Enstar Group: ESGR

Thought this might be interesting for this board, hence posting here.

Country Incorporated: Bermuda


This is a company originally recommended by Global Gains back in 2009. The stock was at $63 back then, and I bought it at the time. In the interest of full disclosure, I have not sold a single share since then. I own the stock, so my viewpoint might be biased. Part of this write up is taken from GG’s original write up.

The Business

Insurance and reinsurance companies don’t always do well. As a matter of fact a lot of them don’t do as good. There are insurance companies that have written policies and hold a significant float and outstanding liabilities but have stopped writing more policies. Enstar buys these companies in run-off and typically does so at a discount to fair value. Enstar derives a significant value from these companies as it puts the cash to use and works on getting rid of the liabilities. Typically they do this by buying out claim holders before the policy expires. The company then takes the excess cash it generates and invests it in variety of financial vehicles. The most high profile investment is a hedge fund run by 11% shareholders (GS alumnus, and private equity heavyweight J. Christopher Flowers.

The business model is capital light and generates significant returns and allows Enstar to hold cash. The results could be lumpy at times.


Back in 2009 when ESGR was originally recommended by GG, the book value / share was $45. At that time, the comparison was made to the book value back in 2005, which was $20. The amount of cash and cash equivalents at that time was $1.5B.

Today, ESGR has grown its book value from 2009 at a rate of 19% to $115. Today the amount of cash and cash equivalents is $4.5B. In 2009, the stock was trading at $63 (at time of recommendation), which was 1.4 times book. Today the stock is trading at $138, which is 1.2 times book value. The range of trading has varied quite a bit. The lowest p/b ratio for ESGR has been 1.13 and the max p/b ratio for ESGR has been 3.55.

With today’s book value with these ranges, we get a stock price range of $130 - $409. ESGR is trading very close to the lower end of the spectrum.

If the growth in book value continues at a 15% compounded rate for the next 5 years, given the above P/B range, we are looking at a stock price between $262 - $823.


The people running the show are key as they have found a good way to find deals and allocate capital. If either suffers, the stock could suffer. The key metric to watch here is P/B. As long as the book value keeps growing, Enstar will do well.

I have held Enstar since 2009 and bought twice during that time. I barely look at this investment. Recently I have looked at this a little more than I have in the past.



Hi Vish,

This looks interesting!

P/E around 9 and selling close to book value. Looks like they have done a good job growing revenue with the 5-year rate being around 36%. However, earnings appear to be lumpy, so may be that’s why the valuation is depressed?

Couple questions:

  1. What is the company’s growth strategy? And what is it’s key differentiator versus competition?

  2. Why is the multiple depressed?


Couple questions:
1) What is the company’s growth strategy? And what is it’s key differentiator versus competition?

2) Why is the multiple depressed?

The growth strategy is to find deals to make that prove profitable and make cash out of it to invest. If they cannot find deals, the growth will suffer. Which brings me to your earlier comment of why the revenue is lumpy.

As far as competition goes, I am not sure who their competition is. I guess investment management companies can be categorized as their competition, cause in the end they invest money.

I’m also not sure why multiple is depressed, but it’s close to the lowest it’s been. Hopefully the market will wake up to that and push it up to match the growth in book value over time.


Thanks Vish.

It looks like this is one of those under followed companies. Market Watch notes two analysts following it, with both rating it as a “Buy”. Looks like a Hidden Gems type of candidate …

The only other thing I would note is that financials is sort of one sector where one can still find some ‘value’ …

I will try to find sometime to do some digging this weekend.