Enstar Group Limited

Hello, everyone. I'm Peter Kalev, Group Treasurer. Thank you for listening to NSTAR's first quarter 2024 earnings audio review with CEO Dominic Sylvester and CFO Matt Kirk. Before we begin, I'd like to remind everyone that this presentation contains forward-looking statements and non-GAAP financial measures. Forward-looking statements in this presentation include, but are not limited to, statements about NSTAR's expectations for future and pending transactions, runoff liability earnings, the performance of its investment portfolio, and the impact of changing interest rates on NSTAR's business. These statements are inherently subject to risks, uncertainties, and assumptions that may cause actual results to differ materially from the statements being made as of the date of this update or in the future. Additional information regarding these statements and our non-GAAP financial measures is outlined in the text that appears below the link to this recording. With that, I will turn it over to Dominic.

Thank you, Peter. After a strong end to 2023, we maintained our momentum into the first quarter. We delivered solid results from our investment portfolio and generated positive performance from our runoff liability earnings. This led to a return on equity of 2.4% and growth in book value per share of 1.7%. Matt will cover our financial performance in more detail shortly, But in summary, the results reflect continued progress against our strategy as we stay focused on meeting the growing risk management needs of the reinsurance sector and creating long-term value for our shareholders. Turning to some strategic highlights. Following the end of the quarter, we announced a lost portfolio transfer agreement with Sirius Point to reinsure $400 million of workers' compensation business for the underwriting years 2018 through 2023. SeriousPoint will seed net reserves of approximately $400 million, and Enstar will provide $200 million of cover in excess of the seeded reserves. This transaction expands our industry-leading workers' compensation line of business, one of our largest and one where we have deep experience and proven success in managing. Further, it is another example of Enstar's versatility in providing bespoke legacy and strategic solutions for our partners. Our strong capital position was endorsed by S&P during the quarter as our primary reinsurer Cabello Bay was assigned an insurer financial strength rating of A with stable outlook. S&P recognized our status as a leader in the legacy market while citing our world-class claims management capabilities. The rating was a welcome validation of the resilience of our business model and we believe it will provide us with additional flexibility to structure future legacy transactions. We remain optimistic about the continuing growth of our pipeline of M&A opportunities, but maintain our highly disciplined approach to ensure we continue to deliver attractive risk-adjusted return for Enstar and our shareholders. We remain mindful of the persistent macro and geopolitical challenges and continue to take them into account as we pursue growth. In summary, we've had a good start to the year and look forward to taking advantage of opportunities across our business through 2024. Over to you, Matt.

Thanks, Dominic. We had a positive first quarter recording $119 million of net income attributable to NSTAR ordinary shareholders with a return on equity or ROE of 2.4% and adjusted ROE of 2.6%. Adjusted ROE is a performance measure that primarily excludes net realized gains and losses and fair value changes on fixed maturity investments and funds held. which we previously called unrealized gains and losses in the income statement. In addition, we continued to deliver on our history of strong book value accretion. We grew book value by 1.7% and fully diluted book value per share growth by 1.4% to $349.41 and $341.53, respectively. First quarter results were largely driven by positive total investment returns of 222 million. We generated 160 million of net investment income due to the considerations received from the QBE, RACQ and AIG transactions, as well as our existing fixed income portfolio, which includes floating rate assets tied to SOFR with interest rates currently above 5%. We also experienced favorable returns on our other investments, including non-core equity of $104 million, primarily driven by continued strong global equity market performance and the tightening of high yield and leveraged loan credit spreads. Our cumulative unrealized loss in other comprehensive income and fair value changes in our fixed maturity portfolio and funds held stands at $789 million, which has adversely impacted book value by approximately $54 per share. As these assets provide liquidity for the settlement of our claims liabilities, we generally hold them to maturity with a view that the unrealized losses and fair value changes will naturally reverse as the securities approach maturity. We recorded runoff liability earnings, or RLE, of 24 million, driven primarily from favorable claims experience across a number of classes, including general liability, asbestos, professional indemnity, and director and officer lines of business. Partially offsetting this was adverse development in our environmental and cash duty lines of business driven by a small number of larger losses on excess policies across multiple portfolios. Consistent with prior years, most of our annual reserve reviews occur in the fourth quarter. And this is where we have historically seen the largest movements in our RLE and adjusted RLE metrics. Our capital and liquidity position remains strong to support future transactions. Our 800 million revolving credit agreement remains fully unutilized and available to us as of March 31st. We continue to maintain a solid group sovereignty ratio after allocating to recent transactions, and we close Q1 with an estimated group capital sovereignty ratio of 195%. In conclusion, we continue to execute on our core strategy of delivering attractive and innovative legacy solutions to first-class partners across the globe. We maintain our disciplined approach toward acquiring and completing profitable legacy solutions, and our best-in-class team of experts remain well positioned to take advantage of our robust pipeline and create additional long-term value for our shareholders. Thank you for your time and your continued interest in NSTAR.