Enstar Group Ltd. – Value Analysis (NASDAQ:ESGR) : August 24, 2017

Capitalcube gives Enstar Group Ltd. a score of 79.

Our analysis is based on comparing Enstar Group Ltd. with the following peers – Third Point Reinsurance Ltd., Axis Capital Holdings Limited, Maiden Holdings, Ltd., Validus Holdings, Ltd., Aspen Insurance Holdings Limited, RenaissanceRe Holdings Ltd. and Everest Re Group, Ltd. (TPRE-US, AXS-US, MHLD-US, VR-US, AHL-US, RNR-US and RE-US).

Fundamental Overview

Enstar Group Ltd. has a fundamental score of 79 and has a relative valuation of OVERVALUED.

Fundamental Score

Company Overview

  • It currently trades at a Price/Book ratio of (1.12).
  • ESGR-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • ESGR-US‘s relatively high profit margins are burdened by capital inefficiency.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • Over the last five years, ESGR-US‘s return on equity has improved from median to better than the median among its peers, suggesting the company has found relative operating advantages.
  • While ESGR-US‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company is likely overinvesting in a business with only median returns.
  • ESGR-US has the financial and operating capacity to borrow quickly.

Drivers of Margin

  • Margins suggest relatively better discipline in both writing policies and controlling operating costs.
  • The company’s comparatively high underwriting margin (i.e. premiums earned minus insurance losses, expressed as a percentage of premiums earned) of 93.77% versus a peer median of 39.97% suggests that ESGR-US follows either a differentiated strategy with pricing advantages and/or a disciplined strategy in writing policies versus peers. Further, ESGR-US‘s pre-tax margins are above the peer median (pre-tax margin of 40.39% compared to 20.46%) suggesting relatively tight control on operating costs.
Drivers of Margins

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Differentiated; High Cost, Commodity; High Cost, Commodity; Low Cost

Company Profile

Enstar Group Ltd. is a holding company, which engages in the acquisition and management of insurance and reinsurance companies. It also provides management, consulting, and other services to the insurance and reinsurance industry. The company operates through the following segments: Non-life Run-off, Atrium, StarStone, and Life and Annuities. The Non-life Run-off segment operates through its subsidiaries that run off their property and casualty and other non-life lines of business. The Atrium segment consists of the active underwriting operations and financial results of Northshore, a holding company that owns Atrium and its subsidiaries and Arden. The StarStone segment includes the active underwriting operations and financial results of StarStone Holdings, which offers a broad range of property, casualty, and specialty insurance products to both large multi-national and small and middle-market clients. The Life and Annuities segment manages closed-block of life and annuity business and life settlements business. Enstar Group was founded by Paul James O’Shea, Nicholas A. Packer and Dominic Francis Michael Silvester in August 2001 and is headquartered in Hamilton, Bermuda.