|
|
9,250
|
|
|
183,069
|
|
|
192,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
—
|
|
|
—
|
|
|
314
|
|
|
12,045
|
|
|
12,359
|
|
|
|
$
|
—
|
|
|
$
|
418,993
|
|
|
$
|
9,564
|
|
|
$
|
3,815,477
|
|
|
$
|
4,244,034
|
|
Total Investments
|
|
$
|
540,454
|
|
|
$
|
9,784,399
|
|
|
$
|
284,305
|
|
|
$
|
3,815,477
|
|
|
$
|
14,424,635
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
385,790
|
|
|
$
|
208,272
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
594,062
|
|
|
|
|
|
|
|
|
|
|
|
|
Reinsurance balances recoverable on paid and unpaid losses:
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
520,830
|
|
|
$
|
—
|
|
|
$
|
520,830
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets:
|
|
|
|
|
|
|
|
|
|
|
Derivatives qualifying as hedging
|
|
$
|
—
|
|
|
$
|
1,169
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,169
|
|
Derivatives not qualifying as hedges
|
|
—
|
|
|
2,964
|
|
|
—
|
|
|
—
|
|
|
2,964
|
|
Derivative instruments
|
|
$
|
—
|
|
|
$
|
4,133
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,133
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and LAE:
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,452,920
|
|
|
$
|
—
|
|
|
$
|
2,452,920
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Derivatives qualifying as hedging
|
|
$
|
—
|
|
|
$
|
28,947
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28,947
|
|
Derivatives not qualifying as hedges
|
|
—
|
|
|
5,195
|
|
|
—
|
|
|
—
|
|
|
5,195
|
|
Derivative instruments
|
|
$
|
—
|
|
|
$
|
34,142
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
34,142
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant
Other Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Fair Value Based on NAV as Practical Expedient
|
|
Total Fair
Value
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
Short-term and Fixed maturity investments:
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency
|
|
$
|
—
|
|
|
$
|
696,077
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
696,077
|
|
U.K government
|
|
—
|
|
|
161,772
|
|
|
—
|
|
|
—
|
|
|
161,772
|
|
Other government
|
|
—
|
|
|
702,856
|
|
|
—
|
|
|
—
|
|
|
702,856
|
|
Corporate
|
|
—
|
|
|
5,448,270
|
|
|
—
|
|
|
—
|
|
|
5,448,270
|
|
Municipal
|
|
—
|
|
|
140,687
|
|
|
—
|
|
|
—
|
|
|
140,687
|
|
Residential mortgage-backed
|
|
—
|
|
|
400,914
|
|
|
—
|
|
|
—
|
|
|
400,914
|
|
Commercial mortgage-backed
|
|
—
|
|
|
813,746
|
|
|
—
|
|
|
—
|
|
|
813,746
|
|
Asset-backed
|
|
—
|
|
|
670,235
|
|
|
—
|
|
|
—
|
|
|
670,235
|
|
|
|
$
|
—
|
|
|
$
|
9,034,557
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,034,557
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets included within funds held - directly managed
|
|
$
|
—
|
|
|
$
|
14,207
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,207
|
|
|
|
|
|
|
|
|
|
|
|
|
Equities:
|
|
|
|
|
|
|
|
|
|
|
Publicly traded equity investments
|
|
$
|
297,310
|
|
|
$
|
30,565
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
327,875
|
|
Exchange-traded funds
|
|
133,047
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
133,047
|
|
Privately held equity investments
|
|
—
|
|
|
—
|
|
|
265,799
|
|
|
—
|
|
|
265,799
|
|
|
|
$
|
430,357
|
|
|
$
|
30,565
|
|
|
$
|
265,799
|
|
|
$
|
—
|
|
|
$
|
726,721
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments:
|
|
|
|
|
|
|
|
|
|
|
Hedge funds
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,121,904
|
|
|
$
|
1,121,904
|
|
Fixed income funds
|
|
—
|
|
|
398,143
|
|
|
—
|
|
|
82,896
|
|
|
481,039
|
|
Equity funds
|
|
—
|
|
|
111,040
|
|
|
—
|
|
|
299,109
|
|
|
410,149
|
|
Private equity funds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
323,496
|
|
|
323,496
|
|
CLO equities
|
|
—
|
|
|
—
|
|
|
87,555
|
|
|
—
|
|
|
87,555
|
|
CLO equity funds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
87,509
|
|
|
87,509
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
—
|
|
|
34
|
|
|
314
|
|
|
6,031
|
|
|
6,379
|
|
|
|
$
|
—
|
|
|
$
|
509,217
|
|
|
$
|
87,869
|
|
|
$
|
1,920,945
|
|
|
$
|
2,518,031
|
|
Total Investments
|
|
$
|
430,357
|
|
|
$
|
9,588,546
|
|
|
$
|
353,668
|
|
|
$
|
1,920,945
|
|
|
$
|
12,293,516
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
144,984
|
|
|
$
|
222,191
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
367,175
|
|
|
|
|
|
|
|
|
|
|
|
|
Reinsurance balances recoverable on paid and unpaid losses:
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
695,518
|
|
|
$
|
—
|
|
|
$
|
695,518
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets:
|
|
|
|
|
|
|
|
|
|
|
Derivatives qualifying as hedging
|
|
$
|
—
|
|
|
$
|
642
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
642
|
|
Derivatives not qualifying as hedges
|
|
—
|
|
|
1,369
|
|
|
—
|
|
|
—
|
|
|
1,369
|
|
Derivative instruments
|
|
$
|
—
|
|
|
$
|
2,011
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,011
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and LAE:
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,621,122
|
|
|
$
|
—
|
|
|
$
|
2,621,122
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Derivatives qualifying as hedging
|
|
$
|
—
|
|
|
$
|
11,452
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,452
|
|
Derivatives not qualifying as hedges
|
|
—
|
|
|
4,106
|
|
|
—
|
|
|
—
|
|
|
4,106
|
|
Derivative instruments
|
|
$
|
—
|
|
|
$
|
15,558
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15,558
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Valuation Methodologies of Financial Instruments Measured at Fair Value
Short-term and Fixed Maturity Investments
The fair values for all securities in the short-term and fixed maturity investments and funds held - directly managed portfolios are independently provided by the investment accounting service providers, investment managers and investment custodians, each of which utilize internationally recognized independent pricing services. We record the unadjusted price provided by the investment accounting service providers, investment managers or investment custodians and validate this price through a process that includes, but is not limited to: (i) comparison of prices against alternative pricing sources; (ii) quantitative analysis (e.g. comparing the quarterly return for each managed portfolio to its target benchmark); (iii) evaluation of methodologies used by external parties to estimate fair value, including a review of the inputs used for pricing; and (iv) comparing the price to our knowledge of the current investment market. Our internal price validation procedures and review of fair value methodology documentation provided by independent pricing services have not historically resulted in adjustment in the prices obtained from the pricing service.
The independent pricing services used by the investment accounting service providers, investment managers and investment custodians obtain actual transaction prices for securities that have quoted prices in active markets. Where we utilize single unadjusted broker-dealer quotes, they are generally provided by market makers or broker-dealers who are recognized as market participants in the markets for which they are providing the quotes. For determining the fair value of securities that are not actively traded, in general, pricing services use "matrix pricing" in which the independent pricing service uses observable market inputs including, but not limited to, reported trades, benchmark yields, broker-dealer quotes, interest rates, prepayment speeds, default rates and other such inputs as are available from market sources to determine a reasonable fair value.
The following describes the techniques generally used to determine the fair value of our short-term and fixed maturity investments by asset class, including the investments underlying the funds held - directly managed.
•U.S. government and agency securities consist of securities issued by the U.S. Treasury and mortgage pass-through agencies such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and other agencies. Non-U.S. government securities consist of bonds issued by non-U.S. governments and agencies along with supranational organizations. The significant inputs used to determine the fair value of these securities include the spread above the risk-free yield curve, reported trades and broker-dealer quotes. These are considered to be observable market inputs and, therefore, the fair values of these securities are classified as Level 2.
•Corporate securities consist primarily of investment-grade debt of a wide variety of corporate issuers and industries. The fair values of these securities are determined using the spread above the risk-free yield curve, reported trades, broker-dealer quotes, benchmark yields, and industry and market indicators. These are considered observable market inputs and, therefore, the fair values of these securities are classified as Level 2. Where pricing is unavailable from pricing services, such as in periods of low trading activity or when transactions are not orderly, we obtain non-binding quotes from broker-dealers. Where significant inputs are unable to be corroborated with market observable information, we classify the securities as Level 3.
•Municipal securities consist primarily of bonds issued by U.S.-domiciled state and municipal entities. The fair values of these securities are determined using the spread above the risk-free yield curve, reported trades, broker-dealer quotes and benchmark yields. These are considered observable market inputs and, therefore, the fair values of these securities are classified as Level 2.
•Asset-backed securities consist primarily of investment-grade bonds backed by pools of loans with a variety of underlying collateral. Residential and commercial mortgage-backed securities include both agency and non-agency originated securities. Where pricing is unavailable from pricing services, we obtain non-binding quotes from broker-dealers. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. The significant inputs used to determine the fair value of these securities include the spread above the risk-free yield curve, reported trades, benchmark yields, prepayment speeds and default rates. The fair values of these securities are classified as Level 2 if the significant inputs are market observable. Where significant inputs are unable to be corroborated with market observable information, we classify the securities as Level 3.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Equities
Our investments in equities consist of a combination of publicly and privately traded investments. Our publicly traded equity investments in common and preferred stocks predominantly trade on major exchanges and are managed by our external advisors. Our exchange-traded funds also trade on major exchanges. Our publicly traded equities are widely diversified and there is no significant concentration in any specific industry. We use an internationally recognized pricing service to estimate the fair value of our publicly traded equities and exchange-traded funds. We have categorized the majority of our publicly traded equity investments, other than preferred stock, and our exchange-traded funds as Level 1 investments because the fair values of these investments are based on unadjusted quoted prices in active markets for identical assets. One equity security is trading in an inactive market and, as a result has been classified as Level 2. The fair value estimates of our investments in publicly traded preferred stock are based on observable market data and, as a result, have been categorized as Level 2.
Our privately held equity investments in common and preferred stocks are direct investments in companies that we believe offer attractive risk adjusted returns and/or offer other strategic advantages. Each investment may have its own unique terms and conditions and there may be restrictions on disposals. The market for these investments is illiquid and there is no active market. We use a combination of cost, internal models, reported values from co-investors/managers and observable inputs, such as capital raises and capital transactions between new and existing shareholders to calculate the fair value of the privately held equity investments. The fair value estimates of our investments in privately held equities are based on unobservable market data and, as a result, have been categorized as Level 3.
Other investments, at fair value
We have ongoing due diligence processes with respect to the other investments carried at fair value in which we invest, including active discussions with managers of the investments. These processes are designed to assist us in assessing the quality of information provided by, or on behalf of, each fund and in determining whether such information continues to be reliable or whether further review is warranted. Certain funds do not provide full transparency of their underlying holdings; however, we obtain the audited financial statements for funds annually and review the audited results relative to the net asset values provided by the managers, and regularly review and discuss the fund performance with the fund managers to corroborate the reasonableness of the reported net asset values ("NAV").
The use of NAV as an estimate of the fair value for investments in certain entities that calculate NAV is a permitted practical expedient. Due to the time lag in the NAV reported by certain fund managers we adjust the valuation for capital calls and distributions. Other investments measured at fair value using NAV as a practical expedient have not been classified in the fair value hierarchy. Other investments for which we do not use NAV as a practical expedient have been valued using prices from independent pricing services, investment managers and broker-dealers.
The following describes the techniques generally used to determine the fair value of our other investments.
•For our investments in hedge funds, we measure fair value by obtaining the most recently available NAV as advised by the external fund manager or third-party administrator. The fair values of these investments are measured using the NAV as a practical expedient and therefore have not been categorized within the fair value hierarchy.
•Our investments in fixed income funds and equity funds are valued based on a combination of prices from independent pricing services, external fund managers or third-party administrators. For the publicly available prices we have classified the investments as Level 2. For the non-publicly available prices we are using NAV as a practical expedient and therefore these have not been categorized within the fair value hierarchy.
•For our investments in private equity funds, we measure fair value by obtaining the most recently available NAV from the external fund manager or third-party administrator. The fair values of these investments are measured using the NAV as a practical expedient and therefore have not been categorized within the fair value hierarchy.
•We measure the fair value of our direct investment in CLO equities based on valuations provided by independent pricing services, our external CLO equity manager, and valuations provided by the broker or lead underwriter of the investment (the "broker"). The fair values measured using prices provided by independent pricing services have been classified as Level 2 and fair values using prices from brokers have
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
been classified as Level 3 due to the use of unobservable inputs in the valuation and the limited number of relevant trades in secondary markets.
•For our investments in the CLO equity funds, we measure fair value by obtaining the most recently available NAV as advised by the external fund manager or third party administrator. The fair value of these investments is measured using the NAV as a practical expedient and therefore have not been categorized within the fair value hierarchy.
•Our investments in private credit funds are primarily valued by obtaining the most recently available NAV from the external fund manager or third-party administrator. The fair values of these investments are measured using the NAV as a practical expedient and therefore have not been categorized within the fair value hierarchy. Included within private credit funds is a loan which is valued at cost less distributions received to date.
•Included within other is an investment in a real estate debt fund, for which we measure fair value by obtaining the most recently available NAV from the external fund manager or third-party administrator. The fair value of this investment is measured using the NAV as a practical expedient and therefore has not been categorized within the fair value hierarchy.
Cash and Cash Equivalents
Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are very close to maturity that they present insignificant risk of changes in value due to changes in interest rates. Included within cash and cash equivalents are money market funds, fixed interest deposits and highly liquid fixed maturity investments purchased with an original maturity of three months or less.
The majority of our cash and cash equivalents included within the fair value hierarchy are comprised of money market and liquid reserve funds which have been categorized as Level 1. Fixed interest deposits and highly liquid fixed maturity investments with an original maturity of three months or less have been categorized as Level 2. Operating cash balances are not subject to the recurring fair value measurement guidance and are therefore excluded from the fair value hierarchy.
Insurance Contracts - Fair Value Option
The Company uses an internal model to calculate the fair value of the liability for losses and loss adjustment expenses and reinsurance balances recoverable on paid and unpaid losses for certain retroactive reinsurance contracts where we have elected the fair value option in our Non-life Run-off segment. The fair value was calculated as the aggregate of discounted cash flows plus a risk margin. The discounted cash flow approach uses (i) estimated nominal cash flows based upon an appropriate payment pattern developed in accordance with standard actuarial techniques and (ii) a discount rate based upon a high quality rated corporate bond yield plus a credit spread for non-performance risk. The model uses corporate bond rates across the yield curve depending on the estimated timing of the future cash flows and specific to the currency of the risk. The risk margin was calculated using the present value of the cost of capital. The cost of capital approach uses (i) projected capital requirements, (ii) multiplied by the risk cost of capital representing the return required for non-hedgeable risk based upon the weighted average cost of capital less investment income and (iii) discounted using the weighted average cost of capital.
Derivative Instruments
The fair values of our derivative instruments, as described in Note 7 - "Derivatives and Hedging Instruments," are classified as Level 2. The fair values are based upon prices in active markets for identical contracts.
Level 3 Measurements and Changes in Leveling
Transfers into or out of levels are recorded at their fair values as of the end of the reporting period, consistent with the date of determination of fair value.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Investments
The following tables present a reconciliation of the beginning and ending balances for all investments measured at fair value on a recurring basis using Level 3 inputs during the years ended December 31, 2020 and 2019:
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|
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|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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|
|
2020
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|
|
|
|
Privately-held Equities
|
|
Other Investments
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning fair value
|
|
|
|
|
|
|
|
|
|
$
|
265,799
|
|
|
$
|
87,869
|
|
|
$
|
353,668
|
|
Purchases
|
|
|
|
|
|
|
|
|
|
20,125
|
|
|
47,092
|
|
|
67,217
|
|
Sales
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(1,289)
|
|
|
(1,289)
|
|
Total realized and unrealized losses
|
|
|
|
|
|
|
|
|
|
(11,183)
|
|
|
(40,368)
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|
|
(51,551)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer out of Level 3 into Level 2
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(83,740)
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|
|
(83,740)
|
|
Ending fair value
|
|
|
|
|
|
|
|
|
|
$
|
274,741
|
|
|
$
|
9,564
|
|
|
$
|
284,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
|
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2019
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|
|
Fixed maturity investments
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Privately-held Equities
|
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Other Investments
|
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Total
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|
|
Corporate
|
|
Residential mortgage-backed
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|
Commercial mortgage-backed
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Asset-backed
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|
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Beginning fair value
|
|
$
|
37,386
|
|
|
$
|
—
|
|
|
$
|
7,389
|
|
|
$
|
9,121
|
|
|
$
|
228,710
|
|
|
$
|
39,367
|
|
|
$
|
321,973
|
|
Purchases
|
|
184
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,713
|
|
|
56,908
|
|
|
87,805
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|
Sales
|
|
(3,520)
|
|
|
—
|
|
|
(784)
|
|
|
(3,605)
|
|
|
(2,016)
|
|
|
(590)
|
|
|
(10,515)
|
|
Total realized and unrealized gains (losses)
|
|
90
|
|
|
(1)
|
|
|
64
|
|
|
255
|
|
|
8,392
|
|
|
(7,816)
|
|
|
984
|
|
Transfer into Level 3 from Level 2
|
|
3,535
|
|
|
102
|
|
|
1,515
|
|
|
21,024
|
|
|
—
|
|
|
—
|
|
|
26,176
|
|
Transfer out of Level 3 into Level 2
|
|
(37,675)
|
|
|
(101)
|
|
|
(8,184)
|
|
|
(26,795)
|
|
|
—
|
|
|
—
|
|
|
(72,755)
|
|
Ending fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
265,799
|
|
|
$
|
87,869
|
|
|
$
|
353,668
|
|
Net realized and unrealized gains related to Level 3 assets in the table above are included in net realized and unrealized gains (losses) in our consolidated statements of earnings.
The securities transferred from Level 2 to Level 3 were transferred due to insufficient market observable inputs for the valuation of the specific assets. The transfers from Level 3 to Level 2 were based upon obtaining market observable information regarding the valuations of the specific assets.
Valuations Techniques and Inputs
The table below presents the quantitative information related to the fair value measurements for our privately held equity investments measured at fair value on a recurring basis using Level 3 inputs:
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|
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Quantitative Information about Level 3 Fair Value Measurements
|
|
Fair Value as of December 31, 2020
|
|
Valuation Techniques
|
|
Unobservable Input
|
|
Average (1)
|
|
(in millions of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
230.3
|
|
|
Guideline company methodology
|
|
Distribution waterfall
|
|
12.98
|
$
|
54.0
|
|
|
Cost as approximation of fair value
|
|
Cost as approximation of fair value
|
|
|
$
|
284.3
|
|
|
|
|
|
|
|
(1) The average represents the arithmetic average of the inputs and is not weighted by the relative fair value.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Insurance Contracts - Fair Value Option
The following table presents a reconciliation of the beginning and ending balances for all insurance contracts measured at fair value on a recurring basis using Level 3 inputs during the years ended December 31, 2020 and 2019:
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|
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|
|
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|
|
|
|
|
|
|
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|
|
2020
|
|
2019
|
|
Liability for losses and LAE
|
|
Reinsurance balances recoverable on paid and unpaid losses
|
|
Net
|
|
Liability for losses and LAE
|
|
Reinsurance balances recoverable on paid and unpaid losses
|
|
Net
|
Beginning fair value
|
$
|
2,621,122
|
|
|
$
|
695,518
|
|
|
$
|
1,925,604
|
|
|
$
|
2,874,055
|
|
|
$
|
739,591
|
|
|
$
|
2,134,464
|
|
Assumed business
|
1,526
|
|
|
(180,972)
|
|
|
182,498
|
|
|
9,218
|
|
|
—
|
|
|
9,218
|
|
Incurred losses and LAE:
|
|
|
|
|
|
|
|
|
|
|
|
Reduction in estimates of ultimate losses
|
(73,596)
|
|
|
59,478
|
|
|
(133,074)
|
|
|
(32,690)
|
|
|
(2,958)
|
|
|
(29,732)
|
|
Reduction in unallocated LAE
|
(17,484)
|
|
|
—
|
|
|
(17,484)
|
|
|
(19,915)
|
|
|
—
|
|
|
(19,915)
|
|
Change in fair value
|
157,965
|
|
|
38,919
|
|
|
119,046
|
|
|
160,630
|
|
|
43,449
|
|
|
117,181
|
|
Total incurred losses and LAE
|
66,885
|
|
|
98,397
|
|
|
(31,512)
|
|
|
108,025
|
|
|
40,491
|
|
|
67,534
|
|
Paid losses
|
(300,234)
|
|
|
(101,326)
|
|
|
(198,908)
|
|
|
(416,770)
|
|
|
(92,145)
|
|
|
(324,625)
|
|
Effect of exchange rate movements
|
63,621
|
|
|
9,213
|
|
|
54,408
|
|
|
46,594
|
|
|
7,581
|
|
|
39,013
|
|
Ending fair value
|
$
|
2,452,920
|
|
|
$
|
520,830
|
|
|
$
|
1,932,090
|
|
|
$
|
2,621,122
|
|
|
$
|
695,518
|
|
|
$
|
1,925,604
|
|
The net assumed business of $182.5 million in the current period relates to the Hannover Re novation transaction disclosed in Note 4 - "Significant New Business." Changes in fair value in the table above are included in net incurred losses and LAE in our consolidated statements of earnings.
The following table presents the components of the net change in fair value for the years ended December 31, 2020, 2019 and 2018:
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|
|
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|
|
|
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|
2020
|
|
2019
|
|
2018
|
Changes in fair value due to changes in:
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|
|
|
|
|
|
Duration
|
|
$
|
20,861
|
|
|
$
|
22,719
|
|
|
$
|
74,011
|
|
Corporate bond yield
|
|
96,478
|
|
|
94,462
|
|
|
(71,031)
|
|
|
|
|
|
|
|
|
Weighted cost of capital
|
|
(5,048)
|
|
|
—
|
|
|
|
Risk cost of capital
|
|
6,755
|
|
|
—
|
|
|
3,684
|
|
Change in fair value
|
|
$
|
119,046
|
|
|
$
|
117,181
|
|
|
$
|
6,664
|
|
Below is a summary of the quantitative information regarding the significant observable and unobservable inputs used in the internal model to determine fair value on a recurring basis as of December 31, 2020 and 2019:
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|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Valuation Technique
|
Unobservable (U) and Observable (O) Inputs
|
Weighted Average
|
|
Weighted Average
|
Internal model
|
Corporate bond yield (O)
|
A rated
|
|
A rated
|
Internal model
|
Credit spread for non-performance risk (U)
|
0.2%
|
|
0.2%
|
Internal model
|
Risk cost of capital (U)
|
5.1%
|
|
5.1%
|
Internal model
|
Weighted average cost of capital (U)
|
8.25%
|
|
8.5%
|
Internal model
|
Duration - liability (U)
|
8.17 years
|
|
7.82 years
|
Internal model
|
Duration - reinsurance balances recoverable on paid and unpaid losses (U)
|
8.23 years
|
|
8.68 years
|
The fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses may increase or decrease due to changes in the corporate bond rate, the credit spread for non-performance risk, the risk cost of capital, the weighted average cost of capital and the estimated payment pattern as described
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
below:
•An increase in the corporate bond rate or credit spread for non-performance risk would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses. Conversely, a decrease in the corporate bond rate or credit spread for non-performance risk would result in an increase in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.
•An increase in the weighted average cost of capital would result in an increase in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses. Conversely, a decrease in the weighted average cost of capital would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.
•An increase in the risk cost of capital would result in an increase in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses. Conversely, a decrease in the risk cost of capital would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.
•The duration of the liability and recoverable is adjusted every period to reflect actual net payments during the period and expected future payments. An acceleration of the estimated payment pattern, a decrease in duration, would result in an increase in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses. Conversely, a deceleration of the estimated payment pattern, an increase in duration, would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.
In addition, the estimate of the capital required to support the liabilities is based upon current industry standards for capital adequacy. If the required capital per unit of risk increases, then the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses would increase. Conversely, a decrease in required capital would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.
Disclosure of Fair Values for Financial Instruments Carried at Cost
Senior Notes
As of December 31, 2020, our 4.50% Senior Notes due 2022 (the "2022 Senior Notes") and our 4.95% Senior Notes due 2029 (the "2029 Senior Notes" and, together with the 2022 Senior Notes, the "Senior Notes") were carried at amortized cost of $349.3 million and $494.2 million, respectively, while the fair value based on observable market pricing from a third party pricing service was $362.4 million and $573.3 million, respectively. The Senior Notes are classified as Level 2.
Junior Subordinated Notes
As of December 31, 2020, our 5.75% Fixed-Rate Reset Junior Subordinated Notes due 2040 (the “Junior Subordinated Notes”) were carried at amortized cost of $344.8 million, while the fair value based on observable market pricing from a third party pricing service was $365.7 million. The Junior Subordinated Notes are classified as Level 2.
Insurance Contracts
Disclosure of fair value of amounts relating to insurance contracts is not required, except those for which we elected the fair value option, as described above.
Remaining Assets and Liabilities
Our remaining assets and liabilities were generally carried at cost or amortized cost, which due to their short-term nature approximates fair value as of December 31, 2020 and 2019.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
13. PREMIUMS WRITTEN AND EARNED
The following tables provide a summary of net premiums written and earned for the years ended December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Premiums
Written
|
|
Premiums
Earned
|
|
Premiums
Written
|
|
Premiums
Earned
|
|
Premiums
Written
|
|
Premiums
Earned
|
Non-life Run-off
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
$
|
5,191
|
|
|
$
|
71,522
|
|
|
$
|
(25,069)
|
|
|
$
|
197,009
|
|
|
$
|
(8,910)
|
|
|
$
|
25,230
|
|
Ceded
|
(2,204)
|
|
|
(12,827)
|
|
|
(269)
|
|
|
(28,513)
|
|
|
(307)
|
|
|
(15,803)
|
|
Net
|
$
|
2,987
|
|
|
$
|
58,695
|
|
|
$
|
(25,338)
|
|
|
$
|
168,496
|
|
|
$
|
(9,217)
|
|
|
$
|
9,427
|
|
Atrium
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
$
|
206,656
|
|
|
$
|
197,492
|
|
|
$
|
192,373
|
|
|
$
|
182,678
|
|
|
$
|
171,494
|
|
|
$
|
164,428
|
|
Ceded
|
(23,462)
|
|
|
(22,099)
|
|
|
(20,017)
|
|
|
(18,619)
|
|
|
(18,006)
|
|
|
(18,113)
|
|
Net
|
$
|
183,194
|
|
|
$
|
175,393
|
|
|
$
|
172,356
|
|
|
$
|
164,059
|
|
|
$
|
153,488
|
|
|
$
|
146,315
|
|
StarStone
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
$
|
326,695
|
|
|
$
|
441,015
|
|
|
$
|
472,815
|
|
|
$
|
549,299
|
|
|
$
|
622,570
|
|
|
$
|
647,218
|
|
Ceded
|
(93,493)
|
|
|
(122,900)
|
|
|
(93,292)
|
|
|
(98,187)
|
|
|
(144,561)
|
|
|
(132,055)
|
|
Net
|
$
|
233,202
|
|
|
$
|
318,115
|
|
|
$
|
379,523
|
|
|
$
|
451,112
|
|
|
$
|
478,009
|
|
|
$
|
515,163
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
$
|
13,441
|
|
|
$
|
19,889
|
|
|
$
|
18,534
|
|
|
$
|
20,544
|
|
|
$
|
32,378
|
|
|
$
|
25,237
|
|
Ceded
|
—
|
|
|
—
|
|
|
(22)
|
|
|
(164)
|
|
|
(311)
|
|
|
(363)
|
|
Net
|
$
|
13,441
|
|
|
$
|
19,889
|
|
|
$
|
18,512
|
|
|
$
|
20,380
|
|
|
$
|
32,067
|
|
|
$
|
24,874
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
$
|
551,983
|
|
|
$
|
729,918
|
|
|
$
|
658,653
|
|
|
$
|
949,530
|
|
|
$
|
817,532
|
|
|
$
|
862,113
|
|
Ceded
|
(119,159)
|
|
|
(157,826)
|
|
|
(113,600)
|
|
|
(145,483)
|
|
|
(163,185)
|
|
|
(166,334)
|
|
Net
|
$
|
432,824
|
|
|
$
|
572,092
|
|
|
$
|
545,053
|
|
|
$
|
804,047
|
|
|
$
|
654,347
|
|
|
$
|
695,779
|
|
Gross premiums written for the year ended December 31, 2020 decreased by $106.7 million primarily due to StarStone International being placed into an orderly run-off, whereas gross premiums written for the year ended December 31, 2019 decreased by $158.9 million primarily due to StarStone's strategy to exit certain lines of business.
14. GOODWILL AND INTANGIBLE ASSETS
The following table presents a reconciliation of the beginning and ending goodwill and intangible assets, included within other assets in the consolidated balance sheets, for the years ended December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
Intangible
assets with
a definite life
|
|
Intangible assets with an indefinite life
|
|
|
|
Total
|
Balance as of December 31, 2018
|
$
|
109,807
|
|
|
$
|
16,887
|
|
|
$
|
67,131
|
|
|
|
|
$
|
193,825
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
—
|
|
|
(2,257)
|
|
|
—
|
|
|
|
|
(2,257)
|
|
Balance as of December 31, 2019
|
$
|
109,807
|
|
|
$
|
14,630
|
|
|
$
|
67,131
|
|
|
|
|
$
|
191,568
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
—
|
|
|
(1,524)
|
|
|
—
|
|
|
|
|
(1,524)
|
|
Impairment losses (StarStone International) (1)
|
(8,000)
|
|
|
—
|
|
|
(4,000)
|
|
|
|
|
(12,000)
|
|
Reclassification to assets held-for-sale (Atrium) (2)
|
(38,848)
|
|
|
(13,106)
|
|
|
(63,131)
|
|
|
|
|
(115,085)
|
|
Balance as of December 31, 2020
|
$
|
62,959
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
62,959
|
|
(1) On June 10, 2020, we announced the StarStone International Run-Off. During the year ended December 31, 2020, we recognized impairment losses of $8.0 million related to the goodwill allocated to StarStone International and $4.0 million on StarStone's Lloyd's syndicate capacity.
(2) On August 13, 2020, we announced the Atrium Exchange Transaction, which resulted in the assets and liabilities of the Atrium segment being classified as held-for-sale as of December 31, 2020. Refer to Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations" for further information.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The gross carrying value, accumulated amortization and net carrying value of goodwill and intangible assets by segment and by type as of December 31, 2020 and 2019 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
Gross
carrying
value
|
|
Accumulated amortization
|
|
Net
carrying
value
|
|
Gross
carrying
value
|
|
Accumulated amortization
|
|
Net
carrying
value
|
Non-life Run-off segment:
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
$
|
62,959
|
|
|
$
|
—
|
|
|
$
|
62,959
|
|
|
$
|
62,959
|
|
|
$
|
—
|
|
|
$
|
62,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Atrium segment:
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
—
|
|
|
—
|
|
|
—
|
|
|
38,848
|
|
|
—
|
|
|
38,848
|
|
Intangible assets with a definite life:
|
|
|
|
|
|
|
|
|
|
|
|
Distribution channel
|
—
|
|
|
—
|
|
|
—
|
|
|
20,000
|
|
|
(8,111)
|
|
|
11,889
|
|
Brand
|
—
|
|
|
—
|
|
|
—
|
|
|
7,000
|
|
|
(4,259)
|
|
|
2,741
|
|
Intangible assets with an indefinite life:
|
|
|
|
|
|
|
|
|
|
|
|
Lloyd’s syndicate capacity
|
—
|
|
|
—
|
|
|
—
|
|
|
33,031
|
|
|
—
|
|
|
33,031
|
|
Management contract
|
—
|
|
|
—
|
|
|
—
|
|
|
30,100
|
|
|
—
|
|
|
30,100
|
|
Total Atrium segment goodwill and intangible assets
|
—
|
|
|
—
|
|
|
—
|
|
|
128,979
|
|
|
(12,370)
|
|
|
116,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
StarStone segment:
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
—
|
|
|
—
|
|
|
—
|
|
|
8,000
|
|
|
—
|
|
|
8,000
|
|
Intangible assets with an indefinite life:
|
|
|
|
|
|
|
|
|
|
|
|
Lloyd’s syndicate capacity
|
—
|
|
|
—
|
|
|
—
|
|
|
4,000
|
|
|
—
|
|
|
4,000
|
|
Total StarStone segment goodwill and intangible assets
|
—
|
|
|
—
|
|
|
—
|
|
|
12,000
|
|
|
—
|
|
|
12,000
|
|
Total goodwill and intangible assets
|
$
|
62,959
|
|
|
$
|
—
|
|
|
$
|
62,959
|
|
|
$
|
203,938
|
|
|
$
|
(12,370)
|
|
|
$
|
191,568
|
|
The amortization recorded on the intangible assets of the Atrium segment, prior to the reclassification to held-for-sale, for the years ended December 31, 2020, 2019 and 2018 was $1.5 million, $2.3 million and $3.6 million, respectively.
15. DEBT OBLIGATIONS AND CREDIT FACILITIES
We utilize debt and credit facilities primarily for funding acquisitions and significant new business, investment activities and, from time to time, for general corporate purposes. Our debt obligations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility
|
|
Origination Date
|
|
Term
|
|
December 31, 2020
|
|
December 31, 2019
|
4.50% Senior Notes due 2022
|
|
March 10, 2017
|
|
5 years
|
|
$
|
349,253
|
|
|
$
|
348,616
|
|
4.95% Senior Notes due 2029
|
|
May 28, 2019
|
|
10 years
|
|
494,194
|
|
|
493,600
|
|
Total Senior Notes
|
|
|
|
|
|
843,447
|
|
|
842,216
|
|
5.75% Junior Subordinated Notes due 2040
|
|
August 26, 2020
|
|
20 years
|
|
344,812
|
|
|
—
|
|
EGL Revolving Credit Facility
|
|
August 16, 2018
|
|
5 years
|
|
185,000
|
|
|
—
|
|
2018 EGL Term Loan Facility
|
|
December 27, 2018
|
|
3 years
|
|
—
|
|
|
348,991
|
|
Total debt obligations
|
|
|
|
$
|
1,373,259
|
|
|
$
|
1,191,207
|
|
In 2020, we issued the Junior Subordinated Notes and fully repaid the 2018 EGL Term Loan Facility.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The table below provides a summary of the total interest expense for the years ended December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Interest expense on debt obligations
|
$
|
57,974
|
|
|
$
|
51,245
|
|
|
$
|
25,205
|
|
Amortization of debt issuance costs
|
1,331
|
|
|
953
|
|
|
537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds withheld balances and other
|
3
|
|
|
343
|
|
|
(46)
|
|
Total interest expense
|
$
|
59,308
|
|
|
$
|
52,541
|
|
|
$
|
25,696
|
|
Senior Notes
We have issued two series of Senior Notes as shown in the table above. The Senior Notes are effectively subordinated to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness, and structurally subordinated to all liabilities of our subsidiaries, including claims of policyholders. The 2022 Senior Notes and the 2029 Senior Notes bear interest at a fixed rate per annum, equal to 4.50% and 4.95%, respectively.
Both series of Senior Notes are rated BBB-. We may repurchase the 2029 Senior Notes at any time prior to three months prior to maturity of the 2029 Senior Notes, subject to the payment of a make-whole premium. After such date, we may repurchase the 2029 Senior Notes at a purchase price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest. We do not have the right to repurchase the 2022 Senior Notes prior to their maturity.
We incurred costs of $2.9 million and $6.8 million in issuing the 2022 and 2029 Senior Notes, respectively. The unamortized costs as of December 31, 2020 were $0.7 million and $5.8 million, respectively.
Junior Subordinated Notes
5.75% Junior Subordinated Notes due 2040
On August 26, 2020, our wholly-owned subsidiary, Enstar Finance LLC ("Enstar Finance") issued the Junior Subordinated Notes in an aggregate principal amount of $350.0 million. The Junior Subordinated Notes bear interest (i) during the initial five-year period ending August 30, 2025, at a fixed rate per annual of 5.75% and (ii) during each five-year reset period thereafter beginning September 1, 2025, at a fixed rate per annum equal to the five-year U.S. treasury rate calculated as of two business days prior to the beginning of such five-year period plus 5.468%.
The Junior Subordinated Notes are rated BB+ and are unsecured junior subordinated obligations of Enstar Finance. The Junior Subordinated Notes are fully and unconditionally guaranteed by us on an unsecured and junior subordinated basis. These debt securities of Enstar Finance are effectively subordinated to the obligations of our other subsidiaries.
Subject to certain requirements and during certain time periods, Enstar Finance may repurchase the Junior Subordinated Notes, in whole or in part, at any time, at a repurchase price equal to at least 100% of the principal amount, plus accrued and unpaid interest.
We incurred costs of $5.2 million in issuing the Junior Subordinated Notes. The unamortized costs as of December 31, 2020 were $5.2 million.
EGL Revolving Credit Facility
On August 16, 2018, we entered into a five-year, unsecured $600.0 million revolving credit agreement. We may request additional commitments under the facility up to an additional $400.0 million, which the existing lenders in their discretion or new lenders may provide, in each case subject to the terms of the agreement. To date, we have not requested any additional commitments under the facility.
As of December 31, 2020, we were permitted to borrow up to an aggregate of $600.0 million under the revolving credit facility. As of December 31, 2020, there was $415.0 million of available unutilized capacity under the facility. Subsequent to December 31, 2020, we borrowed an additional $20.0 million and repaid $30.0 million, increasing the unutilized capacity under the facility to $425.0 million.
We pay interest on loans borrowed under the facility at a per annum rate comprising a reference rate determined based on the type of loan we borrow plus a margin based on the Company's long term senior unsecured debt ratings. The applicable reference rate is adjusted base rate for base rate loans and adjusted LIBOR
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
for LIBOR loans. The applicable margin varies based upon changes to our long term senior unsecured debt ratings assigned by S&P or Fitch. We pay interest quarterly for base rate loans and as frequently as monthly for LIBOR loans, depending on the applicable interest period. We also pay a commitment fee based on the average daily unutilized capacity under the facility. If an event of default occurs, the interest rate may increase and the agent may, and at the request of the required lenders shall, terminate lender commitments and demand early repayment of any outstanding loans borrowed under the facility.
We are subject to business and financial covenants under the revolving credit agreement. Business covenants include limitations on indebtedness and guarantees; liens; mergers, consolidations and other fundamental changes; dispositions; and investments and acquisitions, in each case subject to certain exceptions. Generally, the financial covenants require us to maintain a gearing ratio of consolidated indebtedness to total capitalization of not greater than 0.35 to 1.0 and to maintain a consolidated net worth of not less than the aggregate of (i) $2.3 billion, (ii) 50% of net income available for distribution to our ordinary shareholders at any time after August 16, 2018, and (iii) 50% of the proceeds of any common stock issuance made after August 16, 2018. In addition, we must maintain eligible capital in excess of the enhanced capital requirement imposed on us by the Bermuda Monetary Authority pursuant to the Insurance (Group Supervision) Rules 2011 of Bermuda. We are in compliance with the covenants of the revolving credit facility.
2018 EGL Term Loan Facility
On December 27, 2018, we entered into and fully utilized a three-year, unsecured $500.0 million term loan. During 2019, we repaid $150.0 million, and during 2020, we repaid the remaining $350.0 million and terminated the facility.
Maturities
As of December 31, 2020, the amount of outstanding debt obligations that will become due in each of the next five years and thereafter was as follows: 2021, $0; 2022, $350.0 million; 2023, $185.0 million; 2024, $0; and thereafter, $850.0 million.
Letters of Credit
We utilize unsecured and secured letters of credit to support certain of our (re)insurance performance obligations.
$275.0 million Funds at Lloyd's Letter of Credit Facility
On November 5, 2020, we amended and restated our Fund's at Lloyd's letter of credit facility to reduce its capacity to $275.0 million (with the right to request additional commitments under the facility in an aggregate amount not to exceed $75.0 million) and extended its term by two years. We use letters of credit under this facility to satisfy a portion of our Funds at Lloyd's requirements, and letters of credit issued under the facility will expire at the end of 2025. As of December 31, 2020 and December 31, 2019, our combined Funds at Lloyd's comprised cash and investments of $260.9 million and $639.3 million, respectively, and unsecured letters of credit of $210.0 million and $252.0 million, respectively.
$120.0 million Letter of Credit Facility
We use this facility to provide collateral support for certain reinsurance obligations of our subsidiaries. We may request additional commitments under the facility in an aggregate amount not to exceed $60.0 million, which the existing lender in its discretion or new lenders may provide, in each case subject to the terms of the agreement. As of December 31, 2020 and December 31, 2019, The aggregate amount of letters of credit issued under the facility was $115.7 million and $115.3 million, respectively.
$800.0 million Syndicated Letter of Credit Facility
On August 4, 2020, we increased the total commitments available under this facility by an aggregate amount of $40.0 million, bringing the total size of the facility to $800.0 million. We use this facility to collateralize certain reinsurance obligations. As of December 31, 2020 and December 31, 2019, the aggregate amount of letters of credit issued under the facility was $424.1 million and $608.0 million, respectively.
$65.0 million Letter of Credit Facility
On August 4, 2020, we entered into a $65.0 million letter of credit facility agreement pursuant to which we issued a letter of credit to collateralize a portion of our reinsurance obligations relating to our novation transaction
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
with Hannover Re, which we completed on August 6, 2020, as discussed in Note 4 - "Significant New Business". As of December 31, 2020, the aggregate amount of letters of credit issued under the facility was $61.0 million.
Subsidiary Capital Letters of Credit
We also utilize unsecured and secured letters of credit to support the regulatory capital requirements of certain of our subsidiaries.
$100.0 million Bermuda Letter of Credit Facility
On December 22, 2017, we entered into a $100.0 million subsidiary capital letter of credit facility agreement. The letter of credit issued under the agreement qualifies as eligible capital for one of our Bermuda regulated subsidiaries. As of December 31, 2020, the aggregate face amount of letters of credit under the facility was $100.0 million.
GBP £32.0 million United Kingdom Letter of Credit Facility
On December 8, 2020, we entered into a £32.0 million ($43.7 million) subsidiary capital letter of credit facility agreement. The letter of credit issued under the agreement qualifies as Ancillary Own Funds capital for one of our U.K. regulated subsidiaries. As of December 31, 2020, the aggregate face amount of letters of credit under the facility was $43.7 million.
16. NONCONTROLLING INTEREST
We have both redeemable noncontrolling interest ("RNCI") and noncontrolling interest ("NCI") on our consolidated balance sheets. RNCI with redemption features that are not solely within our control are classified within temporary equity in the consolidated balance sheets and carried at redemption value, which is fair value. The change in fair value is recognized through retained earnings as if the balance sheet date were also the redemption date. In addition, we also have NCI, which does not have redemption features and is classified within equity in the consolidated balance sheets.
Redeemable Noncontrolling Interest
RNCI as of December 31, 2020 and 2019 comprised the ownership interests held by the Trident V Funds (39.3%) and the Dowling Funds (1.7%) in our subsidiary North Bay. As discussed in Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations," North Bay owned our investments in Northshore, the holding company that owns Atrium and Arden, and SSHL, the holding company for the StarStone group.
The following is a reconciliation of the beginning and ending carrying amount of the equity attributable to the RNCI for the years ended December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Balance at beginning of year
|
$
|
438,791
|
|
|
$
|
458,543
|
|
Capital contributions
|
—
|
|
|
13,127
|
|
Dividends paid
|
—
|
|
|
(11,556)
|
|
Net losses attributable to RNCI
|
(27,512)
|
|
|
(12,029)
|
|
Change in unrealized gains (losses) on AFS investments attributable to RNCI
|
1,517
|
|
|
(126)
|
|
Change in currency translation adjustments attributable to RNCI
|
(1,397)
|
|
|
10
|
|
|
|
|
|
Change in redemption value of RNCI
|
(46,224)
|
|
|
(9,178)
|
|
Cumulative effect of change in accounting principle attributable to RNCI (1)
|
261
|
|
|
—
|
|
Balance at end of year
|
$
|
365,436
|
|
|
$
|
438,791
|
|
(1) The Company adopted ASU 2016-13 and the related amendments on January 1, 2020. Refer to Note 2 - "Significant Accounting Policies" for further details.
We carried the RNCI at its estimated redemption value, which is fair value, as of December 31, 2020 and 2019. The decrease in the year ended December 31, 2020 included $27.5 million of net losses attributable to RNCI primarily arising on StarStone and which result from COVID-19 related net underwriting losses and exit costs associated with the decision to place StarStone International into run-off, partially offset by the gain on sale of StarStone U.S.; and $46.2 million due to change in redemption value. The redemption value decreased as a result of the StarStone International Run-Off decision and the agreement to sell both StarStone U.S and Northshore.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Following the completion of the Atrium Exchange Transaction on January 1, 2021, as described in Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations," we will deconsolidate the RNCI relating to Northshore in the first quarter of 2021, and thereafter the remaining RNCI will be for StarStone International.
Refer to Note 23 - "Commitments and Contingencies" for additional information regarding RNCI.
Noncontrolling Interest
As of December 31, 2020 and 2019, we had $13.6 million and $14.2 million, respectively, of NCI primarily related to external interests in three of our subsidiaries. A reconciliation of the beginning and ending carrying amount of the equity attributable to NCI is included in the consolidated statement of changes in shareholders equity.
17. SHAREHOLDERS' EQUITY
As of December 31, 2020 and 2019, the authorized share capital was 111,000,000 ordinary shares ("Voting Ordinary Shares") and non-voting convertible ordinary shares ("Non-Voting Ordinary Shares"), each of par value $1.00 per share, and 45,000,000 preferred shares of par value $1.00 per share.
Voting Ordinary Shares
Our Voting Ordinary Shares are listed and trade under the "ESGR" ticker symbol on the NASDAQ Global Select Market. Each Voting Ordinary Share entitles the holder thereof to one vote.
Share Repurchases
On March 9, 2020, our Board of Directors adopted a stock trading plan for the purpose of repurchasing a limited number of our Company’s ordinary shares, not to exceed $150.0 million in aggregate (the "Repurchase Program"). On March 23, 2020, we suspended our Repurchase Program due to uncertainty from the COVID-19 pandemic. The Repurchase Program resumed on September 21, 2020 and expires on March 1, 2021.
From inception to December 31, 2020, we repurchased 178,280 ordinary shares at an average price of 145.87, for an aggregate price of $26.0 million under the Repurchase Program. As of December 31, 2020, the remaining capacity under the Repurchase Program was $124.0 million. We did not repurchase any shares subsequent to December 31, 2020.
Joint Share Ownership Plan
On January 21, 2020, 565,630 Voting Ordinary Shares were issued to the trustee of the Enstar Group Limited Employee Benefit Trust (the "EB Trust"). Voting rights in respect of shares held in the EB Trust have been contractually waived. We have consolidated the EB Trust, and shares held in the EB Trust are classified like treasury shares as contra-equity in our consolidated balance sheet. The EB Trust supports awards made under our Joint Share Ownership Plan, as described in Note 19 - "Share-Based Compensation and Pensions."
Shares issued in acquisition of KaylaRe
On May 14, 2018, 1,501,778 Voting Ordinary Shares were issued as consideration for the acquisition of KaylaRe Holdings Ltd, as described in Note 3 - "Business Acquisitions".
Non-Voting Ordinary Shares
The Non-Voting Ordinary Shares are comprised of several different series as of December 31, 2020:
•the Series C shares were originally issued in connection with investment transactions in April and December of 2011 and on exercise of warrants in March 2017. The Series C shares: (i) have all of the economic rights (including dividend rights) attaching to Voting Ordinary Shares but are non-voting except in certain limited circumstances; (ii) will automatically convert at a one-for-one exchange ratio (subject to adjustment for share splits, dividends, recapitalizations, consolidations or similar transactions) into Voting Ordinary Shares if the registered holder transfers them in a widely dispersed offering; (iii) may only vote on certain limited matters that would constitute a variation of class rights and as required under Bermuda law, provided that the aggregate voting power of the Series C shares with respect to any merger, consolidation or amalgamation will not exceed 0.01% of the aggregate voting power of our issued share capital; and (iv) require the registered holders’ written consent in order to vary the rights of the shares in a significant and adverse manner.
•the Series B and Series D shares were created in connection with the 2011 investment transactions, but no shares in these series are issued and outstanding. Holders of the Series C shares have the right to
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
convert such shares, on a share-for-share basis, subject to certain adjustments, into Series D shares at their option. There is no economic difference in Series B, C or D shares, but there are slight differences in the conversion rights and the limited voting rights of each series.
•there were 910,010 Series E shares issued and outstanding as of December 31, 2020. On May 14, 2018, 505,239 Series E non-voting shares were issued as consideration for the acquisition of KaylaRe Holdings Ltd, as described in Note 3 - "Business Acquisitions". The Series E shares have substantially the same rights as the Series C shares, except that (i) they are convertible only into Voting Ordinary Shares and (ii) they may only vote as required under Bermuda law. The Series E shares include all other Non-Voting Ordinary Shares authorized under our bye-laws but not classified as Series A, B, C or D Non-Voting Ordinary Shares.
Warrants
As of December 31, 2020, there were warrants outstanding to acquire 175,901 Series C Non-Voting Ordinary Shares for an exercise price of $115.00 per share, subject to certain adjustments (the "Warrants"). The Warrants were issued in April 2011 and expire in April 2021.
Series C Preferred Shares
As of December 31, 2020, there were 388,571 Series C Participating Non-Voting Perpetual Preferred Shares ("Series C Preferred Shares") issued and held by one of our wholly-owned subsidiaries. The Series C Preferred Shares (i) upon liquidation, dissolution or winding up of the Company, entitle their holders to a preference over holders of our ordinary voting and non-voting shares of an amount equal to $0.001 per share with respect to surplus assets and (ii) are non-voting except in certain limited circumstances. The Series C Preferred shares have dividend rights equal to those of the ordinary voting shares, subject to certain limitations and in an amount determined by a "participation rate" that is generally reflective of the reduction in the number of Series C Preferred Shares issued in exchange for the previously outstanding Series A Shares. The Series C Preferred Shares otherwise rank on parity with the ordinary voting and non-voting shares, and they rank senior to each other class or series of share capital, unless the terms of any such class or series shall expressly provide otherwise.
Series D Preferred Shares
On June 28, 2018, the Company raised $400.0 million of gross proceeds through the public offering of 16,000 shares of its 7.00% non-cumulative fixed-to-floating rate Series D perpetual preferred shares ("Series D Preferred Shares") (equivalent to 16,000,000 depositary shares, each of which represents a 1/1,000th interest in a Series D Preferred Share), $1.00 par value and $25,000 liquidation preference (the "Liquidation Preference") per share (equivalent to $25.00 per depositary share). The depositary shares are listed and trade under the "ESGRP" ticker symbol on the NASDAQ Global Select Market. The Series D Preferred Shares are not redeemable prior to September 1, 2028, except in specified circumstances as described in the prospectus supplement relating to the offering. On and after September 1, 2028, the Series D Preferred Shares, represented by the depositary shares, will be redeemable at the Company’s option, in whole or from time to time in part, at a redemption price equal to $25,000 per Series D Preferred Share (equivalent to $25.00 per depositary share), plus any declared and unpaid dividends.
Series E Preferred Shares
On November 21, 2018, the Company raised $110.0 million of gross proceeds through the public offering of 4,400 shares of its 7.00% fixed rate non-cumulative Series E perpetual preferred shares ("Series E Preferred Shares") (equivalent to 4,400,000 depositary shares, each of which represents a 1/1,000th interest in a Series E Preferred Share), $1.00 par value and $25,000 liquidation preference (the "Series E Liquidation Preference") per share (equivalent to $25.00 per depositary share). The depositary shares are listed and trade under the "ESGRO" ticker symbol on the NASDAQ Global Select Market. The Series E Preferred Shares are not redeemable prior to March 1, 2024, except in specified circumstances as described in the prospectus supplement relating to the offering. On and after March 1, 2024, the Series E Preferred Shares, represented by the depositary shares, will be redeemable at the Company’s option, in whole or from time to time in part, at a redemption price equal to $25,000 per Series E Preferred Share (equivalent to $25.00 per depositary share), plus any declared and unpaid dividends.
Dividends on Preferred Shares
Holders of Series D and Series E Preferred Shares are entitled to receive, only when, as and if declared, non-cumulative cash dividends, paid quarterly in arrears on the 1st day of March, June, September and December of each year, commencing on September 1, 2018 for the Series D Preferred Shares and March 1, 2019 for the Series
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
E Preferred Shares, of 7.00% per annum. Commencing on September 1, 2028, the Series D Preferred Shares will convert to a floating rate basis and dividends will be payable on a non-cumulative basis, when, as and if declared, at three-month LIBOR plus 4.015% per annum. Dividends that are not declared will not accumulate and will not be payable. During the years ended December 31, 2020, 2019 and 2018, we declared and paid dividends on Series D Preferred Shares of $28.0 million, $28.0 million and $12.1 million, respectively. During the years ended December 31, 2020 and 2019, we declared and paid dividends on Series E Preferred Shares of $7.7 million and $7.9 million, respectively. On February 5, 2021, we declared $7.0 million and $1.9 million of dividends on the Series D and E Preferred Shares, respectively, to be paid on March 1, 2021 to shareholders of record as of February 15, 2021.
Any payment of dividends must be approved by our Board of Directors. Our ability to pay dividends is subject to certain restrictions, as described in Note 22 - "Dividend Restrictions and Statutory Financial Information".
Accumulated Other Comprehensive Income
The following table presents a roll forward of accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) arising during the year
|
|
Cumulative Currency Translation Adjustment
|
|
Defined Benefit Pension Liability
|
|
Total
|
Balance, December 31, 2017, net of tax
|
|
$
|
2,440
|
|
|
$
|
11,171
|
|
|
$
|
(3,143)
|
|
|
$
|
10,468
|
|
Unrealized gains (losses) on fixed income available-for-sale investments arising during the year
|
|
(2,284)
|
|
|
—
|
|
|
—
|
|
|
(2,284)
|
|
Reclassification adjustment for net realized (gains) losses included in net earnings
|
|
63
|
|
|
—
|
|
|
—
|
|
|
63
|
|
Change in currency translation adjustment
|
|
—
|
|
|
(202)
|
|
|
—
|
|
|
(202)
|
|
Decrease in defined benefit pension liability
|
|
—
|
|
|
—
|
|
|
2,156
|
|
|
2,156
|
|
Total other comprehensive income (loss)
|
|
(2,221)
|
|
|
(202)
|
|
|
2,156
|
|
|
(267)
|
|
Other comprehensive (income) loss attributable to RNCI
|
|
222
|
|
|
17
|
|
|
—
|
|
|
239
|
|
Balance, December 31, 2018, net of tax
|
|
441
|
|
|
10,986
|
|
|
(987)
|
|
|
10,440
|
|
Unrealized gains (losses) on fixed income available-for-sale investments arising during the year
|
|
2,896
|
|
|
—
|
|
|
—
|
|
|
2,896
|
|
Reclassification adjustment for net realized (gains) losses included in net earnings
|
|
(3,894)
|
|
|
—
|
|
|
—
|
|
|
(3,894)
|
|
Change in currency translation adjustment
|
|
—
|
|
|
(2,428)
|
|
|
—
|
|
|
(2,428)
|
|
Decrease in defined benefit pension liability
|
|
—
|
|
|
—
|
|
|
42
|
|
|
42
|
|
Total other comprehensive income (loss)
|
|
(998)
|
|
|
(2,428)
|
|
|
42
|
|
|
(3,384)
|
|
Other comprehensive (income) loss attributable to RNCI
|
|
125
|
|
|
(10)
|
|
|
—
|
|
|
115
|
|
Balance, December 31, 2019, net of tax
|
|
(432)
|
|
|
8,548
|
|
|
(945)
|
|
|
7,171
|
|
Unrealized gains (losses) on fixed income available-for-sale investments arising during the year
|
|
104,924
|
|
|
—
|
|
|
—
|
|
|
104,924
|
|
Reclassification adjustment for change in allowance for credit losses recognized in net earnings
|
|
(509)
|
|
|
—
|
|
|
—
|
|
|
(509)
|
|
Reclassification adjustment for net realized (gains) losses included in net earnings
|
|
(18,033)
|
|
|
—
|
|
|
—
|
|
|
(18,033)
|
|
Reclassification to earnings on disposal of subsidiary
|
|
(11,856)
|
|
|
34
|
|
|
—
|
|
|
(11,822)
|
|
Change in currency translation adjustment
|
|
—
|
|
|
(2,103)
|
|
|
—
|
|
|
(2,103)
|
|
Decrease in defined benefit pension liability
|
|
—
|
|
|
—
|
|
|
1,152
|
|
|
1,152
|
|
Total other comprehensive income (loss)
|
|
74,526
|
|
|
(2,069)
|
|
|
1,152
|
|
|
73,609
|
|
Other comprehensive (income) loss attributable to RNCI
|
|
(1,518)
|
|
|
1,397
|
|
|
—
|
|
|
(121)
|
|
Balance, December 31, 2020, net of tax
|
|
$
|
72,576
|
|
|
$
|
7,876
|
|
|
$
|
207
|
|
|
$
|
80,659
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents details about the tax effects allocated to each component of other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before Tax Amount
|
|
Tax (Expense) Benefit
|
|
Net of Tax Amount
|
Twelve months ended December 31, 2020
|
|
|
|
|
|
|
Unrealized gains (losses) on fixed income available-for-sale investments arising during the year
|
|
$
|
115,610
|
|
|
$
|
(10,686)
|
|
|
$
|
104,924
|
|
Reclassification adjustment for change in allowance for credit losses recognized in net earnings
|
|
(499)
|
|
|
(10)
|
|
|
(509)
|
|
Reclassification adjustment for net realized (gains) losses included in net earnings
|
|
(19,766)
|
|
|
1,733
|
|
|
(18,033)
|
|
Reclassification to earnings on disposal of subsidiary
|
|
(15,008)
|
|
|
3,152
|
|
|
(11,856)
|
|
Change in currency translation adjustment
|
|
(2,294)
|
|
|
191
|
|
|
(2,103)
|
|
Reclassification to earnings on disposal of subsidiary
|
|
34
|
|
|
—
|
|
|
34
|
|
Decrease in defined benefit pension liability
|
|
1,097
|
|
|
55
|
|
|
1,152
|
|
Other comprehensive income (loss)
|
|
$
|
79,174
|
|
|
$
|
(5,565)
|
|
|
$
|
73,609
|
|
In the year ended December 31, 2019 and 2018, the deferred tax (expense) benefit associated with items reported in other comprehensive income (loss) was subject to a full valuation allowance. For information on valuation allowances on deferred tax assets, refer to “Assessment of Valuation Allowance on Deferred Tax Assets” within Note 20 - "Income Taxation."
The following table presents details amounts reclassified from accumulated other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Details about AOCI components
|
|
2020
|
|
2019
|
|
2018
|
|
Affected Line Item in Statement where Net Earnings are presented
|
Unrealized gains (losses) on fixed income available-for-sale investments
|
|
18,682
|
|
|
3,894
|
|
|
(63)
|
|
|
Net realized and unrealized gains (losses)
|
|
|
16,591
|
|
|
—
|
|
|
—
|
|
|
Net earnings from discontinued operations
|
|
|
35,273
|
|
|
3,894
|
|
|
(63)
|
|
|
Total before tax
|
|
|
(4,875)
|
|
|
—
|
|
|
—
|
|
|
Income tax (expense)
|
|
|
30,398
|
|
|
3,894
|
|
|
(63)
|
|
|
Net of tax
|
Currency translation adjustment on disposal of subsidiary
|
|
(34)
|
|
|
—
|
|
|
—
|
|
|
Net earnings from discontinued operations
|
Total reclassifications for the period, net of tax
|
|
30,364
|
|
|
3,894
|
|
|
(63)
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
18. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted net earnings per ordinary share for the years ended December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Numerator:
|
|
|
|
|
|
Earnings (loss) per share attributable to Enstar ordinary shareholders:
|
|
|
|
|
|
Net earnings (loss) from continuing operations(1)
|
$
|
1,711,810
|
|
|
$
|
897,825
|
|
|
$
|
(163,232)
|
|
Net earnings from discontinued operations(2)
|
7,534
|
|
|
4,350
|
|
|
878
|
|
Net earnings (loss) attributable to Enstar ordinary shareholders
|
$
|
1,719,344
|
|
|
$
|
902,175
|
|
|
$
|
(162,354)
|
|
Denominator:
|
|
|
|
|
|
Weighted-average ordinary shares outstanding — basic(3)
|
21,551,408
|
|
|
21,482,617
|
|
|
20,698,310
|
|
Effect of dilutive securities:
|
|
|
|
|
|
Share-based compensation plans(4)
|
208,293
|
|
227,878
|
|
129,746
|
Warrants
|
58,593
|
|
64,571
|
|
76,120
|
|
|
|
|
|
|
|
Weighted-average ordinary shares outstanding — diluted
|
21,818,294
|
|
|
21,775,066
|
|
|
20,904,176
|
|
Earnings (loss) per share attributable to Enstar ordinary shareholders:
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
Net earnings (loss) from continuing operations
|
$
|
79.43
|
|
|
$
|
41.80
|
|
|
$
|
(7.89)
|
|
Net earnings from discontinued operations
|
0.35
|
|
|
0.20
|
|
|
0.05
|
|
Net earnings (loss) per ordinary share
|
$
|
79.78
|
|
|
$
|
42.00
|
|
|
$
|
(7.84)
|
|
Diluted (5):
|
|
|
|
|
|
Net earnings (loss) from continuing operations
|
$
|
78.45
|
|
|
$
|
41.23
|
|
|
$
|
(7.89)
|
|
Net earnings from discontinued operations
|
0.35
|
|
|
0.20
|
|
|
0.05
|
|
Net earnings (loss) per ordinary share
|
$
|
78.80
|
|
|
$
|
41.43
|
|
|
$
|
(7.84)
|
|
(1) Net earnings (loss) from continuing operations attributable to Enstar ordinary shareholders equals net earnings (loss) from continuing operations, plus net loss (earnings) from continuing operations attributable to noncontrolling interest, less dividends on preferred shares.
(2) Net earnings (loss) from discontinued operations attributable to Enstar ordinary shareholders equals net earnings (loss) from discontinued operations, net of income taxes, plus net loss (earnings) from discontinued operations attributable to noncontrolling interest; refer to Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations" for a breakdown by period.
(3) Weighted-average ordinary shares for basic earnings per share includes ordinary shares (voting and non-voting) but excludes ordinary shares held in the EB Trust in respect of JSOP awards.
(4) Share-based dilutive securities include restricted shares, restricted share units, and performance share units. Certain share-based compensation awards, including the ordinary shares held in the EB Trust in respect of JSOP awards, were excluded from the calculation for the year ended December 31, 2020 because they were anti-dilutive.
(5) During a period of loss, the basic weighted average ordinary shares outstanding is used in the denominator of the diluted loss per ordinary share computation as the effect of including potentially dilutive securities would be anti-dilutive.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
19. SHARE-BASED COMPENSATION AND PENSIONS
Share-based compensation
The 2016 and 2006 Equity Incentive Plans are our primary share-based compensation plans. We also maintain other share-based compensation plans as discussed below. The table below provides a summary of the compensation costs for all of our share-based compensation plans for the years ended December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Share-based compensation plans:
|
|
|
|
|
|
Restricted shares and restricted share units
|
$
|
8,286
|
|
|
$
|
6,564
|
|
|
$
|
7,641
|
|
Performance share units
|
12,678
|
|
|
23,582
|
|
|
1,968
|
|
Cash-settled stock appreciation rights
|
215
|
|
|
2,575
|
|
|
(3,316)
|
|
Joint share ownership plan expense
|
4,296
|
|
|
—
|
|
|
—
|
|
Other share-based compensation plans:
|
|
|
|
|
|
Northshore/Atrium incentive plan
|
971
|
|
|
3,652
|
|
|
2,792
|
|
StarStone incentive plan
|
(223)
|
|
|
223
|
|
|
—
|
|
Deferred compensation and ordinary share plan for non-employee directors
|
1,183
|
|
|
992
|
|
|
1,155
|
|
Employee share purchase plan
|
339
|
|
|
411
|
|
|
430
|
|
Total share-based compensation
|
$
|
27,745
|
|
|
$
|
37,999
|
|
|
$
|
10,670
|
|
The associated tax benefit recorded to income tax expense in the Consolidated statement of operations was $2.7 million, $2.9 million and $1.9 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Restricted Shares and Restricted Share Units
Restricted shares and restricted share units are service awards that typically vest over three years. These awards are share-settled and are recorded in additional paid-in capital on the consolidated balance sheets. The fair value of these awards is measured at the grant date and expensed over the service period. The following table summarizes the activity related to restricted shares and restricted share awards during 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted-Average Share Price
|
Nonvested — January 1
|
64,572
|
|
|
$180.49
|
Granted
|
70,012
|
|
|
152.28
|
Vested
|
(38,961)
|
|
|
174.93
|
Forfeited
|
(373)
|
|
|
177.73
|
Nonvested — December 31
|
95,250
|
|
|
161.60
|
The unrecognized compensation cost related to our unvested restricted share and restricted share unit awards as of December 31, 2020 was $7.9 million. This cost is recognizable over the next 2.07 years, which is the weighted average contractual life.
Performance Share Units ("PSUs")
PSUs are share-settled and vest following the end of the three-year performance period. The number of shares to vest will be determined by a performance adjustment based on either (i) the change in fully diluted book value per share ("FDBVPS") over three years, or (ii) average annual non-GAAP operating income return on equity, excluding StarStone.
Performance Share Units based on FDBVPS
The following table summarizes the awards granted, the vested and unvested PSU awards at December 31, 2020, and the performance criteria and associated performance multipliers at various levels of achievement.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Year
|
Inception-to-date Activity Roll-forward
|
|
Performance Criteria:
Change in FDBVPS (3 year)
|
|
Performance Multiplier
Levels Per Award Agreements
|
PSUs Granted
at Target
|
|
Forfeited
|
|
Estimated Change in Multiplier
|
|
Vested
|
|
Unvested at December 31, 2020
|
|
Threshold
|
|
Target
|
|
Target +
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Target +
|
|
Maximum
|
2017
|
36,321
|
|
|
(12,267)
|
|
|
9,527
|
|
|
(33,581)
|
|
|
—
|
|
|
20.00
|
%
|
|
30.00
|
%
|
|
N/A
|
|
40.00
|
%
|
|
50.00
|
%
|
|
100.00
|
%
|
|
N/A
|
|
150.00
|
%
|
2017
|
91,875
|
|
|
—
|
|
|
18,100
|
|
|
(109,975)
|
|
|
—
|
|
|
30.30
|
%
|
|
35.65
|
%
|
|
N/A
|
|
41.00
|
%
|
|
50.00
|
%
|
|
100.00
|
%
|
|
N/A
|
|
150.00
|
%
|
2018
|
39,682
|
|
|
(12,545)
|
|
|
10,218
|
|
|
(6,700)
|
|
|
30,655
|
|
|
25.00
|
%
|
|
32.50
|
%
|
|
N/A
|
|
40.00
|
%
|
|
50.00
|
%
|
|
100.00
|
%
|
|
N/A
|
|
150.00
|
%
|
2019
|
18,308
|
|
|
(1,758)
|
|
|
7,835
|
|
|
(881)
|
|
|
23,504
|
|
|
20.00
|
%
|
|
30.00
|
%
|
|
N/A
|
|
40.00
|
%
|
|
60.00
|
%
|
|
100.00
|
%
|
|
N/A
|
|
150.00
|
%
|
2020
|
22,591
|
|
|
(2,151)
|
|
|
—
|
|
|
(701)
|
|
|
19,739
|
|
|
25.00
|
%
|
|
32.50
|
%
|
|
N/A
|
|
40.00
|
%
|
|
60.00
|
%
|
|
100.00
|
%
|
|
N/A
|
|
150.00
|
%
|
2020
|
52,948
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
52,948
|
|
|
33.10
|
%
|
|
36.80
|
%
|
|
44.30
|
%
|
|
52.10
|
%
|
|
50.00
|
%
|
|
100.00
|
%
|
|
150.00
|
%
|
|
200.00
|
%
|
|
261,725
|
|
|
(28,721)
|
|
|
45,680
|
|
|
(151,838)
|
|
|
126,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For each type of PSU based on FDBVPS, a change in the FDBVPS Performance Criteria at each of Threshold, Target and Maximum will result in the application of the respective Threshold, Target and Maximum Performance Multiplier and a settlement of awards at that level. In addition, for the 2020 FDBVPS Type II award, a change in the FDBVPS Performance Criteria at "Target +" will result in the application of the "Target +" Performance Multiplier. Straight-line interpolation applies within these ranges, and no settlement occurs if the increase in FDBVPS is less than the Threshold.
Performance Share Units based on Average Annual Non-GAAP Operating Income Return on Equity ("Operating ROE")
The following table summarizes the awards granted, the vested and unvested units at December 31, 2020, and the performance criteria and associated performance multipliers at various levels of achievement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Year
|
|
Inception-to-date Activity Roll-forward
|
|
Performance Criteria:
Average Annual Operating ROE
|
|
Performance Multiplier
Levels Per Award Agreements
|
PSUs Granted
at Target
|
|
Forfeited
|
|
Estimated Change in Multiplier
|
|
Vested
|
|
Unvested at December 31, 2020
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
2019
|
|
18,308
|
|
|
(1,756)
|
|
|
7,811
|
|
|
(930)
|
|
|
23,433
|
|
|
9.60
|
%
|
|
12.00
|
%
|
|
14.40
|
%
|
|
60.00
|
%
|
|
100.00
|
%
|
|
150.00
|
%
|
2020
|
|
22,560
|
|
|
(2,151)
|
|
|
—
|
|
|
(701)
|
|
|
19,708
|
|
|
9.60
|
%
|
|
12.00
|
%
|
|
14.40
|
%
|
|
60.00
|
%
|
|
100.00
|
%
|
|
150.00
|
%
|
|
|
40,868
|
|
|
(3,907)
|
|
|
7,811
|
|
|
(1,631)
|
|
|
43,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Operating ROE is calculated based upon the non-GAAP operating income return on opening shareholder's equity, excluding StarStone. Average Annual Operating ROE is the sum of the three individual year annual operating ROE %'s divided by three. An Average Annual Operating ROE of Target to Maximum or more results in a settlement of 100% to a maximum of 150% of the units granted, respectively. An Average Annual Operating ROE of Threshold to Target results in a settlement of 60% to 100%. Straight-line interpolation applies within these ranges and no settlement occurs if the Average Annual Operating ROE is less than the Threshold.
Performance Multipliers
For expense purposes we assume a Target vesting at the initial time of award. At the end of each reporting period, we estimate the expected performance multiplier, as shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Award Description
|
|
2020
|
|
2019
|
|
2018
|
2017 FDBVPS Type I (30.00% Target Change)
|
|
139%
|
(1)
|
139%
|
|
50%
|
2017 FDBVPS Type II (35.65% Target Change)
|
|
120%
|
(1)
|
120%
|
|
50%
|
2018 FDBVPS
|
|
150%
|
(1)
|
100%
|
|
50%
|
2019 FDBVPS
|
|
150%
|
|
100%
|
|
N/A
|
2019 Average Operating ROE
|
|
150%
|
|
100%
|
|
N/A
|
2020 FDBVPS Type I (32.50% Target Change)
|
|
100%
|
|
N/A
|
|
N/A
|
2020 Average Operating ROE
|
|
100%
|
|
N/A
|
|
N/A
|
2020 FDBVPS Type II (36.80% Target Change)
|
|
100%
|
|
N/A
|
|
N/A
|
(1) Multipliers for the 2017 and 2018 awards are the final achieved terms.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The unrecognized compensation cost related to our unvested PSU share awards as of December 31, 2020 was $14.4 million. This cost is recognizable over the next 1.9 years, which is the weighted average contractual life.
Roll-forward of Performance Share Units
The following table summarizes the activity related to PSUs during 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted-Average Share Price
|
Nonvested — January 1
|
206,949
|
|
|
$185.61
|
Granted
|
98,099
|
|
|
167.94
|
Change in performance multiplier
|
25,850
|
|
|
179.71
|
Vested
|
(153,469)
|
|
|
187.24
|
Forfeited
|
(7,442)
|
|
|
146.76
|
Nonvested — December 31
|
169,987
|
|
|
174.10
|
Cash-Settled Stock Appreciation Rights
Cash-settled stock appreciation right awards ("SARs") give the holder the right, upon exercise, to receive in cash the difference between the market price per share of our ordinary shares at the time of exercise and the exercise price of the SARs. The exercise price of each SAR is equal to the market price of our ordinary shares on the date of the grant. Vested SARs are exercisable for periods not to exceed either 4 years or 10 years from the date of grant. We have not granted any new SARs since 2015.
The following table summarizes the activity related to SARs during 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of SARs
|
|
Weighted-Average Exercise Price of SARs
|
|
Weighted-Average Expected Term (in years)
|
|
Aggregate Intrinsic Value(1)
|
Balance, beginning of year
|
89,227
|
|
|
$
|
143.33
|
|
|
|
|
|
Exercised
|
(12,793)
|
|
|
136.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
76,434
|
|
|
144.40
|
|
|
1.90
|
|
$
|
4,623
|
|
(1) The aggregate intrinsic value is calculated as the pre-tax difference between the exercise price of the underlying share awards and the closing price per share of our ordinary shares of $204.89 on December 31, 2020.
Compensation expense for SARs is based on the estimated fair value on the date of grant using the Black-Scholes valuation model, which requires the use of subjective assumptions related to the expected stock price volatility, expected term, expected dividend yield and risk-free interest rate. SARs are liability-classified awards for which compensation expense and the liability are re-measured using the then-current Black Scholes assumptions at each interim reporting date based upon the portion of the requisite service period rendered. There was no unrecognized compensation cost related to our SARs as of December 31, 2020.
The following table sets forth the assumptions used to estimate the fair value of the SARs using the Black-Scholes option valuation model as of December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Weighted-average fair value per SAR
|
$
|
78.47
|
|
|
$
|
76.03
|
|
|
$
|
45.85
|
|
Weighted-average volatility
|
49.43
|
%
|
|
19.75
|
%
|
|
18.94
|
%
|
Weighted-average risk-free interest rate
|
0.15
|
%
|
|
1.64
|
%
|
|
2.72
|
%
|
Dividend yield
|
0.00
|
%
|
|
0.00
|
%
|
|
0.00
|
%
|
Joint Share Ownership Plan
Under the JSOP, we have the ability to make equity awards to our U.K.-based staff through which a recipient acquires jointly held interests in a set number of our Voting Ordinary Shares together with the independent trustee of the EB Trust at fair market value, pursuant to the terms of a joint ownership agreement. Voting rights in respect of shares held in the EB Trust are contractually waived. Shares held in the EB Trust are classified as treasury shares.
On January 21, 2020, a JSOP award comprising 565,630 underlying Voting Ordinary Shares was made to our Chief Executive Officer which cliff-vests after 3 years. The value of the award at vesting, if any, is determined based on the price of our Voting Ordinary Shares appreciating above a certain threshold between the date of grant and the vesting date. If the higher of the closing price per Share on January 20, 2023 and the 10-day volume weighted average price per Share for the ten consecutive trading days ending on January 20, 2023 (each, the "Market Price") is $266.00 or greater (the "Hurdle"), the award will have a value equal to the Market Price, less $205.89, multiplied
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
by 565,630. If the Market Price is less than $266.00 on such date, the award will have no value. In addition, 20% of the award is subject to a performance condition based on growth in fully diluted book value per share between January 1, 2020 and December 31, 2022.
The accounting for stock-settled JSOP awards is similar to options, whereby the grant date fair value of $13.6 million is expensed over the life of the award. To determine the grant date fair value of $24.13 per share, we utilized a Monte-Carlo valuation model with the following assumptions:
|
|
|
|
|
|
|
2020
|
|
|
Weighted-average volatility
|
18.66
|
%
|
Weighted-average risk-free interest rate
|
1.55
|
%
|
Dividend yield
|
0.00
|
%
|
The unrecognized compensation cost related to our unvested JSOP share awards as of December 31, 2020 was $9.4 million. This cost is recognizable over the next 2.1 years, which is the weighted average contractual life.
Other share-based compensation plans
Northshore and Atrium Incentive Plans
Our subsidiary, Northshore, had long-term incentive plans that award time-based restricted shares of Northshore to certain Atrium employees. Shares generally vested over two to three years. These share awards have been classified as liability awards. There is no unrecognized compensation as we de-consolidated Northshore on January 1, 2021 as discussed in Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations."
StarStone Incentive Plan
Our subsidiary, StarStone, had long-term incentive plans that were cash-settled plans for StarStone employees. The awards were based on StarStone's performance over two to three years. These share awards were classified as liability awards. The plan was terminated and awards settled during 2020. There is no unrecognized compensation cost.
Deferred Compensation and Ordinary Share Plan for Non-Employee Directors
The number of units credited to the accounts of non-employee directors for the years ended December 31, 2020, 2019 and 2018 under the Enstar Group Limited Deferred Compensation and Ordinary Share Plan for Non-Employee Directors (the "Deferred Compensation Plan") were 7,204, 5,976 and 5,691, respectively.
Employee Share Purchase Plan
We provide an Employee Share Purchase Plan whereby eligible employees may purchase Enstar shares at a 15% discount to market price, in an amount of share value limited to the lower of $21,250 or 15% of the employee's base salary. The 15% discount is expensed as compensation cost. The number of shares issued to employees under the Employee Share Purchase Plan for the years ended December 31, 2020, 2019 and 2018 were 16,914, 15,269 and 14,183, respectively.
Pension Plans
We provide retirement benefits to eligible employees through various plans that we sponsor. Pension expense can be affected by changes in our employee headcount. The table below summarizes the expense related to our Defined Contribution Plans and our Defined Benefit Plan for the years ended December 31, 2020, 2019 and 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Defined contribution plans
|
$
|
11,791
|
|
|
$
|
11,798
|
|
|
$
|
11,434
|
|
Defined benefit plan
|
2,975
|
|
|
684
|
|
|
2,243
|
|
Total pension expense
|
$
|
14,766
|
|
|
$
|
12,482
|
|
|
$
|
13,677
|
|
The increase in the 2020 defined benefit plan pension expense was driven by annuity purchases for partial risk transfer of certain plan liabilities. During 2020, an actuarial review was performed on the defined benefit plan, which determined that the plan’s unfunded liability, as of December 31, 2020 and 2019 was $6.9 million and $8.9 million, respectively. As of December 31, 2020 and 2019, we had an accrued liability of $6.9 million and $8.9 million, respectively, for this plan.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
20. INCOME TAXATION
Enstar Group Limited is incorporated under the laws of Bermuda and under Bermuda law is not required to pay taxes in Bermuda based upon income or capital gains. The Company, under the Exempted Undertakings Tax Protection Act of 1966, is protected against any legislation that may be enacted in Bermuda which would impose any tax on profits, income, or gain until March 31, 2035.
We have foreign operating subsidiaries and branch operations principally located in the United States, United Kingdom, Continental Europe and Australia that are subject to federal, foreign, state and local taxes in those jurisdictions. The undistributed earnings from our foreign subsidiaries will be indefinitely reinvested in those jurisdictions where the undistributed earnings were earned.
Deferred tax liabilities have not been accrued with respect to the undistributed earnings of our foreign subsidiaries. Generally, when earnings are distributed as dividends, withholding taxes may be imposed by the jurisdiction of the paying subsidiary. For our U.S. subsidiaries, we have not currently accrued any withholding taxes with respect to unremitted earnings because, solely for U.S. Federal income tax purposes, there are no accumulated positive earnings and profits that could be subject to U.S. dividend withholding tax. For our United Kingdom subsidiaries, there are no withholding taxes imposed as a matter of UK domestic tax law. For our other foreign subsidiaries, an insignificant amount of earnings is indefinitely reinvested; however, it would not be practicable to compute the related amounts of withholding taxes due to a variety of factors, including the amount, timing and manner of any repatriation. Because we operate in many jurisdictions, our net earnings are subject to risk due to changing tax laws and tax rates around the world. The current, rapidly changing economic environment may increase the likelihood of substantial changes to tax laws in the jurisdictions in which we operate.
Income Tax Expense
The following table presents earnings (loss) before income taxes by jurisdiction attributable to continuing operations, including earnings from equity method investments, for the years ended December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Domestic (Bermuda)
|
$
|
1,503,505
|
|
|
$
|
576,338
|
|
|
$
|
(232,743)
|
|
Foreign
|
231,444
|
|
|
356,878
|
|
|
15,293
|
|
Total earnings (loss) before income taxes attributable to continuing operations
|
$
|
1,734,949
|
|
|
$
|
933,216
|
|
|
$
|
(217,450)
|
|
The following table presents our current and deferred income tax expense (benefit) attributable to continuing operations by jurisdiction for the years ended December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Current:
|
|
|
|
|
|
Domestic (Bermuda)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign
|
15,232
|
|
|
16,330
|
|
|
(917)
|
|
|
15,232
|
|
|
16,330
|
|
|
(917)
|
|
Deferred:
|
|
|
|
|
|
Domestic (Bermuda)
|
—
|
|
|
—
|
|
|
—
|
|
Foreign
|
8,595
|
|
|
(3,958)
|
|
|
(2,772)
|
|
|
8,595
|
|
|
(3,958)
|
|
|
(2,772)
|
|
Total income tax expense (benefit) attributable to continuing operations
|
$
|
23,827
|
|
|
$
|
12,372
|
|
|
$
|
(3,689)
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The actual effective income tax rate differs from the statutory rate of 0 percent under Bermuda law to earnings (loss) attributable to continuing operations before income taxes, including earnings (loss) from equity method investments for the years ended December 31, 2020, 2019 and 2018 as shown in the following reconciliation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Earnings (loss) before income taxes
|
$
|
1,734,949
|
|
|
$
|
933,216
|
|
|
$
|
(217,450)
|
|
Bermuda income taxes at statutory rate
|
0.0
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
Foreign income tax rate differential
|
1.2
|
%
|
|
8.6
|
%
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in valuation allowance
|
0.1
|
%
|
|
(7.2)
|
%
|
|
(1.8)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. base erosion and anti-abuse tax
|
—
|
%
|
|
0.3
|
%
|
|
(0.3)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
0.1
|
%
|
|
(0.4)
|
%
|
|
3.2
|
%
|
Effective tax rate
|
1.4
|
%
|
|
1.3
|
%
|
|
1.7
|
%
|
Our effective tax rate is generally driven by the geographical distribution of our pre-tax earnings between our taxable and non-taxable jurisdictions.
Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities (included in other assets and other liabilities, respectively, on the consolidated balance sheet) reflect the tax effect of the differences between the financial statement carrying amount and the income tax bases of assets and liabilities. Significant components of the deferred tax assets and deferred tax liabilities as of December 31, 2020 and 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Deferred tax assets:
|
|
|
|
Net operating loss carryforwards
|
$
|
141,459
|
|
|
$
|
144,609
|
|
|
|
|
|
Insurance reserves
|
22,238
|
|
|
7,535
|
|
Unearned premiums
|
68
|
|
|
151
|
|
|
|
|
|
Provisions for bad debt
|
407
|
|
|
6,172
|
|
|
|
|
|
Defendant asbestos and environmental liabilities
|
121,006
|
|
|
140,000
|
|
Other deferred tax assets
|
16,696
|
|
|
3,230
|
|
Deferred tax assets
|
301,874
|
|
|
301,697
|
|
Valuation allowance
|
(118,229)
|
|
|
(117,390)
|
|
Deferred tax assets, net of valuation allowance
|
183,645
|
|
|
184,307
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
Unrealized gains on investments
|
(20,185)
|
|
|
(14,079)
|
|
Lloyd's underwriting profit taxable in future periods
|
(15,555)
|
|
|
(8,852)
|
|
Deferred policy acquisition cost
|
—
|
|
|
(8,267)
|
|
Other deferred tax liabilities
|
(9,242)
|
|
|
(13,390)
|
|
Deferred tax liabilities
|
(44,982)
|
|
|
(44,588)
|
|
|
|
|
|
Net deferred tax asset
|
$
|
138,663
|
|
|
$
|
139,719
|
|
Net Deferred Tax Asset (Liability) Balance by Major Jurisdiction:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
|
Net Deferred Tax
Asset
|
|
Net Deferred Tax
Asset
|
|
|
|
|
United States
|
$
|
156,730
|
|
|
$
|
154,700
|
|
United Kingdom
|
(18,095)
|
|
|
(16,074)
|
|
Other
|
28
|
|
|
1,093
|
|
Total
|
$
|
138,663
|
|
|
$
|
139,719
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Net Operating Loss Carryforwards:
As of December 31, 2020, we had net operating loss carryforwards that could be available to offset future taxable income, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Jurisdiction
|
Loss Carryforwards
|
|
Tax effect
|
|
Expiration
|
Operating and Capital Loss Carryforwards:
|
|
|
|
|
|
United States - Net operating loss
|
$
|
428,732
|
|
|
$
|
90,034
|
|
|
2024-2038
|
|
|
|
|
|
|
United Kingdom
|
185,230
|
|
|
35,194
|
|
|
Indefinitely
|
Luxembourg
|
17,200
|
|
|
4,300
|
|
|
2035-2036
|
Other
|
48,683
|
|
|
11,931
|
|
|
Indefinitely
|
The U.S. and UK net operating loss carryforwards are also subject to certain utilization limitations and have been considered in management's assessment of Valuation Allowance.
Assessment of Valuation Allowance on Deferred Tax Assets
As of December 31, 2020 and 2019, we had deferred tax asset valuation allowances of $118.2 million and $117.4 million, respectively, related to foreign subsidiaries. We recorded a net increase of $0.8 million in our deferred tax valuation allowance primarily due to a change in deferred tax assets which management does not believe meet the "more likely than not" realization standard.
The realization of deferred tax assets is dependent on generating sufficient taxable income in future periods in which the tax benefits are deductible or creditable. The amount of the deferred tax asset considered realizable, however, could be revised in the future if estimates of future taxable income change. Income taxes are determined and assessed jurisdictionally by legal entity or by filing group. Certain jurisdictions require or allow combined or consolidated tax filings. We have estimated future taxable income of our foreign subsidiaries and provided a valuation allowance in respect of those assets where we do not expect to realize a benefit. We have considered all available evidence using a “more likely than not” standard in determining the amount of the valuation allowance. We considered the following evidence: (i) net earnings or losses in recent years; (ii) the future sustainability and likelihood of positive net earnings of our subsidiaries; (iii) the carryforward periods of tax losses including the effect of reversing temporary differences; and (iv) tax planning strategies, in making our determination. The assumptions used in determining future taxable income require significant judgment and any changes in these assumptions could have an impact on earnings.
Unrecognized Tax Benefits
During the years ended December 31, 2020, 2019 and 2018, there were no unrecognized tax benefits. There were no accruals for the payment of interest and penalties related to unrecognized tax benefits as of each of December 31, 2020, 2019 and 2018.
Open Tax Years
Our operating subsidiaries may be subject to audit by various tax authorities and may have different statutes of limitations expiration dates. Tax authorities may propose adjustments to our income taxes. Listed below are the tax years that remain subject to examination by a major tax jurisdiction as of December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
Major Tax Jurisdiction
|
|
|
|
|
Open Tax Years
|
United States
|
|
|
|
|
2017-2020
|
United Kingdom
|
|
|
|
|
2019-2020
|
Australia
|
|
|
|
|
2015-2020
|
21. RELATED PARTY TRANSACTIONS
Stone Point Capital LLC
Through several private transactions occurring from May 2012 to July 2012 and an additional private transaction that closed in May 2018, investment funds managed by Stone Point Capital LLC ("Stone Point") have acquired an aggregate of 1,635,986 of our Voting Ordinary Shares (which constitutes 8.8% of our outstanding Voting Ordinary Shares). On November 6, 2013, we appointed James D. Carey to our Board of Directors. Mr. Carey is the sole member of an entity that is one of four general partners of the entities serving as general partners for Trident, is a member of the investment committees of such general partners, and is a member and senior principal
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
of Stone Point, the manager of the Trident funds.
On November 30, 2020, we completed the sale and recapitalization of StarStone U.S. to Core Specialty in a transaction described in Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations".
Pursuant to the terms of a Recapitalization Agreement entered into on August 13, 2020 among us, the Trident V Funds, which are advised by Stone Point, and the Dowling Funds (the "Recapitalization Agreement"), we agreed to exchange a portion of our indirect interest in Northshore, the holding company that owns Atrium and Arden, for all of the Trident V Funds’ indirect interest in StarStone U.S. (the “Exchange Transaction”), which is described in Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations."
Our interests in StarStone and Atrium are held through North Bay, which is a joint venture between us, the Trident V Funds and the Dowling Funds. As of December 31, 2020, we had an indirect 59.0% interest in North Bay and the Trident V Funds and the Dowling Funds owned 39.3% and 1.7%, respectively. North Bay owned 100% of StarStone Specialty Holdings Limited ("SSHL"), the holding company for the StarStone group, which included StarStone U.S. and StarStone International. North Bay also owned 92% of Northshore. North Bay also owns the preferred equity of three segregated cells within our wholly-owned subsidiary Fitzwilliam Insurance Limited (the “Fitzwilliam Cells”) that have provided reinsurance to StarStone and are considered part of StarStone International. Following the completion of the sale and recapitalization of StarStone U.S. and the Exchange Transaction, we now own 25.23% of Core Specialty on a fully diluted basis, which owns StarStone U.S., and 13.8% of Northshore, which continues to own Atrium and Arden. The Trident V Funds own 76.3% of Northshore, and the Dowling Funds own 0.4% of Core Specialty and 1.6% of Northshore. The Exchange Transaction had no impact on the ultimate ownership of SSHL, which continues to own StarStone International, with us, the Trident V Funds and the Dowling Funds retaining our and their prior ownership interests in SSHL of 59.0%, 39.3% and 1.7%, respectively.
In connection with the closing of the Exchange Transaction, we entered into amended and restated shareholders’ agreements with the Trident V Funds and the Dowling Funds with respect to our investment in SSHL and Northshore. With respect to SSHL, we have the right to designate three of five members of the SSHL board of directors and the Trident V Funds have the right to designate the other two members. The Trident V Funds also have certain customary rights as a minority shareholder to approve certain material matters and transactions. Each shareholder of SSHL must provide us and the Trident V Funds with a right of first offer to acquire its shares in SSHL if such shareholder wishes to sell them. Each shareholder will also have certain rights to participate in sales of SSHL shares by the other shareholders, and we have certain rights to cause the Trident V Funds and the Dowling Funds to sell their SSHL shares if we wish to sell control of SSHL or the StarStone International business.
Also pursuant to the terms of the shareholders’ agreement for SSHL, at any time after December 31, 2022, the Trident V Funds have the right to cause us to purchase their shares in SSHL at their fair market value, and the Dowling Funds have the right to participate in any such sale transaction initiated by the Trident V Funds. We would be entitled to pay the purchase price for such SSHL shares in cash or in unrestricted ordinary shares of Enstar that are then listed or admitted to trading on a national securities exchange. At any time after March 31, 2023, we will have the right to cause the Trident V Funds and the Dowling Funds to sell their shares in SSHL to us at their fair market value. We would be obligated to pay the purchase price for such SSHL shares in cash.
Pursuant to the terms of the shareholders’ agreement for Northshore, for so long as we own 50% or more of the Northshore shares we held upon the closing of the Exchange Transaction, we have the right to designate one member to the board of directors of Northshore and each of its material subsidiaries. Our shares in Northshore are subject to an 18-month restriction on transfer following the closing of the Exchange Transaction, after which the Trident V Funds have a right of first offer to acquire our shares in Northshore if we wish to sell them. We have certain rights to participate in sales of Northshore shares by the Trident V Funds, and the Trident V Funds have certain rights to cause us to sell our Northshore shares if the Trident V Funds wish to sell control of Northshore or the Atrium business. We, in partnership with StarStone's other shareholders, have previously completed transactions to provide capital support to StarStone in the form of:
(i) a contribution to its contributed surplus account and a loss portfolio transfer, effective October 1, 2018. To fund the transaction, the North Bay shareholders contributed an aggregate amount of $135.0 million to North Bay in proportion to their ownership interests. Trident’s proportionate contribution of $53.1 million was temporarily funded by North Bay and was reimbursed in the first quarter of 2019; and
(ii) a loss portfolio transfer, effective April 1, 2019, for which shareholders agreed to contribute an aggregate amount of $48.0 million.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In addition, Enstar has separately entered into a loss portfolio transfer and adverse development cover with StarStone effective October 1, 2019, whereby StarStone transferred $189.4 million in loss reserves and unearned premium to a wholly-owned Enstar subsidiary in exchange for premium of $189.4 million. Enstar also provided an additional $59.0 million adverse development cover in excess of the $189.4 million.
As of December 31, 2020 and December 31, 2019, the RNCI on our balance sheet relating to these Trident co-investment transactions was $350.2 million and $420.5 million, respectively.
As of December 31, 2020, we had the following additional relationships with Stone Point and its affiliates:
•Investments in funds (carried within other investments) managed by Stone Point, with respect to which we recognized net unrealized gains (losses);
•Investments in registered investment companies affiliated with entities owned by Trident or otherwise affiliated with Stone Point, with respect to which we recognized net unrealized gains (losses) and interest income;
•Separate accounts managed by Eagle Point Credit Management, PRIMA Capital Advisors and SKY Harbor Capital Management, which are affiliates of entities owned by Trident, with respect to which we incurred management fees;
•Investments in funds (carried within other investments) managed by Sound Point Capital, an entity in which Mr. Carey has an indirect minority ownership interest and serves as a director, with respect to which we recognized net unrealized gains (losses);
•Sound Point Capital has acted as collateral manager for certain of our direct investments in CLO debt and equity securities, with respect to which we recognized net unrealized gains (losses) and interest income;
•Marble Point Capital, which is an affiliate of an entity owned by Trident, has acted as collateral manager for certain of our direct investments in CLO debt and equity securities, with respect to which we recognized net unrealized gains (losses) and interest income;
•A separate account managed by Sound Point Capital, with respect to which we incurred management fees in prior periods;
•In the fourth quarter of 2018, we invested $25.0 million in Mitchell TopCo Holdings, the parent company of Mitchell International and Genex Services, as a co-investor alongside certain Trident funds; and
•In the second quarter of 2020, we invested $10.0 million in a 2 year senior secured unrated floating rate term loan facility with an extension option which was arranged and managed by Sound Point Capital. The facility's borrower, Amplify U.S. Inc., is a subsidiary of Evergreen (as defined below) and has used the proceeds to purchase AmTrust's preferred stock. The facility ranks senior to all other claims of the borrower, the purchased preferred stock and cash flows therefrom serve as collateral, and AmTrust has provided an unsecured guarantee for the facility. For further information on our relationships with Evergreen and AmTrust, refer to the AmTrust section below.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents the amounts included in our consolidated balance sheet related to our related party transactions with Stone Point and its affiliated entities:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
|
|
Short-term investments, AFS, at fair value
|
$
|
878
|
|
|
$
|
1,431
|
|
Fixed maturities, trading, at fair value
|
196,086
|
|
|
269,131
|
|
Fixed maturities, AFS, at fair value
|
227,397
|
|
|
160,303
|
|
Equities, at fair value
|
103,914
|
|
|
121,794
|
|
Other investments, at fair value:
|
|
|
|
Hedge funds
|
19,844
|
|
|
18,993
|
|
Fixed income funds
|
210,017
|
|
|
381,449
|
|
|
|
|
|
Private equity funds
|
37,262
|
|
|
34,858
|
|
CLO equities
|
38,658
|
|
|
32,560
|
|
CLO equity funds
|
166,523
|
|
|
87,509
|
|
|
|
|
|
|
|
|
|
Private Debt
|
27,016
|
|
|
16,312
|
|
Real estate fund
|
27,278
|
|
|
18,106
|
|
Total investments
|
1,054,873
|
|
|
1,142,446
|
|
Cash and cash equivalents
|
23,933
|
|
|
54,080
|
|
Other assets
|
403
|
|
|
10
|
|
Other liabilities
|
745
|
|
|
4,710
|
|
Net investment
|
$
|
1,078,464
|
|
|
$
|
1,191,826
|
|
The following table presents the amounts included in net earnings related to our related party transactions with Stone Point and its affiliated entities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Net investment income
|
$
|
16,325
|
|
|
$
|
8,733
|
|
|
$
|
7,424
|
|
Net realized and unrealized gains (losses)
|
23,750
|
|
|
26,631
|
|
|
207
|
|
Total net earnings
|
$
|
40,075
|
|
|
$
|
35,364
|
|
|
$
|
7,631
|
|
KaylaRe
On December 15, 2016, KaylaRe completed an initial capital raise of $620.0 million. We originally owned 48.2% of KaylaRe's common shares and recorded our investment in KaylaRe using the equity method basis of accounting, pursuant to the conclusion that we were not required to consolidate following an analysis based on the guidance in ASC 810 - Consolidation.
On May 14, 2018, we completed a transaction to acquire all of the outstanding shares and warrants of KaylaRe, following the receipt of all required regulatory approvals. In consideration for the acquired shares and warrants of KaylaRe, we issued an aggregate of 2,007,017 ordinary shares, comprising 1,501,778 voting ordinary shares and 505,239 Series E non-voting ordinary shares to the shareholders of KaylaRe as follows: (i) 1,204,353 voting ordinary shares and 505,239 Series E Shares to a fund managed by Hillhouse Capital Management, Ltd.; (ii) 285,986 voting ordinary shares to Trident; and (iii) 11,439 voting ordinary shares to the minority shareholder. In addition, the Shareholders Agreement between Enstar and the other KaylaRe shareholders was effectively terminated. Effective May 14, 2018 we consolidated KaylaRe into our consolidated financial statements and any balances between KaylaRe and Enstar are now eliminated on consolidation. Refer to Note 3 - "Business Acquisitions" for additional information. Effective September 30, 2019, KaylaRe and KaylaRe Ltd. merged with Cavello Bay Reinsurance Limited, a wholly-owned subsidiary of the Company, with Cavello Bay Reinsurance Limited as the surviving company.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Our consolidated statement of earnings for the year ended December 31, 2018 included the following balances related to transactions between us and KaylaRe and KaylaRe Ltd. up until May 14, 2018, the date of acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
Fee income due to Enstar Limited
|
|
|
|
|
$
|
1,453
|
|
|
|
|
|
|
|
Transactions under KaylaRe-StarStone QS:
|
|
|
|
|
|
Ceded premium earned
|
|
|
|
|
(52,651)
|
|
Net incurred losses
|
|
|
|
|
31,654
|
|
Acquisition costs
|
|
|
|
|
18,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net earnings (loss)
|
|
|
|
|
$
|
(770)
|
|
Hillhouse
Investment funds managed by Hillhouse Capital (defined below) collectively own 9.4% of Enstar’s voting ordinary shares. These funds also own non-voting ordinary shares and warrants to purchase additional non-voting ordinary shares, which together with their voting ordinary shares, represent 16.6% economic interest in Enstar. The warrants, which expire in April 2021, permit these funds to acquire 175,901 Series C Non-Voting Ordinary Shares for an exercise price of $115.00 per share, subject to certain adjustments. From February 2017 to February 2021, Jie Liu, a partner of AnglePoint (defined below), served on our Board.
We have made significant direct investments in funds (the "Hillhouse Funds") managed by Hillhouse Capital Management, Ltd. and Hillhouse Capital Advisors, Ltd. (together, "Hillhouse Capital") and AnglePoint Asset Management Ltd., an affiliate of Hillhouse Capital ("AnglePoint"). As of December 31, 2020, the carrying value (i.e., the net asset value) of our direct investment in the InRe Fund, L.P. (the "InRe Fund"), which is managed by AnglePoint, was $2.4 billion (December 31, 2019: $918.6 million). The growth in the fund for the year ended December 31, 2020 was generated by significant unrealized investment gains during the year and an increase in our subscription to the fund of $300.0 million in June 2020. The InRe Fund qualifies as a variable interest entity and our maximum exposure to loss is the amount of our investment in the fund, as disclosed in the table below. As of December 31, 2020, the InRe Fund's assets were invested (5)% in net short fixed income securities, 20% in North American equities, 67% in international equities and 18% in financing, derivatives and other items. The derivatives in the InRe Fund are used for both hedging and investment purposes. The InRe Fund utilizes prime brokerage borrowing facilities and has also securitized certain letters of credit relating to intragroup reinsurances. We do not provide any financial support to the InRe Fund. Funds that employ leverage through borrowings and derivatives can generate outsized returns but can also experience greater levels of volatility.
As of December 31, 2020 and 2019, our equity method investee, Enhanzed Re, had investments in a fund managed by AnglePoint, as set forth in the table below.
Our consolidated balance sheet as of December 31, 2020 and 2019 included the following balances related to transactions with Hillhouse Capital and AnglePoint (as applicable):
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Investments in funds managed by AnglePoint, held by Enhanzed Re
|
$
|
851,435
|
|
|
$
|
327,799
|
|
Our ownership percentage of Enhanzed Re
|
47.4
|
%
|
|
47.4
|
%
|
Our share of investments in funds managed by AnglePoint held by Enhanzed Re (through our equity method investment ownership)
|
$
|
403,580
|
|
|
$
|
155,377
|
|
|
|
|
|
Investment in other funds managed by AnglePoint and Hillhouse:
|
|
|
|
InRe Fund
|
$
|
2,365,158
|
|
|
$
|
918,633
|
|
Other funds
|
369,508
|
|
|
232,968
|
|
|
$
|
2,734,666
|
|
|
$
|
1,151,601
|
|
We incurred management and performance fees of $394.0 million, which is deducted from the Hillhouse Funds' reported NAV, for the year ended December 31, 2020 in relation to the investment in funds managed by Hillhouse Capital and AnglePoint as described above.
On February 21, 2021, we entered into a Termination and Release Agreement with InRe Fund, Hillhouse Capital, AnglePoint, and certain of their affiliates to terminate certain relationships, primarily with respect to InRe Fund, and to work collaboratively to effectuate the smooth transition of these changes. Pursuant to the Termination
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
and Release Agreement, AnglePoint will cease to serve as the InRe Fund's investment manager on or prior to April 1, 2021 in connection with the intended purchase of AnglePoint’s Hong Kong affiliate (“AnglePoint HK”) by us or our designee from affiliates of Hillhouse Capital. As part of those transactions, AnglePoint will assign its investment management agreement with InRe Fund to AnglePoint HK. In connection with AnglePoint ceasing to serve as investment manager, affiliates of Hillhouse Capital agreed to a deduction of $100.0 million from amounts due to them from the InRe Fund and to waive their right to receive any performance fees that could have been earned for 2021. The Agreement also includes mutual releases of certain liabilities and obligations between Enstar and its affiliates on the one hand and Hillhouse and its affiliates on the other hand.
In the first quarter of 2021, as a result of the Termination and Release Agreement, we will re-evaluate our conclusions with regard to consolidation of the InRe Fund in accordance with the accounting for variable interest entities.
Monument Re
Monument Insurance Group Limited ("Monument Re") was established in October 2016 and Enstar has invested a total of $59.6 million in the common and preferred shares of Monument Re as of December 31, 2020 (December 31, 2019: $26.6 million). We own 20% of the common shares of Monument Re, as well as different classes of preferred shares which have fixed dividend yields, and which collectively represented a total economic interest of 23.0% as of December 31, 2020 (December 31, 2019: 23.5%). In connection with our investment in Monument Re, we entered into a Shareholders Agreement with the other shareholders and have accounted for our equity interest in Monument Re as an equity method investment since we have significant influence over its operating and financial policies.
On May 31, 2019, we completed the transfer of our remaining life assurance policies written by our wholly-owned subsidiary Alpha Insurance SA to a subsidiary of Monument Re. In this transaction, we transferred policy benefits for life and annuity contracts with a carrying value of €88.8 million (or $99.1 million) and total assets with a fair value of €91.1 million (or $101.6 million) to a subsidiary of Monument Re.
Our investment in the common and preferred shares of Monument Re, which is included in equity method investments on our consolidated balance sheet, as of December 31, 2020 and 2019 was $193.7 million and $60.6 million, respectively.
During the twelve months ended December 31, 2020 and 2019 our share of net earnings on our investment in Monument Re was $88.3 million and $19.8 million, respectively. In addition, we received director fees from Monument Re of less than $0.1 million in connection with one of our representatives serving on Monument Re's board of directors during the twelve months ended December 31, 2020.
Clear Spring (formerly SeaBright)
Effective January 1, 2017, we sold SeaBright Insurance Company (“SeaBright Insurance”) to Clear Spring PC Acquisition Corp., a subsidiary of Delaware Life Insurance Company ("Delaware Life"). Following the sale, SeaBright Insurance was capitalized with $56.0 million of equity, with Enstar retaining a 20% indirect equity interest in SeaBright Insurance. Subsequently, SeaBright Insurance was renamed Clear Spring Property and Casualty Company ("Clear Spring"). Effective December 30, 2020, we sold our remaining interest in Clear Spring to Delaware Life for $12.2 million and recorded a gain on sale of $0.6 million in the fourth quarter of 2020. As a result, Clear Spring was not a related party as of December 31, 2020.
Prior to the sale, we accounted for our equity interest in Clear Spring as an equity method investment as we had significant influence over its operating and financial policies. Our investment in the common shares of Clear Spring which is included in equity method investments on our consolidated balance sheet, as of December 31, 2020 and 2019 was $0 and $10.6 million, respectively.
During the twelve months ended December 31, 2020 and 2019 our share of net earnings on our investment in Clear Spring was $1.0 million and $0.6 million, respectively.
Effective January 1, 2017, StarStone National Insurance Company (“StarStone National”) entered into a ceding quota share treaty with Clear Spring pursuant to which Clear Spring reinsures 33.3% of core workers' compensation business written by StarStone National. This agreement was terminated as of December 31, 2018.
Effective January 1, 2017, we also entered into an assuming quota share treaty with Clear Spring pursuant to which an Enstar subsidiary reinsures 25% of all workers' compensation business written by Clear Spring. This is recorded as other activities.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As noted above, Clear Spring was not a related party as of December 31, 2020. Our consolidated balance sheet as of December 31, 2019 included the following balances between us and Clear Spring:
|
|
|
|
|
|
|
|
|
|
|
2019
|
Balances under StarStone ceding quota share included, in assets or liabilities held-for-sale:
|
|
|
|
Reinsurance balances recoverable on paid and unpaid losses
|
|
|
$
|
22,812
|
|
Prepaid insurance premiums
|
|
|
51
|
|
Ceded payable
|
|
|
3,616
|
|
Ceded acquisition costs
|
|
|
21
|
|
|
|
|
|
Balances under assuming quota share:
|
|
|
|
Losses and LAE
|
|
|
6,135
|
|
Unearned reinsurance premiums
|
|
|
13
|
|
Funds held
|
|
|
8,611
|
|
Our consolidated statement of earnings for the years ended December 31, 2020, 2019 and 2018 included the following amounts between us and Clear Spring:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Transactions under StarStone ceding quota share, included in net earnings (loss) from discontinued operations:
|
|
|
|
|
|
Ceded premium earned
|
$
|
122
|
|
|
$
|
(14,994)
|
|
|
(29,520)
|
|
Net incurred losses and LAE
|
2,730
|
|
|
6,567
|
|
|
18,143
|
|
Acquisition costs
|
56
|
|
|
356
|
|
|
7,035
|
|
|
|
|
|
|
|
Transactions under assuming quota share:
|
|
|
|
|
|
Premium earned
|
(15)
|
|
|
3,749
|
|
|
7,380
|
|
Net incurred losses and LAE
|
1,014
|
|
|
(2,202)
|
|
|
(4,536)
|
|
Acquisition costs
|
11
|
|
|
(92)
|
|
|
(1,836)
|
|
|
|
|
|
|
|
Total net earnings (loss)
|
$
|
3,918
|
|
|
$
|
(6,616)
|
|
|
$
|
(3,334)
|
|
AmTrust
In November 2018, pursuant to a Subscription Agreement with Evergreen Parent L.P. ("Evergreen"), K-Z Evergreen, LLC and Trident Pine Acquisition LP ("Trident Pine"), we purchased equity in Evergreen in the aggregate amount of $200.0 million. Evergreen is an entity formed by private equity funds managed by Stone Point and the Karfunkel-Zyskind family that acquired the 45% of the issued and outstanding shares of common stock of AmTrust that the Karfunkel-Zyskind Family and certain of its affiliates and related parties did not already own or control. The equity interest was in the form of equity securities issued at the same price and in the same proportion as the equity interest purchased by Trident Pine. In a second transaction in December 2019, Enstar acquired an additional $25.9 million of Evergreen securities from another investor.
Following the closing of the second transaction, Enstar owns 8.5% of the equity interest in Evergreen and Trident Pine owns 21.8%. Evergreen owns all of the equity interest in AmTrust. In addition, upon the successful closing of the transaction we received a fee of $3.3 million, half of which was received upon closing, and the other half was received on the first anniversary of the closing. The fee was recorded in full in other income within our consolidated statements of earnings for the year ended December 31, 2018.
Our indirect investment in the shares of AmTrust, carried in equities on our consolidated balance sheet, as of December 31, 2020 and 2019 was $230.3 million and $240.1 million, respectively.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents the amounts included in net earnings related to our related party transactions with AmTrust:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Net investment income
|
$
|
7,365
|
|
|
$
|
7,667
|
|
|
$
|
299
|
|
Net realized and unrealized gains
|
(11,183)
|
|
|
10,086
|
|
|
—
|
|
Total net earnings
|
$
|
(3,818)
|
|
|
$
|
17,753
|
|
|
$
|
299
|
|
Citco
In June 2018, we made a $50.0 million indirect investment in the shares of Citco III Limited ("Citco"), a fund administrator with global operations. As of December 31, 2020, we owned 31.9% of the common shares in HH CTCO Holdings Limited, which in turn owns 15.4% of the convertible preferred shares, amounting to a 6.2% interest in the total equity of Citco. Pursuant to an investment agreement and in consideration for participation therein, a related party of Hillhouse Capital provided us with investment support. In a private transaction that preceded our co-investment opportunity, certain Citco shareholders, including Trident, agreed to sell all or a portion of their interests in Citco. As of December 31, 2020, Trident owned 3.4% interest in Citco. Mr. Carey currently serves as an observer to the board of directors of Citco in connection with Trident's investment therein.
Our indirect investment in the shares of Citco, which is included in equity method investments on our consolidated balance sheet, as of December 31, 2020 and 2019 was $53.0 million and $51.7 million, respectively.
During the twelve months ended December 31, 2020 and 2019 our share of net earnings on our indirect investment in Citco was $2.2 million and $2.7 million, respectively.
Enhanzed Re
Enhanzed Re is a joint venture between Enstar, Allianz SE ("Allianz") and Hillhouse Capital that was capitalized in December 2018. Enhanzed Re is a Bermuda-based Class 4 and Class E reinsurer and will reinsure life, Non-life Run-off, and property and casualty insurance business, initially sourced from Allianz and Enstar. Enstar, Allianz and Hillhouse Capital affiliates have made equity investment commitments in the aggregate of $470.0 million to Enhanzed Re. Enstar owns 47.4% of the entity, Allianz owns 24.9%, and an affiliate of Hillhouse Capital owns 27.7%. As of December 31, 2020, Enstar contributed $154.1 million of its total capital commitment to Enhanzed Re and had an uncalled amount of $68.7 million. We have accounted for our equity interest in Enhanzed Re as an equity method investment as we have significant influence over its operating and financial policies.
Enstar acts as the (re)insurance manager for Enhanzed Re, for which it receives fee income recorded within fees and commission income, AnglePoint acts as the primary investment manager, and an affiliate of Allianz provides investment management services. Enhanzed Re writes business from affiliates of its operating sponsors, Allianz SE and Enstar. It also underwrites other business to maximize diversification by risk and geography.
Our investment in the common shares of Enhanzed Re, which is included in equity method investments on our consolidated balance sheet, as of December 31, 2020 and 2019 was $330.3 million and $182.9 million, respectively.
During the twelve months ended December 31, 2020 and 2019 our share of net earnings on our investment in Enhanzed Re was $147.3 million and $28.9 million, respectively.
We have ceded 10% of the Zurich and AXA transactions, as discussed in Note 4 - "Significant New Business," to Enhanzed Re on the same terms and conditions as those received by Enstar.
During the year ended December 31, 2020, one of our UK-based Non-life Run-off subsidiaries ceded $137.0 million of net loss reserves to Enhanzed Re. The reinsurance is on a funds held basis with fixed crediting rates.
Our consolidated balance sheet as of December 31, 2020 and 2019 included the following balances between us and Enhanzed Re:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Balances under ceding quota share:
|
|
|
|
Reinsurance balances recoverable
|
$
|
208,379
|
|
|
$
|
59,601
|
|
Funds held
|
193,981
|
|
|
50,089
|
|
Insurance balances payables
|
1,276
|
|
|
1,443
|
|
|
|
|
|
Other assets
|
730
|
|
|
1,033
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Our consolidated statement of earnings for the years ended December 31, 2020 and 2019 included the following amounts between us and Enhanzed Re:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Amounts under ceding quota share:
|
|
|
|
Ceded premium earned
|
$
|
(391)
|
|
|
$
|
—
|
|
Net incurred losses and LAE
|
(5,977)
|
|
|
—
|
|
Acquisition costs
|
169
|
|
|
73
|
|
Net investment income
|
(4,272)
|
|
|
—
|
|
Net realized and unrealized gains
|
(740)
|
|
|
—
|
|
Other income
|
2,617
|
|
|
—
|
|
Fees and commission income
|
572
|
|
|
749
|
|
Total Net earnings
|
$
|
(8,022)
|
|
|
$
|
822
|
|
|
|
|
|
Change in unrealized gains (losses) on AFS investments
|
$
|
(2,729)
|
|
|
$
|
—
|
|
Core Specialty
Following the sale and recapitalization of StarStone U.S. as described in Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations," our investment in the common shares of Core Specialty, which is included in equity method investments on our consolidated balance sheet was $235.0 million as of December 31, 2020.
In connection with the sale and recapitalization of StarStone U.S. we entered into an LPT and ADC reinsurance agreement with respect to StarStone U.S.’ legacy reserves. Concurrent with the closing of the LPT and ADC reinsurance agreement, we entered into an ASA with StarStone U.S., through which one of our wholly-owned subsidiaries was appointed as an independent contractor to provide certain administrative services covering the business we assumed from StarStone U.S. through the LPT and ADC reinsurance agreement.
In addition, concurrent with the sale of StarStone U.S. to Core Specialty, one of our wholly-owned subsidiaries entered into a TSA with Core Specialty through which our subsidiary and Core Specialty agreed to provide certain transitional services to each other relating to the StarStone U.S. businesses, for a specified period of time.
On completion of the sale and recapitalization of StarStone U.S. on November 30, 2020, we received $235.0 million of Core Specialty shares and $51.5 million of cash. Subsequently, the cash component of the consideration has been determined to be $47.0 million. The surplus of $4.5 million is repayable to Core Specialty and is recorded within other liabilities.
Furthermore, there are existing reinsurance agreements whereby (i) certain of our subsidiaries provide reinsurance protection to StarStone U.S. ("the assuming reinsurances") and (ii) StarStone U.S. provides reinsurance protection to certain of our subsidiaries ("the ceding reinsurances"). These arrangements remain in place.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Our consolidated balance sheet as of December 31, 2020 included the following balances between us and Core Specialty:
|
|
|
|
|
|
|
2020
|
Balances under assuming quota share, LPT and ADC reinsurances:
|
|
Funds held by reinsured companies
|
$
|
58,086
|
|
Other assets
|
38,846
|
|
Losses and loss adjustment expenses
|
682,637
|
|
Insurance and reinsurance balances payable
|
24,806
|
|
Other liabilities
|
5,003
|
|
|
|
Balances under ceding reinsurances:
|
|
Reinsurance balances recoverable on paid and unpaid losses
|
1,736
|
|
|
|
Balances under service agreements:
|
|
Other assets
|
6,727
|
|
Other liabilities
|
328
|
|
|
|
Balances under sale and recapitalization agreement:
|
|
Other liabilities
|
4,512
|
|
Our consolidated statement of earnings for the year ended December 31, 2020 included the following amounts between us and Core Specialty:
|
|
|
|
|
|
|
2020
|
Transactions under assuming quota share, LPT and ADC reinsurances:
|
|
Net premiums earned
|
$
|
76
|
|
Net incurred losses and loss adjustment expenses
|
(1,223)
|
|
Acquisition costs
|
458
|
|
|
|
Transactions under service agreements:
|
|
Fees and commission income
|
4,004
|
|
|
|
Total net earnings
|
$
|
3,315
|
|
22. DIVIDEND RESTRICTIONS AND STATUTORY FINANCIAL INFORMATION
Parent Company Dividend Restrictions
There were no significant restrictions on the Parent Company's ability to pay dividends from retained earnings as of December 31, 2020. Bermuda law permits the payment of dividends if (i) we are not, or would not be after payment, unable to pay our liabilities as they become due and (ii) the realizable value of our assets is in excess of our liabilities after taking such payment into account. We have not historically declared a dividend on our ordinary shares. The issuance of our Series D and E Preferred Shares have resulted in the declaration of dividends. Holders of Series D and Series E Preferred Shares are entitled to receive, only when, as and if declared, non-cumulative cash dividends, paid quarterly in arrears on the 1st day of March, June, September and December of each year of 7.0% per annum. Refer to Note 17 - "Shareholders' Equity" for details regarding dividends on preferred shares.
The Bermuda Monetary Authority ("BMA") acts as group supervisor to Enstar. On an annual basis, we are required to file group statutory financial statements, a group statutory financial return, a group capital and solvency return, audited group financial statements and a Group Solvency Self-Assessment ("GSSA") with the BMA. The
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
GSSA is designed to document our perspective on the capital resources necessary to achieve our business strategies and remain solvent, and to provide the BMA with insights on our risk management, governance procedures and documentation related to this process. We are required to maintain available group statutory capital and surplus in an amount that is at least equal to the group enhanced capital requirement ("Group ECR"). The BMA has also established a group target capital level equal to 120% of the Group ECR. We are in compliance with these requirements.
Our ability to pay dividends to our shareholders is dependent upon the ability of our (re)insurance subsidiaries to distribute capital and pay dividends to us. Our (re)insurance subsidiaries are subject to certain regulatory restrictions on the distribution of capital and payment of dividends in the jurisdictions in which they operate, as described below. The restrictions are generally based on net income or levels of capital and surplus as determined in accordance with the relevant statutory accounting practices. Failure of these subsidiaries to meet their applicable regulatory requirements could result in restrictions on any distributions of capital or retained earnings or stricter regulatory oversight of the subsidiaries.
Our ability to pay dividends and make other forms of distributions may also be limited by repayment obligations and financial covenants in our outstanding loan facility agreements.
Subsidiary Statutory Financial Information and Dividend Restrictions
Our (re)insurance subsidiaries prepare their statutory financial statements in accordance with statutory accounting practices prescribed or permitted by local regulators. Statutory and local accounting differs from U.S. GAAP, including in the treatment of investments, acquisition costs and deferred income taxes, amongst other items.
The statutory capital and surplus amounts for the years ended December 31, 2020 and 2019 and statutory net income amounts for the years ended December 31, 2020, 2019 and 2018 for our (re)insurance subsidiaries based in Bermuda, the United Kingdom, Australia, the United States and Continental Europe are summarized in the table below which includes information relating to acquisitions from the year of acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory Capital and Surplus
|
|
|
|
|
|
|
|
Required
|
|
Actual
|
|
Statutory Income
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2018
|
Bermuda
|
$
|
2,711,687
|
|
|
$
|
2,138,395
|
|
|
$
|
5,565,429
|
|
|
$
|
4,016,663
|
|
|
$
|
1,850,913
|
|
|
$
|
643,683
|
|
|
$
|
29,486
|
|
U.K.
|
803,685
|
|
|
837,104
|
|
|
1,224,208
|
|
|
1,532,751
|
|
|
43,219
|
|
|
154,644
|
|
|
(52,936)
|
|
U.S.
|
185,904
|
|
|
364,507
|
|
|
554,339
|
|
|
861,379
|
|
|
(67,477)
|
|
|
121,406
|
|
|
(75,005)
|
|
Europe
|
95,746
|
|
|
94,334
|
|
|
214,115
|
|
|
229,344
|
|
|
(983)
|
|
|
11,816
|
|
|
(17,611)
|
|
Australia
|
18,858
|
|
|
18,110
|
|
|
58,531
|
|
|
37,815
|
|
|
(1,722)
|
|
|
4,847
|
|
|
1,761
|
|
As of December 31, 2020, the total amount of net assets of our consolidated subsidiaries that were restricted was $3.8 billion.
Certain material aspects of these laws and regulations as they relate to solvency, dividends and capital and surplus are summarized below.
Bermuda
Our Bermuda-based (re)insurance subsidiaries are registered under the Insurance Act 1978 of Bermuda and related regulations, as amended (the "Insurance Act"). The Insurance Act imposes certain solvency and liquidity standards and auditing and reporting requirements and grants the BMA powers to supervise, investigate, require information and the production of documents and intervene in the affairs of insurance companies.
The Insurance Act requires that our Bermuda-based (re)insurance subsidiaries maintain certain solvency and liquidity standards. The minimum liquidity ratio requires that the value of relevant assets not be less than 75% of the amount of relevant liabilities. The minimum solvency margin, which varies depending on the class of the insurer, is determined as a percentage of either net reserves for losses and LAE or premiums. Our Bermuda subsidiaries with commercial insurance licenses are required to maintain a minimum statutory capital and surplus (Enhanced Capital Requirement or "ECR") at least equal to the greater of a minimum solvency margin or the Bermuda Solvency Capital Requirement ("BSCR"). The BSCR is calculated based on a standardized risk-based capital model as provided by the BMA.
Each of our regulated Bermuda subsidiaries would be prohibited from declaring or paying any dividends if it were in breach of its minimum solvency margin or liquidity ratio or if the declaration or payment of such dividends
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
would cause it to fail to meet such margin or ratio. In addition, each of our regulated Bermuda subsidiaries is prohibited, without the prior approval of the BMA, from reducing by 15% or more its total statutory capital, or from reducing by 25% of more its total statutory capital and surplus, as set out in its previous year’s statutory financial statements. Our Bermuda insurance companies that are in run-off are required to seek BMA approval for any dividends or distributions.
As of December 31, 2020 and 2019, each of our Bermuda-based (re)insurance subsidiaries exceeded their respective minimum solvency and liquidity requirements. The Bermuda (re)insurance subsidiaries in aggregate exceeded minimum solvency requirements by $2.9 billion as of December 31, 2020 (2019: $1.9 billion) and were in compliance with their liquidity requirements.
United Kingdom
U.K. Insurance Companies (non-Lloyd's)
Our U.K. based insurance subsidiaries are regulated by the U.K. Prudential Regulatory Authority (the "PRA") and the Financial Conduct Authority (the "FCA", together with the PRA, the "U.K. Regulator").
Our U.K.-based insurance subsidiaries are required to maintain adequate financial resources in accordance with the requirements of the U.K. Regulator. Insurers must comply with a Solvency Capital Requirement ("SCR"), which is calculated using either the Solvency II standard formula or a bespoke internal model. Our non-Lloyd's U.K. companies use the standard formula for determining compliance with the SCR.
The calculation of the minimum capital resources requirements in any particular case depends on, among other things, the type and amount of insurance business written and claims paid by the insurance company. As of December 31, 2020 and 2019, all of our U.K. insurance subsidiaries maintained capital in excess of the minimum capital resources requirements and complied with the relevant U.K. Regulator requirements. Our U.K.-based insurance subsidiaries, including our Lloyd's Syndicates described below, in aggregate, maintained capital in excess of the minimum capital resources requirements by $420.5 million and $695.6 million as of December 31, 2020 and 2019, respectively.
The U.K. Regulator’s rules require our U.K. insurance subsidiaries to obtain regulatory approval for any proposed or actual payment of a dividend. The U.K. Regulator uses the SCR, among other tests, when assessing requests to make distributions.
Lloyd’s
As of December 31, 2020, we participated in the Lloyd’s market through our interests in: (i) Atrium’s Syndicate 609, which is managed by Atrium Underwriters Limited, a Lloyd's managing agent; (ii) StarStone’s Syndicate 1301, which is managed by StarStone Underwriting Limited ("SUL"), a Lloyd’s managing agent; and (iii) Syndicate 2008, a wholly aligned syndicate that has permission to underwrite RITC business and other run-off or discontinued business type transactions with other Lloyd’s syndicates. We participated on each of the three syndicates through a single, wholly owned Lloyd’s corporate member. SUL serves as managing agent for Syndicate 2008. On November 17, 2020, we announced an agreement to sell SUL, together with the right to operate StarStone's Syndicate 1301; and on January 1, 2021, we sold the Atrium business. These transactions are discussed further in Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations."
The underwriting capacity of a member of Lloyd’s is supported by providing Funds at Lloyd’s, as described in Note 6 - "Investments". Business plans, including maximum underwriting capacity, for Lloyd’s syndicates requires annual approval by the Lloyd’s Franchise Board, which may require changes to any business plan or additional capital to support underwriting plans.
The Lloyd’s market has applied the Solvency II internal model under Lloyd’s supervision, and our Lloyd’s operations are required to meet Solvency II standards. Lloyd's has the approval of the PRA to use its internal model under the Solvency II regime.
United States
Our U.S. Non-life Run-off (re)insurance subsidiaries are subject to the insurance laws and regulations of the states in which they are domiciled, licensed and/or eligible to conduct business. These laws restrict the amount of dividends the subsidiaries can pay to us. The restrictions are generally based on statutory net income and/or certain levels of statutory surplus as determined in accordance with the relevant statutory accounting requirements of the individual domiciliary states or states in which any of the (re)insurance subsidiaries are commercially domiciled. Generally, prior regulatory approval must be obtained before an insurer may make a distribution above a specified
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
level.
The U.S. (re)insurance subsidiaries are also required to maintain minimum levels of solvency and liquidity as determined by law, and to comply with Risk-Based Capital ("RBC") requirements and licensing rules as specified by the National Association of Insurance Commissioners ("NAIC"). RBC is used to evaluate the adequacy of capital and surplus maintained by our U.S. (re)insurance subsidiaries in relation to three major risk areas associated with: (i) asset risk; (ii) insurance risk and (iii) other risks. For all of our U.S. (re)insurance subsidiaries, with the exception of one subsidiary which has a permitted accounting practice to treat an adverse development cover reinsurance agreement as prospective reinsurance, there are no prescribed or permitted statutory accounting practices that differ significantly from the statutory accounting principles established by NAIC.
As of December 31, 2020, all of our U.S. non-life (re)insurance subsidiaries exceeded their required levels of risk-based capital. On an aggregate basis, our U.S. non-life (re)insurance subsidiaries exceeded their minimum levels of risk-based capital as of December 31, 2020 by $362.2 million (2019: $488.3 million).
Europe
Our Liechtenstein insurance subsidiary (StarStone Insurance SE) is regulated by the Liechtenstein Financial Market Authority ("FMA") pursuant to the Liechtenstein Insurance Supervisory Act. This subsidiary is obligated to maintain a minimum solvency margin based on the Solvency II regulations. As of December 31, 2020, this subsidiary exceeded the Solvency II requirements by $97.6 million (2019: $119.0 million). The amount of dividends that this subsidiary is permitted to distribute is restricted to freely distributable reserves, which consist of retained earnings, the current year profit and legal reserves. Any dividend exceeding the current year profit requires the FMA’s approval. Solvency and capital requirements for this subsidiary are based on the Solvency II framework and must continue to be met following any distribution.
Our Belgian insurance subsidiary files financial statements and returns with the National Bank of Belgium. This subsidiary was in compliance with its solvency and capital requirements under Solvency II.
Australia
The Company’s Australian insurance subsidiary is regulated and subject to prudential supervision by the Australian Prudential Regulation Authority (“APRA”). APRA is the primary regulatory body responsible for regulating compliance with the Insurance Act 1973. APRA’s prudential standards require that all insurers maintain and meet prescribed capital adequacy requirements designed to ensure that insurers to meet their insurance obligations under a wide range of scenarios.
A run-off insurer must obtain APRA’s written consent prior to making any capital releases, including any payment of dividends, not from current year profits. The Company’s insurance subsidiary must provide APRA a valuation prepared by its Appointed Actuary that demonstrates that the tangible assets of the insurer, after the proposed capital reduction, are sufficient to cover its insurance liabilities.
23. COMMITMENTS AND CONTINGENCIES
Concentration of Credit Risk
We believe that there are no significant concentrations of credit risk associated with our cash and cash equivalents, fixed maturity investments, or other investments. Our cash and investments are managed pursuant to guidelines that follow prudent standards of diversification and liquidity, and limit the allowable holdings of a single issue and issuers. We are also subject to custodial credit risk on our investments, which we manage by diversifying our holdings amongst large financial institutions that are highly regulated.
We have exposure to credit risk on certain of our assets pledged to ceding companies under insurance contracts. In addition, we are potentially exposed should any insurance intermediaries be unable to fulfill their contractual obligations with respect to payments of balances owed to and by us.
Credit risk exists in relation to (re)insurance balances recoverable on paid and unpaid losses. We remain liable to the extent that counterparties do not meet their contractual obligations and, therefore, we evaluate and monitor concentration of credit risk among our (re)insurers.
We are also subject to credit risk in relation to funds held by reinsured companies. Under funds held arrangements, the reinsured company has retained funds that would otherwise have been remitted to our reinsurance subsidiaries. The funds may be placed into trust or subject to other security arrangements. However,
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
we generally have the contractual ability to offset any shortfall in the payment of the funds held balances with amounts owed by us. As of December 31, 2020, we had a significant funds held concentration of $955.0 million to one reinsured company which has financial strength credit ratings of A+ from A.M. Best and AA from S&P.
We limit the amount of credit exposure to any one counterparty and none of our counterparty credit exposures, excluding U.S. government instruments and the counterparty noted above, exceeded 10% of shareholders’ equity as of December 31, 2020. Our credit exposure to the U.S. government was $1.4 billion as of December 31, 2020.
Legal Proceedings
We are, from time to time, involved in various legal proceedings in the ordinary course of business, including litigation and arbitration regarding claims. Estimated losses relating to claims arising in the ordinary course of business, including the anticipated outcome of any pending arbitration or litigation are included in the liability for losses and LAE in our consolidated balance sheets. In addition to claims litigation, we may be subject to other lawsuits and regulatory actions in the normal course of business, which may involve, among other things, allegations of underwriting errors or omissions, employment claims or regulatory activity. We do not believe that the resolution of any currently pending legal proceedings, either individually or taken as a whole, will have a material effect on our business, results of operations or financial condition. We anticipate that, similar to the rest of the (re)insurance industry, we will continue to be subject to litigation and arbitration proceedings in the ordinary course of business, including litigation generally related to the scope of coverage with respect to asbestos and environmental and other claims.
Unfunded Investment Commitments
As of December 31, 2020, we had unfunded commitments of $975.5 million to other investments, $68.7 million to equity method investments and $5.0 million to fixed maturity investments.
Guarantees
As of December 31, 2020 and 2019, parental guarantees and capital instruments supporting subsidiaries' insurance obligations were $1.5 billion and $1.0 billion, respectively. We also guarantee the Junior Subordinated Notes and the FAL facility, which are described in Note 15 - "Debt Obligations and Credit Facilities."
Redeemable Noncontrolling Interest
We have the right to purchase the RNCI interests from the RNCI holders at certain times in the future (each such right, a "call right") and the RNCI holders have the right to sell their RNCI interests to us at certain times in the future (each such right, a "put right"). Pursuant to the Exchange Transaction described in Note 21 - "Related Party Transactions" we exchanged a portion of our indirect interest in Northshore, the holding company that owns Atrium and Arden, for all of the Trident V Funds' indirect interest in StarStone U.S. on January 1, 2021. Following the closing of the Exchange Transaction, we have maintained a call right over the portion of SSHL owned by the Trident V Funds and the Dowling Funds, and they will maintain put rights to transfer those interests to us.
Leases
We have recognized a right-of-use asset and an offsetting lease liability on our consolidated balance sheets, relating primarily to office space and facilities that we have leased to conduct our business operations. On an ongoing basis we determine whether an arrangement is a lease or contains a lease at inception and also complete an assessment to determine the classification of each lease as either a finance lease or an operating lease. Our leases are all currently classified as operating leases.
Our leases have remaining lease terms of one year to 36 years, some of which include options to extend the lease term for up to five years and some of which include options to terminate the lease within one year. We consider these options in determining the lease term used to establish our right-of-use assets and lease liabilities. Renewal options that we believe we are likely to exercise are considered when determining lease terms. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Since a majority of our leases do not provide an implicit discount rate, we use our collateralized incremental borrowing rate in determining the present value of lease payments.
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The table below provides the lease cost and other information relating to our operating leases for the years ended December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Lease cost:
|
|
|
|
Operating lease cost
|
$
|
12,720
|
|
|
$
|
13,627
|
|
Short-term lease cost(1)
|
246
|
|
|
—
|
|
Total lease cost
|
12,966
|
|
|
13,627
|
|
Sub-lease income(2)
|
(553)
|
|
|
(542)
|
|
Total net lease cost
|
$
|
12,413
|
|
|
$
|
13,085
|
|
|
|
|
|
Other information:
|
|
|
|
Operating cash paid for amounts included in the measurement of lease liabilities
|
$
|
13,421
|
|
|
$
|
11,129
|
|
Non-cash activity: right-of-use assets relating to leases
|
295
|
|
|
57,536
|
|
|
|
|
|
Weighted-average remaining lease term
|
6.1 years
|
|
6.3 years
|
Weighted-average discount rate
|
6.5
|
%
|
|
6.3
|
%
|
(1) Leases with an initial lease term of twelve months or less are not recognized within our consolidated balance sheets.
(2) Sub-lease income consists of rental income received from third parties to whom we have sub-leased some of our leased office spaces and is included within other income in our consolidated statements of earnings.
Lease expense for the year ended December 31, 2018 was $11.3 million, relating to office space and facilities that we leased to conduct our business operations.
The table below provides a summary of the operating leases recorded on our consolidated balance sheets for the years ended December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet classification
|
|
2020
|
|
2019
|
Right-of-use assets (1) (2)
|
Other assets
|
|
$
|
32,297
|
|
|
$
|
46,747
|
|
Current lease liabilities (2)
|
Other liabilities
|
|
7,959
|
|
|
11,403
|
|
Non-current lease liabilities (2)
|
Other liabilities
|
|
27,064
|
|
|
34,785
|
|
(1) Following our decision to put the StarStone International operations into orderly run-off effective June 10, 2020, we recorded total impairment charges of $3.5 million on the right-of-use assets relating to certain StarStone International operating leases as of December 31, 2020.
(2) The right-of-use assets and the total lease liability balances exclude balances of $1.0 million and $0.8 million respectively, related to Atrium which have been reclassified to held-for-sale balances on our consolidated balance sheet as of December 31, 2020.
The table below provides a summary of the contractual maturities of our operating lease liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
2026 and beyond
|
|
Total lease payments
|
|
Less: Imputed interest
|
|
Present value of lease liabilities
|
Contractual maturities
|
|
$
|
9,774
|
|
|
8,099
|
|
|
7,267
|
|
|
5,561
|
|
|
4,534
|
|
|
8,577
|
|
|
43,812
|
|
|
(8,789)
|
|
|
$
|
35,023
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
24. SEGMENT INFORMATION
We have three reportable segments of business that are each managed, operated and separately reported: (i) Non-life Run-off; (ii) Atrium; and (iii) StarStone. Our other activities, which do not qualify as a reportable segment, include our corporate expenses, debt servicing costs, holding company income and expenses, foreign exchange and other miscellaneous items. These segments are described in Note 1 - "Description of Business."
As discussed in Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations," the strategic transactions related to our Atrium and StarStone segments will enable us to focus on our core Non-life Run-off business. We will review and assess our segment structure in 2021 to reflect the changes to the StarStone and Atrium segments in the fourth quarter of 2020 and the first quarter of 2021, respectively.
The following tables set forth selected and consolidated statement of earnings results by segment for the years ended December 31, 2020, 2019, and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Non-life
Run-off
|
|
Atrium
|
|
StarStone
|
|
Other
|
|
Total
|
Gross premiums written
|
$
|
5,191
|
|
|
$
|
206,656
|
|
|
$
|
326,695
|
|
|
$
|
13,441
|
|
|
$
|
551,983
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums written
|
$
|
2,987
|
|
|
$
|
183,194
|
|
|
$
|
233,202
|
|
|
$
|
13,441
|
|
|
$
|
432,824
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
$
|
58,695
|
|
|
$
|
175,393
|
|
|
$
|
318,115
|
|
|
$
|
19,889
|
|
|
$
|
572,092
|
|
Net incurred losses and LAE
|
(44,995)
|
|
|
(87,226)
|
|
|
(266,738)
|
|
|
(16,967)
|
|
|
(415,926)
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition costs
|
(20,177)
|
|
|
(59,611)
|
|
|
(90,797)
|
|
|
(435)
|
|
|
(171,020)
|
|
Operating expenses
|
(200,990)
|
|
|
(13,078)
|
|
|
(81,853)
|
|
|
—
|
|
|
(295,921)
|
|
Underwriting income (loss)
|
(207,467)
|
|
|
15,478
|
|
|
(121,273)
|
|
|
2,487
|
|
|
(310,775)
|
|
Net investment income
|
282,048
|
|
|
5,542
|
|
|
27,443
|
|
|
(12,216)
|
|
|
302,817
|
|
Net realized and unrealized gains
|
1,627,526
|
|
|
4,165
|
|
|
10,328
|
|
|
—
|
|
|
1,642,019
|
|
Fees and commission income
|
19,462
|
|
|
22,984
|
|
|
—
|
|
|
—
|
|
|
42,446
|
|
Other income (losses)
|
99,940
|
|
|
131
|
|
|
3,734
|
|
|
(2,673)
|
|
|
101,132
|
|
Corporate expenses
|
(97,727)
|
|
|
(21,522)
|
|
|
(42,011)
|
|
|
(44,298)
|
|
|
(205,558)
|
|
Interest income (expense)
|
(67,195)
|
|
|
—
|
|
|
(2,110)
|
|
|
9,997
|
|
|
(59,308)
|
|
Net foreign exchange gains (losses)
|
(13,214)
|
|
|
4,327
|
|
|
(10,140)
|
|
|
2,634
|
|
|
(16,393)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS (LOSS) BEFORE INCOME TAXES
|
1,643,373
|
|
|
31,105
|
|
|
(134,029)
|
|
|
(44,069)
|
|
|
1,496,380
|
|
Income tax expense
|
(17,412)
|
|
|
(4,122)
|
|
|
(902)
|
|
|
(1,391)
|
|
|
(23,827)
|
|
Earnings from equity method investments
|
238,569
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
238,569
|
|
NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS
|
1,864,530
|
|
|
26,983
|
|
|
(134,931)
|
|
|
(45,460)
|
|
|
1,711,122
|
|
Net earnings from discontinued operations, net of income taxes
|
—
|
|
|
—
|
|
|
16,251
|
|
|
—
|
|
|
16,251
|
|
NET EARNINGS (LOSS)
|
1,864,530
|
|
|
26,983
|
|
|
(118,680)
|
|
|
(45,460)
|
|
|
1,727,373
|
|
Net (earnings) loss attributable to noncontrolling interest
|
1,597
|
|
|
(11,059)
|
|
|
37,133
|
|
|
—
|
|
|
27,671
|
|
NET EARNINGS (LOSS) ATTRIBUTABLE TO ENSTAR
|
1,866,127
|
|
|
15,924
|
|
|
(81,547)
|
|
|
(45,460)
|
|
|
1,755,044
|
|
Dividends on preferred shares
|
—
|
|
|
—
|
|
|
—
|
|
|
(35,700)
|
|
|
(35,700)
|
|
NET EARNINGS (LOSS) ATTRIBUTABLE TO ENSTAR ORDINARY SHAREHOLDERS
|
$
|
1,866,127
|
|
|
$
|
15,924
|
|
|
$
|
(81,547)
|
|
|
$
|
(81,160)
|
|
|
$
|
1,719,344
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios:
|
|
|
|
|
|
|
|
|
|
Loss ratio
|
|
|
49.7
|
%
|
|
83.8
|
%
|
|
|
|
|
Acquisition expense ratio
|
|
|
34.0
|
%
|
|
28.5
|
%
|
|
|
|
|
Operating expense ratio
|
|
|
7.5
|
%
|
|
25.8
|
%
|
|
|
|
|
Combined ratio
|
|
|
91.2
|
%
|
|
138.1
|
%
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
Non-life
Run-off
|
|
Atrium
|
|
StarStone
|
|
Other
|
|
Total
|
Gross premiums written
|
$
|
(25,069)
|
|
|
$
|
192,373
|
|
|
$
|
472,815
|
|
|
$
|
18,534
|
|
|
$
|
658,653
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums written
|
$
|
(25,338)
|
|
|
$
|
172,356
|
|
|
$
|
379,523
|
|
|
$
|
18,512
|
|
|
$
|
545,053
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
$
|
168,496
|
|
|
$
|
164,059
|
|
|
$
|
451,112
|
|
|
$
|
20,380
|
|
|
$
|
804,047
|
|
Net incurred losses and LAE
|
(51,625)
|
|
|
(77,276)
|
|
|
(469,240)
|
|
|
(16,038)
|
|
|
(614,179)
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition costs
|
(73,642)
|
|
|
(56,956)
|
|
|
(109,369)
|
|
|
(642)
|
|
|
(240,609)
|
|
Operating expenses
|
(199,756)
|
|
|
(14,452)
|
|
|
(60,627)
|
|
|
—
|
|
|
(274,835)
|
|
Underwriting income (loss)
|
(156,527)
|
|
|
15,375
|
|
|
(188,124)
|
|
|
3,700
|
|
|
(325,576)
|
|
Net investment income
|
275,236
|
|
|
7,049
|
|
|
34,396
|
|
|
(8,410)
|
|
|
308,271
|
|
Net realized and unrealized gains
|
968,350
|
|
|
6,195
|
|
|
31,572
|
|
|
5,849
|
|
|
1,011,966
|
|
Fees and commission income
|
18,293
|
|
|
10,160
|
|
|
—
|
|
|
—
|
|
|
28,453
|
|
Other income
|
34,809
|
|
|
140
|
|
|
329
|
|
|
1,792
|
|
|
37,070
|
|
Corporate expenses
|
(70,689)
|
|
|
(13,825)
|
|
|
(7,790)
|
|
|
(45,945)
|
|
|
(138,249)
|
|
Interest income (expense)
|
(62,055)
|
|
|
—
|
|
|
(475)
|
|
|
9,989
|
|
|
(52,541)
|
|
Net foreign exchange gains (losses)
|
9,918
|
|
|
(504)
|
|
|
(1,505)
|
|
|
3
|
|
|
7,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS (LOSS) BEFORE INCOME TAXES
|
1,017,335
|
|
|
24,590
|
|
|
(131,597)
|
|
|
(33,022)
|
|
|
877,306
|
|
Income tax expense
|
(7,250)
|
|
|
(4,033)
|
|
|
(1,004)
|
|
|
(85)
|
|
|
(12,372)
|
|
Earnings (losses) from equity method investments
|
56,128
|
|
|
—
|
|
|
(218)
|
|
|
—
|
|
|
55,910
|
|
NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS
|
1,066,213
|
|
|
20,557
|
|
|
(132,819)
|
|
|
(33,107)
|
|
|
920,844
|
|
Net earnings from discontinued operations, net of income taxes
|
—
|
|
|
—
|
|
|
7,375
|
|
|
—
|
|
|
7,375
|
|
NET EARNINGS (LOSS)
|
1,066,213
|
|
|
20,557
|
|
|
(125,444)
|
|
|
(33,107)
|
|
|
928,219
|
|
Net (earnings) loss attributable to noncontrolling interest
|
(6,409)
|
|
|
(8,432)
|
|
|
24,711
|
|
|
—
|
|
|
9,870
|
|
NET EARNINGS (LOSS) ATTRIBUTABLE TO ENSTAR
|
1,059,804
|
|
|
12,125
|
|
|
(100,733)
|
|
|
(33,107)
|
|
|
938,089
|
|
Dividends on preferred shares
|
—
|
|
|
—
|
|
|
—
|
|
|
(35,914)
|
|
|
(35,914)
|
|
NET EARNINGS (LOSS) ATTRIBUTABLE TO ENSTAR ORDINARY SHAREHOLDERS
|
$
|
1,059,804
|
|
|
$
|
12,125
|
|
|
$
|
(100,733)
|
|
|
$
|
(69,021)
|
|
|
$
|
902,175
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios:
|
|
|
|
|
|
|
|
|
|
Loss ratio
|
|
|
47.1
|
%
|
|
104.0
|
%
|
|
|
|
|
Acquisition expense ratio
|
|
|
34.7
|
%
|
|
24.2
|
%
|
|
|
|
|
Operating expense ratio
|
|
|
8.8
|
%
|
|
13.5
|
%
|
|
|
|
|
Combined ratio
|
|
|
90.6
|
%
|
|
141.7
|
%
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
Non-life
Run-off
|
|
Atrium
|
|
StarStone
|
|
Other
|
|
Total
|
Gross premiums written
|
$
|
(8,910)
|
|
|
$
|
171,494
|
|
|
$
|
622,570
|
|
|
$
|
32,378
|
|
|
$
|
817,532
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums written
|
$
|
(9,217)
|
|
|
$
|
153,488
|
|
|
$
|
478,009
|
|
|
$
|
32,067
|
|
|
$
|
654,347
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
$
|
9,427
|
|
|
$
|
146,315
|
|
|
$
|
515,163
|
|
|
$
|
24,874
|
|
|
$
|
695,779
|
|
Net incurred losses and LAE
|
306,067
|
|
|
(69,810)
|
|
|
(543,080)
|
|
|
(16,899)
|
|
|
(323,722)
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition costs
|
(4,006)
|
|
|
(50,646)
|
|
|
(120,517)
|
|
|
(2,686)
|
|
|
(177,855)
|
|
Operating expenses
|
(158,731)
|
|
|
(17,777)
|
|
|
(98,137)
|
|
|
—
|
|
|
(274,645)
|
|
Underwriting income (loss)
|
152,757
|
|
|
8,082
|
|
|
(246,571)
|
|
|
5,289
|
|
|
(80,443)
|
|
Net investment income
|
226,287
|
|
|
5,686
|
|
|
27,000
|
|
|
2,725
|
|
|
261,698
|
|
Net realized and unrealized losses
|
(381,712)
|
|
|
(3,251)
|
|
|
(12,320)
|
|
|
(10,249)
|
|
|
(407,532)
|
|
Fees and commission income
|
16,466
|
|
|
18,622
|
|
|
—
|
|
|
—
|
|
|
35,088
|
|
Other income (losses)
|
35,978
|
|
|
162
|
|
|
(550)
|
|
|
(1,517)
|
|
|
34,073
|
|
Corporate expenses
|
(39,093)
|
|
|
(6,921)
|
|
|
—
|
|
|
(28,127)
|
|
|
(74,141)
|
|
Interest income (expense)
|
(30,616)
|
|
|
—
|
|
|
(103)
|
|
|
5,023
|
|
|
(25,696)
|
|
Net foreign exchange gains (losses)
|
2,534
|
|
|
(3,394)
|
|
|
(2,832)
|
|
|
1,048
|
|
|
(2,644)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS (LOSS) BEFORE INCOME TAXES
|
(17,399)
|
|
|
18,986
|
|
|
(235,376)
|
|
|
(25,808)
|
|
|
(259,597)
|
|
Income tax benefit (expense)
|
3,581
|
|
|
(3,732)
|
|
|
3,892
|
|
|
(52)
|
|
|
3,689
|
|
Earnings from equity method investments
|
42,147
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
42,147
|
|
NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS
|
28,329
|
|
|
15,254
|
|
|
(231,484)
|
|
|
(25,860)
|
|
|
(213,761)
|
|
Net earnings from discontinued operations, net of income taxes
|
—
|
|
|
—
|
|
|
1,489
|
|
|
—
|
|
|
1,489
|
|
NET EARNINGS (LOSS)
|
28,329
|
|
|
15,254
|
|
|
(229,995)
|
|
|
(25,860)
|
|
|
(212,272)
|
|
Net (earnings) loss attributable to noncontrolling interest
|
(3,107)
|
|
|
(6,257)
|
|
|
71,415
|
|
|
—
|
|
|
62,051
|
|
NET EARNINGS (LOSS) ATTRIBUTABLE TO ENSTAR
|
25,222
|
|
|
8,997
|
|
|
(158,580)
|
|
|
(25,860)
|
|
|
(150,221)
|
|
Dividend on preferred shares
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,133)
|
|
|
(12,133)
|
|
NET EARNINGS (LOSS) ATTRIBUTABLE TO ENSTAR ORDINARY SHAREHOLDERS
|
$
|
25,222
|
|
|
$
|
8,997
|
|
|
$
|
(158,580)
|
|
|
$
|
(37,993)
|
|
|
$
|
(162,354)
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios:
|
|
|
|
|
|
|
|
|
|
Loss ratio
|
|
|
47.7
|
%
|
|
105.4
|
%
|
|
|
|
|
Acquisition expense ratio
|
|
|
34.6
|
%
|
|
23.4
|
%
|
|
|
|
|
Operating expense ratio
|
|
|
12.2
|
%
|
|
19.1
|
%
|
|
|
|
|
Combined ratio
|
|
|
94.5
|
%
|
|
147.9
|
%
|
|
|
|
|
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Gross Premiums Written by Geographical Area
The following table summarizes our gross premiums written for the year ended December 31, 2020 by geographic area. Geographic distribution in future years is subject to variation based upon market conditions and business strategies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-life Run-off
|
|
Atrium
|
|
StarStone
|
|
Other
|
|
Total
|
|
Total
|
|
%
|
|
Total
|
|
%
|
|
Total
|
|
%
|
|
Total
|
|
%
|
|
Total
|
|
%
|
|
(In thousands of U.S. dollars, except percentages)
|
United States
|
$
|
4,969
|
|
|
95.7
|
|
|
$
|
103,411
|
|
|
50.1
|
|
|
$
|
61,104
|
|
|
18.7
|
|
|
$
|
13,441
|
|
|
100.0
|
|
|
$
|
182,925
|
|
|
33.2
|
|
United Kingdom
|
(229)
|
|
|
(4.4)
|
|
|
14,054
|
|
|
6.8
|
|
|
105,057
|
|
|
32.2
|
|
|
—
|
|
|
—
|
|
|
118,882
|
|
|
21.5
|
|
Europe
|
1,615
|
|
|
31.1
|
|
|
19,705
|
|
|
9.5
|
|
|
62,181
|
|
|
19.0
|
|
|
—
|
|
|
—
|
|
|
83,501
|
|
|
15.1
|
|
Asia
|
—
|
|
|
—
|
|
|
7,834
|
|
|
3.8
|
|
|
60,262
|
|
|
18.4
|
|
|
—
|
|
|
—
|
|
|
68,096
|
|
|
12.3
|
|
Rest of World
|
(1,164)
|
|
|
(22.4)
|
|
|
61,652
|
|
|
29.8
|
|
|
38,091
|
|
|
11.7
|
|
|
—
|
|
|
—
|
|
|
98,579
|
|
|
17.9
|
|
Total
|
$
|
5,191
|
|
|
100.0
|
|
|
$
|
206,656
|
|
|
100.0
|
|
|
$
|
326,695
|
|
|
100.0
|
|
|
$
|
13,441
|
|
|
100.0
|
|
|
$
|
551,983
|
|
|
100.0
|
|
Assets by Segment
Invested assets are managed on a subsidiary by subsidiary basis, and investment income and realized and unrealized gains (losses) on investments are recognized in each segment as earned. Our total assets as of December 31, 2020 and 2019 by segment and for our other activities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Assets by Segment:
|
|
|
|
Non-life Run-off (1)
|
$
|
19,062,400
|
|
|
$
|
15,775,409
|
|
Atrium (2)
|
615,778
|
|
|
580,405
|
|
StarStone
|
2,583,247
|
|
|
3,985,137
|
|
Other
|
(614,141)
|
|
|
(514,852)
|
|
Total assets
|
$
|
21,647,284
|
|
|
$
|
19,826,099
|
|
(1) The total assets within the Non-life Run-off segment include assets of $95.5 million related to Arden's operations that have been included within Northshore's held-for-sale assets in Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations" and Discontinued Operations."
(2) The total assets within the Atrium segment are all included within Northshore's held-for-sale assets in Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations".
ENSTAR GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
25. UNAUDITED CONDENSED QUARTERLY FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
$
|
108,146
|
|
|
$
|
185,336
|
|
|
$
|
161,724
|
|
|
$
|
175,802
|
|
|
$
|
142,871
|
|
|
$
|
190,962
|
|
|
$
|
159,351
|
|
|
$
|
251,947
|
|
Fees and commission income
|
14,121
|
|
|
9,522
|
|
|
10,787
|
|
|
6,437
|
|
|
10,010
|
|
|
6,017
|
|
|
7,528
|
|
|
6,477
|
|
Net investment income
|
61,530
|
|
|
76,847
|
|
|
72,130
|
|
|
81,502
|
|
|
94,443
|
|
|
74,271
|
|
|
74,714
|
|
|
75,651
|
|
Net realized and unrealized gains (losses)
|
803,467
|
|
|
153,477
|
|
|
500,005
|
|
|
145,060
|
|
|
967,608
|
|
|
260,669
|
|
|
(629,061)
|
|
|
452,760
|
|
Other income (losses)
|
33,372
|
|
|
21,703
|
|
|
48,404
|
|
|
822
|
|
|
(1,087)
|
|
|
8,831
|
|
|
20,443
|
|
|
5,714
|
|
|
1,020,636
|
|
|
446,885
|
|
|
793,050
|
|
|
409,623
|
|
|
1,213,845
|
|
|
540,750
|
|
|
(367,025)
|
|
|
792,549
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net incurred losses and loss adjustment expenses
|
76,248
|
|
|
48,068
|
|
|
109,686
|
|
|
163,258
|
|
|
186,692
|
|
|
146,554
|
|
|
43,300
|
|
|
256,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition costs
|
38,202
|
|
|
78,417
|
|
|
37,708
|
|
|
33,310
|
|
|
49,067
|
|
|
51,081
|
|
|
46,043
|
|
|
77,801
|
|
General and administrative expenses
|
142,394
|
|
|
116,780
|
|
|
115,828
|
|
|
97,365
|
|
|
144,830
|
|
|
100,676
|
|
|
98,427
|
|
|
98,263
|
|
Interest expense
|
16,872
|
|
|
13,519
|
|
|
15,003
|
|
|
14,950
|
|
|
14,018
|
|
|
13,036
|
|
|
13,415
|
|
|
11,036
|
|
Net foreign exchange losses (gains)
|
15,018
|
|
|
12,186
|
|
|
8,156
|
|
|
(13,665)
|
|
|
5,158
|
|
|
(2,579)
|
|
|
(11,939)
|
|
|
(3,854)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
288,734
|
|
|
268,970
|
|
|
286,381
|
|
|
295,218
|
|
|
399,765
|
|
|
308,768
|
|
|
189,246
|
|
|
439,545
|
|
EARNINGS (LOSS) BEFORE INCOME TAXES
|
731,902
|
|
|
177,915
|
|
|
506,669
|
|
|
114,405
|
|
|
814,080
|
|
|
231,982
|
|
|
(556,271)
|
|
|
353,004
|
|
Income tax benefit (expense)
|
1,468
|
|
|
12,893
|
|
|
(13,915)
|
|
|
(13,465)
|
|
|
(16,652)
|
|
|
(7,698)
|
|
|
5,272
|
|
|
(4,102)
|
|
Earnings (losses) from equity method investments
|
85,844
|
|
|
11,722
|
|
|
149,065
|
|
|
17,703
|
|
|
(8,790)
|
|
|
17,713
|
|
|
12,450
|
|
|
8,772
|
|
NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS
|
819,214
|
|
|
202,530
|
|
|
641,819
|
|
|
118,643
|
|
|
788,638
|
|
|
241,997
|
|
|
(538,549)
|
|
|
357,674
|
|
Net earnings (loss) from discontinued operations, net of income taxes
|
15,441
|
|
|
(4,666)
|
|
|
4,031
|
|
|
7,916
|
|
|
(1,152)
|
|
|
(3,943)
|
|
|
(2,069)
|
|
|
8,068
|
|
NET EARNINGS (LOSS)
|
834,655
|
|
|
197,864
|
|
|
645,850
|
|
|
126,559
|
|
|
787,486
|
|
|
238,054
|
|
|
(540,618)
|
|
|
365,742
|
|
Net (earnings) loss attributable to noncontrolling interest
|
(3,131)
|
|
|
4,900
|
|
|
(21,912)
|
|
|
109
|
|
|
19,992
|
|
|
2,713
|
|
|
32,722
|
|
|
2,148
|
|
NET EARNINGS (LOSS) ATTRIBUTABLE TO ENSTAR
|
831,524
|
|
|
202,764
|
|
|
623,938
|
|
|
126,668
|
|
|
807,478
|
|
|
240,767
|
|
|
(507,896)
|
|
|
367,890
|
|
Dividends on preferred shares
|
(8,925)
|
|
|
(8,925)
|
|
|
(8,925)
|
|
|
(8,925)
|
|
|
(8,925)
|
|
|
(8,925)
|
|
|
(8,925)
|
|
|
(9,139)
|
|
NET EARNINGS (LOSS) ATTRIBUTABLE TO ENSTAR ORDINARY SHAREHOLDERS
|
$
|
822,599
|
|
|
$
|
193,839
|
|
|
$
|
615,013
|
|
|
$
|
117,743
|
|
|
$
|
798,553
|
|
|
$
|
231,842
|
|
|
$
|
(516,821)
|
|
|
$
|
358,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per ordinary share attributable to Enstar ordinary shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) from continuing operations
|
$
|
37.91
|
|
|
$
|
9.15
|
|
|
$
|
28.39
|
|
|
$
|
5.26
|
|
|
$
|
37.06
|
|
|
$
|
10.90
|
|
|
$
|
(23.93)
|
|
|
$
|
16.49
|
|
Net earnings (loss) from discontinued operations
|
0.33
|
|
|
(0.13)
|
|
|
0.11
|
|
|
0.22
|
|
|
(0.03)
|
|
|
(0.11)
|
|
|
(0.05)
|
|
|
0.22
|
|
Basic
|
$
|
38.24
|
|
|
$
|
9.02
|
|
|
$
|
28.50
|
|
|
$
|
5.48
|
|
|
$
|
37.03
|
|
|
$
|
10.79
|
|
|
$
|
(23.98)
|
|
|
$
|
16.71
|
|
Diluted(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) from continuing operations
|
$
|
37.47
|
|
|
$
|
9.02
|
|
|
$
|
28.13
|
|
|
$
|
5.21
|
|
|
$
|
36.68
|
|
|
$
|
10.81
|
|
|
$
|
(23.93)
|
|
|
$
|
16.35
|
|
Net earnings (loss) from discontinued operations
|
0.32
|
|
|
(0.13)
|
|
|
0.11
|
|
|
0.21
|
|
|
(0.03)
|
|
|
(0.11)
|
|
|
(0.05)
|
|
|
0.22
|
|
Net earnings (loss) per ordinary share
|
$
|
37.79
|
|
|
$
|
8.89
|
|
|
$
|
28.24
|
|
|
$
|
5.42
|
|
|
$
|
36.65
|
|
|
$
|
10.70
|
|
|
$
|
(23.98)
|
|
|
$
|
16.57
|
|
(1) During a period of loss, the basic weighted average ordinary shares outstanding is used in the denominator of the diluted loss per ordinary share computation as the effect of including potentially dilutive securities would be anti-dilutive.
SCHEDULE I
ENSTAR GROUP LIMITED
SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES
As of December 31, 2020
(Expressed in thousands of U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type of investment
|
|
Cost (1)
|
|
Fair Value
|
|
Amount at which shown in the balance sheet
|
Short-term and fixed maturity investments — Trading and short-term and fixed maturity investments within funds held - directly managed:(2)
|
|
|
|
|
|
|
U.S. government and agency
|
|
$
|
219,487
|
|
|
$
|
233,050
|
|
|
$
|
233,050
|
|
U.K. government
|
|
34,494
|
|
|
37,508
|
|
|
37,508
|
|
Other government
|
|
321,306
|
|
|
352,026
|
|
|
352,026
|
|
Corporate
|
|
3,353,054
|
|
|
3,749,383
|
|
|
3,749,383
|
|
Municipal
|
|
116,588
|
|
|
132,637
|
|
|
132,637
|
|
Residential mortgage-backed
|
|
219,360
|
|
|
225,074
|
|
|
225,074
|
|
Commercial mortgage-backed
|
|
554,639
|
|
|
577,602
|
|
|
577,602
|
|
Asset-backed
|
|
349,941
|
|
|
339,675
|
|
|
339,675
|
|
Total
|
|
5,168,869
|
|
|
5,646,955
|
|
|
5,646,955
|
|
Short-term and fixed maturity investments — AFS:(2)
|
|
|
|
|
|
|
U.S. government and agency
|
|
715,527
|
|
|
717,998
|
|
|
717,998
|
|
U.K. government
|
|
12,494
|
|
|
13,574
|
|
|
13,574
|
|
Other government
|
|
142,459
|
|
|
150,127
|
|
|
150,127
|
|
Corporate
|
|
1,873,184
|
|
|
1,937,349
|
|
|
1,937,349
|
|
Municipal
|
|
28,881
|
|
|
30,032
|
|
|
30,032
|
|
Residential mortgage-backed
|
|
326,268
|
|
|
328,871
|
|
|
328,871
|
|
Commercial mortgage-backed
|
|
273,516
|
|
|
276,488
|
|
|
276,488
|
|
Asset-backed
|
|
199,467
|
|
|
199,610
|
|
|
199,610
|
|
Total
|
|
3,571,796
|
|
|
3,654,049
|
|
|
3,654,049
|
|
Equities(3)
|
|
444,570
|
|
|
512,557
|
|
|
512,557
|
|
Other investments, at fair value(4)
|
|
982,770
|
|
|
982,770
|
|
|
982,770
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,168,005
|
|
|
$
|
10,796,331
|
|
|
$
|
10,796,331
|
|
(1)Original cost of fixed maturity securities is reduced by repayments and adjusted for amortization of premiums or accretion of discounts.
(2)The difference in the amount of fixed maturities shown at fair value and the fixed maturities shown in our consolidated balance sheet relates to the fair value of $18.2 million as of December 31, 2020 for our investment in fixed maturities issued by affiliates of Stone Point. Refer to Note 21 - "Related Party Transactions" of the notes to the consolidated financial statements.
(3)The difference in the amount of equities shown at fair value and the equities shown in our consolidated balance sheet relates to the fair value of $77.1 million as of December 31, 2020 for our investment in a registered investment company affiliated with entities owned by Trident, $26.9 million as a co-investor alongside Stone Point and a $230.3 million investment in AmTrust. Refer to Note 21 - "Related Party Transactions" of the notes to the consolidated financial statements.
(4)The difference in the amount of other investments shown at fair value and the other investments shown in our consolidated balance sheet relates to the fair value of $3.3 billion as of December 31, 2020 for our other investments in funds or companies owned by or affiliated with certain related parties. Refer to Note 21 - "Related Party Transactions" of the notes to the consolidated financial statements.
SCHEDULE II
ENSTAR GROUP LIMITED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Balance Sheets - Parent Company Only
As of December 31, 2020 and 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
(in thousands of U.S.
dollars, except share data)
|
ASSETS
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,872
|
|
|
$
|
4,568
|
|
Balances due from subsidiaries
|
|
18,951
|
|
|
134,897
|
|
Investments in subsidiaries
|
|
7,887,255
|
|
|
6,050,197
|
|
Other assets
|
|
8,047
|
|
|
6,391
|
|
TOTAL ASSETS
|
|
$
|
7,922,125
|
|
|
$
|
6,196,053
|
|
LIABILITIES
|
|
|
|
|
Debt obligations
|
|
$
|
903,447
|
|
|
$
|
1,191,207
|
|
Balances due to subsidiaries
|
|
300,987
|
|
|
135,532
|
|
Other liabilities
|
|
43,296
|
|
|
27,131
|
|
TOTAL LIABILITIES
|
|
1,247,730
|
|
|
1,353,870
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares (par value $1 each, issued and outstanding 2020: 22,085,232; 2019: 21,511,505):
|
|
|
|
|
Voting Ordinary Shares (issued and outstanding 2020: 18,575,550; 2019: 18,001,823)
|
|
18,576
|
|
|
18,002
|
|
|
|
|
|
|
Non-voting convertible ordinary Series C Shares (issued and outstanding 2020 and 2019: 2,599,672)
|
|
2,600
|
|
|
2,600
|
|
Non-voting convertible ordinary Series E Shares (issued and outstanding 2020 and 2019: 910,010)
|
|
910
|
|
|
910
|
|
Preferred Shares:
|
|
|
|
|
Series C Preferred Shares (issued and held in treasury 2020 and 2019: 388,571)
|
|
389
|
|
|
389
|
|
Series D Preferred Shares (issued and outstanding 2020 and 2019: 16,000)
|
|
400,000
|
|
|
400,000
|
|
Series E Preferred Shares (issued and outstanding 2020 and 2019: 4,400)
|
|
110,000
|
|
|
110,000
|
|
Treasury shares, at cost (Series C Preferred Shares 2020 and 2019: 388,571)
|
|
(421,559)
|
|
|
(421,559)
|
|
Joint Share Ownership Plan (voting ordinary shares, held in trust 2020: 565,630; 2019: 0)
|
|
(566)
|
|
|
—
|
|
Additional paid-in capital
|
|
1,836,074
|
|
|
1,836,778
|
|
Accumulated other comprehensive income
|
|
80,659
|
|
|
7,171
|
|
Retained earnings
|
|
4,647,312
|
|
|
2,887,892
|
|
Total Enstar Group Limited Shareholders’ Equity
|
|
6,674,395
|
|
|
4,842,183
|
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$
|
7,922,125
|
|
|
$
|
6,196,053
|
|
See accompanying notes to the Condensed Financial Information of Registrant
SCHEDULE II
ENSTAR GROUP LIMITED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT - CONTINUED
Statements of Earnings - Parent Company Only
For the Years Ended December 31, 2020, 2019 and 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
(in thousands of U.S. dollars)
|
INCOME
|
|
|
|
|
|
Net investment income
|
$
|
1,680
|
|
|
$
|
3,649
|
|
|
$
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,680
|
|
|
3,649
|
|
|
142
|
|
EXPENSES
|
|
|
|
|
|
General and administrative expenses
|
45,689
|
|
|
44,964
|
|
|
68,977
|
|
Interest expense
|
51,739
|
|
|
51,508
|
|
|
27,353
|
|
Net foreign exchange losses (gains)
|
(2,655)
|
|
|
(21,516)
|
|
|
7,655
|
|
|
94,773
|
|
|
74,956
|
|
|
103,985
|
|
EARNINGS (LOSSES) BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES
|
(93,093)
|
|
|
(71,307)
|
|
|
(103,843)
|
|
Equity in undistributed earnings (losses) of subsidiaries - continuing operations
|
1,831,886
|
|
|
1,002,021
|
|
|
(47,867)
|
|
Equity in undistributed earnings (losses) of subsidiaries - discontinued operations
|
16,251
|
|
|
7,375
|
|
|
1,489
|
|
NET EARNINGS
|
1,755,044
|
|
|
938,089
|
|
|
(150,221)
|
|
Dividends on preferred shares
|
(35,700)
|
|
|
(35,914)
|
|
|
(12,133)
|
|
NET EARNINGS (LOSS) ATTRIBUTABLE TO ENSTAR GROUP LIMITED ORDINARY SHAREHOLDERS
|
$
|
1,719,344
|
|
|
$
|
902,175
|
|
|
$
|
(162,354)
|
|
See accompanying notes to the Condensed Financial Information of Registrant
Statements of Comprehensive Income - Parent Company Only
For the Years Ended December 31, 2020, 2019 and 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
(in thousands of U.S. dollars)
|
NET EARNINGS
|
$
|
1,755,044
|
|
|
$
|
938,089
|
|
|
$
|
(150,221)
|
|
OTHER COMPREHENSIVE INCOME (LOSS) RELATING TO SUBSIDIARIES, NET OF TAX
|
73,488
|
|
|
(3,269)
|
|
|
(27)
|
|
COMPREHENSIVE INCOME
|
$
|
1,828,532
|
|
|
$
|
934,820
|
|
|
$
|
(150,248)
|
|
See accompanying notes to the Condensed Financial Information of Registrant
SCHEDULE II
ENSTAR GROUP LIMITED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT - CONTINUED
Statements of Cash Flows - Parent Company Only
For the Years Ended December 31, 2020, 2019 and 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
(in thousands of U.S. dollars)
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
Net cash flows provided by (used in) operating activities
|
$
|
117,220
|
|
|
$
|
(128,462)
|
|
|
$
|
(128,382)
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
Dividends and return of capital from subsidiaries
|
44,000
|
|
|
65,500
|
|
|
101,000
|
|
Contributions to subsidiaries
|
(26,000)
|
|
|
(240,382)
|
|
|
(660,339)
|
|
Net cash flows provided by (used in) investing activities
|
18,000
|
|
|
(174,882)
|
|
|
(559,339)
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
Net proceeds from the issuance of preferred shares
|
—
|
|
|
—
|
|
|
495,357
|
|
Dividends on preferred shares
|
(35,700)
|
|
|
(35,914)
|
|
|
(12,133)
|
|
Repurchase of shares
|
(26,006)
|
|
|
—
|
|
|
—
|
|
Repayment of loans
|
(449,210)
|
|
|
(219,000)
|
|
|
(898,633)
|
|
Receipt of loans
|
379,000
|
|
|
547,613
|
|
|
1,115,885
|
|
Net cash flows provided by (used in) financing activities
|
(131,916)
|
|
|
292,699
|
|
|
700,476
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
3,304
|
|
|
(10,645)
|
|
|
12,755
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
4,568
|
|
|
15,213
|
|
|
2,458
|
|
CASH AND CASH EQUIVALENTS, END OF YEAR
|
$
|
7,872
|
|
|
$
|
4,568
|
|
|
$
|
15,213
|
|
See accompanying notes to the Condensed Financial Information of Registrant
Notes to the Condensed Financial Information of Registrant
The Condensed Financial Information of Registrant should be read in conjunction with our consolidated financial statements and the accompanying notes thereto included in Part II - Item 8 of this Annual Report on Form 10-K. Our wholly-owned and majority owned subsidiaries are recorded based upon our proportionate share of our subsidiaries' net assets (similar to presenting them on the equity method).
Net investment income relates to interest on loans to subsidiaries. For the years ended December 31, 2020, 2019, and 2018, interest paid was $46.5 million, $46.5 million, and $25.1 million, respectively.
Investing activities in the Condensed Statements of Cash Flows primarily represents the flow of funds to and from subsidiaries to provide cash on hand to fund business acquisitions and significant new business.
Non-Cash investing activities during the years ended December 31, 2020, 2019, and 2018, included:
i.$130.0 million, $0 and $0, respectively, for dividends and return of capital from subsidiaries. In 2020, these transactions were to settle intercompany balances, resulting in a net reduction in balances due to subsidiaries and a decrease in investments in subsidiaries.
ii.$0, $0 and $414.8 million, respectively, for contributions to subsidiaries. In 2018, these transactions represented the contribution of the acquired outstanding shares and warrants of KaylaRe Holdings, Ltd, to another subsidiary company.
As of December 31, 2020 and 2019, parental guarantees and capital support instruments supporting subsidiaries' insurance obligations were $1.5 billion and $1.0 billion, respectively. In addition, as of December 31, 2020 and 2019, there were $210.0 million and $252.0 million, respectively, of unsecured letters of credit for Funds at Lloyd's which have a parental guarantee. Furthermore, as of December 31, 2020, we also guarantee the Junior Subordinated Notes issued in 2020 for an aggregate principal amount of $350.0 million.
As of December 31, 2020 and 2019, retained earnings were $4,647.3 million and $2,887.9 million, respectively, an increase of $1,759.4 million. This increase was primarily attributable to the net earnings of $1,719.3 million.
SCHEDULE III
ENSTAR GROUP LIMITED
SUPPLEMENTARY INSURANCE INFORMATION
(Expressed in thousands of U.S. Dollars)
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As of December 31,
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Year ended December 31,
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Deferred
Acquisition
Costs
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Reserves
for Losses
and Loss
Adjustment
Expenses
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Unearned
Premiums
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Policy Benefits for Life and Annuity Contracts
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Net
Premiums
Earned
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Net
Investment
Income
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Losses
and Loss
Expenses
and
Policy
Benefits
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Amortization
of Deferred
Acquisition
Costs
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Other Operating Expenses
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Net
Premiums
Written
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2020
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Non-life Run-off (1)
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$
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22,736
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$
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9,235,082
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$
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71,629
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$
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—
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$
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58,695
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$
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282,048
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$
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44,995
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$
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20,177
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$
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298,717
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$
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2,987
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Atrium (1)
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—
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—
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—
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—
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175,393
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5,542
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87,226
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59,611
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34,600
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183,194
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StarStone
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21,439
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1,327,956
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191,502
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—
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318,115
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27,443
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266,738
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90,797
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123,864
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233,202
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Other
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264
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30,244
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11,550
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—
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19,889
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(12,216)
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16,967
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435
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44,298
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13,441
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Total
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$
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44,439
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$
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10,593,282
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$
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274,681
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$
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—
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$
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572,092
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$
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302,817
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$
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415,926
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$
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171,020
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$
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501,479
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$
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432,824
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2019
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Non-life Run-off
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$
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41,753
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$
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8,295,361
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$
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129,715
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$
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—
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$
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168,496
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$
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275,236
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$
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51,625
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$
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73,642
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$
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270,445
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$
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(25,338)
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Atrium
|
22,184
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|
231,672
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|
80,863
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—
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|
164,059
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7,049
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77,276
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56,956
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28,277
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172,356
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StarStone
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52,188
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1,318,294
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305,116
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—
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451,112
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34,396
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469,240
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109,369
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68,417
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379,523
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Other
|
388
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23,077
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17,998
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—
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20,380
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(8,410)
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16,038
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642
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45,945
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18,512
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Total
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$
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116,513
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$
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9,868,404
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$
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533,692
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$
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—
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$
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804,047
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$
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308,271
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$
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614,179
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$
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240,609
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$
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413,084
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$
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545,053
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2018
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Non-life Run-off
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$
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4,378
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$
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7,540,662
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$
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136,023
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$
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—
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$
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9,427
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$
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226,287
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$
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(306,067)
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$
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4,006
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$
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197,824
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$
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(9,217)
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Atrium
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20,355
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241,284
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70,429
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—
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146,315
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5,686
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69,810
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50,646
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24,698
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153,488
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StarStone
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62,161
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1,247,989
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382,605
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—
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515,163
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27,000
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543,080
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120,517
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98,137
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478,009
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Other
|
364
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18,861
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17,002
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105,080
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24,874
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2,725
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16,899
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2,686
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28,127
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32,067
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Total
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$
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87,258
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$
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9,048,796
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$
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606,059
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$
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105,080
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$
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695,779
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$
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261,698
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$
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323,722
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$
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177,855
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$
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348,786
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$
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654,347
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(1) As of December 31, 2020, the assets and liabilities of Northshore, the holding company which owns Atrium and Arden (a Non-life Run-off subsidiary), were classified as held-for-sale. Deferred acquisition costs, reserves for losses and loss adjustment expenses and unearned premiums for Northshore were $24.0 million, $254.1 million and $91.4 million, respectively. Refer to Note 5 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations" for further information.
SCHEDULE IV
ENSTAR GROUP LIMITED
REINSURANCE
For the Years Ended December 31, 2020, 2019 and 2018
(Expressed in thousands of U.S. Dollars)
|
|
|
|
|
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Gross
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Ceded to
Other
Companies
|
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Assumed
from
Other
Companies
|
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Net Amount
|
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Percentage
of Amount
Assumed
to Net
|
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|
2020
|
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Premiums earned:
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|
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Property and casualty
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$
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542,119
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$
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(157,826)
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|
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$
|
187,799
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$
|
572,092
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32.8
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%
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|
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Total premiums earned
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$
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542,119
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$
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(157,826)
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$
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187,799
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$
|
572,092
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|
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|
2019
|
|
|
|
|
|
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|
|
Life insurance in force
|
$
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725,293
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$
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(65,795)
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$
|
—
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|
|
$
|
659,498
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|
|
—
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%
|
Premiums earned:
|
|
|
|
|
|
|
|
|
|
Property and casualty
|
679,212
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(145,460)
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|
|
269,023
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|
802,775
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|
33.5
|
%
|
Life and annuities
|
1,295
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|
|
(23)
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|
|
—
|
|
|
1,272
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|
|
—
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%
|
Total premiums earned
|
$
|
680,507
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$
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(145,483)
|
|
|
$
|
269,023
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|
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$
|
804,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
Life insurance in force
|
$
|
855,366
|
|
|
$
|
(84,603)
|
|
|
$
|
—
|
|
|
$
|
770,763
|
|
|
—
|
%
|
Premiums earned:
|
|
|
|
|
|
|
|
|
|
Property and casualty
|
539,169
|
|
|
(166,308)
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|
|
319,052
|
|
|
691,913
|
|
|
46.1
|
%
|
Life and annuities
|
3,892
|
|
|
(26)
|
|
|
—
|
|
|
3,866
|
|
|
—
|
%
|
Total premiums earned
|
$
|
543,061
|
|
|
$
|
(166,334)
|
|
|
$
|
319,052
|
|
|
$
|
695,779
|
|
|
|