Enstar Group Ltd. announced it has increased the capitalization of its specialty property/casualty insurance subsidiary StarStone U.S. Holdings Inc., by $630 million.
Three private equity investors have committed $610 million in new equity capital which, together with the rollover of Enstar’s existing ownership, and an additional equity commitment of over $20 million from management, will increase the equity capitalization of StarStone U.S. to more than $850 million.
The capital infusion is designed to let the company pursue growth in a hardening market, company executives indicate.
“We observe premium pricing increasing and capacity contracting across multiple classes of business including commercial property, D&O, excess casualty, marine & aviation and professional liability,” said Jeff Consolino, a former executive with American Financial Group, who will be StarStone’s new CEO.
Consolino said that social inflation and natural catastrophe losses, such as floods and wildfires, have added to the momentum for price hikes.
“In addition, the COVID-19 pandemic has led to market dislocation and additional capital need. We believe a specialist insurance company with the right leadership, financial backing, protection from legacy exposures and niche orientation can create significant value in this environment,” he continued.
The equity investment in StarStone was led by SkyKnight Capital, L.P., Dragoneer Investment Group and Aquiline Capital Partners LLC. (Aquiline was founded by Jeff Greenberg, who is the company’s chairman and CEO). Enstar will receive a combination of cash consideration and shares in the recapitalized StarStone U.S., valued at a modest premium to book value.
Coinciding with the capital infusion, a new management team and board of directors will be appointed to StarStone U.S. In addition to Consolino, Ed Noonan, the former chairman and CEO of Validus Group, will become executive chairman.
With the signing of the transaction, John Hendrickson stepped down from his role as StarStone Group CEO, a position he has held since 2018.
The new board of directors will include Messrs. Noonan and Consolino; Paul O’Shea and Robert Campbell from Enstar; Matthew Ebbel, managing partner of SkyKnight; Marc Stad, managing partner of Dragoneer; and Chris Watson, partner of Aquiline.
StarStone U.S. operates in the United States with two insurance platforms: StarStone Specialty Insurance Co., which is an excess and surplus lines insurer, and StarStone National Insurance Co., an admitted markets insurer. StarStone was purchased by Enstar Group in 2014.
“This is a pivotal moment for StarStone U.S. as we reposition the company towards specialty E&S growth,” said Dominic Silvester, CEO of Enstar, in a statement.
He added that Enstar is committed to realizing StarStone U.S.’ full potential and StarStone U.S. will work with Enstar in ongoing acquisition activities.
Adverse Development Cover
In conjunction with the capital infusion, one of Enstar’s wholly owned subsidiaries will enter into a combination loss portfolio and adverse development cover reinsurance agreement with StarStone U.S., designed to free the company from legacy liabilities.
The recapitalization is expected to close in the second half of 2020 after obtaining regulatory approvals.
Consolino is an experienced insurance industry leader with over 28 years of industry experience. Most recently, he was executive vice president, chief financial officer and a director of American Financial Group, Inc. He was previously a founding executive of Validus Holdings Ltd., where he served as president and chief financial officer.
“I am looking forward to working with the company’s many talented underwriters, employees, and distribution partners as well as the reconstituted board of directors to build a market leading specialty insurance company,” said Consolino.
Noonan brings more than 40 years of industry experience to the company. He served most recently as chairman and CEO of Validus Group, a position he held from 2005 to 2018. Validus Group ultimately was acquired by AIG in 2018. Noonan also served as president and CEO of American Re from 1997 to 2002, after joining the firm in 1983.
“Today’s dynamic market conditions have created a need for dedicated underwriting capacity across multiple E&S and admitted lines of business,” said Greenberg of Aquiline. “We witnessed the strength of the Validus management team first-hand and believe Jeff and Ed will build a market leader at StarStone.”
About StarStone U.S.
From eight underwriting offices in the United States, StarStone U.S. offers a range of property and casualty insurance products for small to mid-sized businesses. StarStone U.S. is an insurance holding company operating through StarStone Specialty Insurance Co., a U.S. excess and surplus lines insurer, and StarStone National Insurance Co., a U.S. admitted markets insurer. StarStone is rated “A-” (Excellent) by A.M. Best.
Enstar Group Ltd.
With approximately $19.1 billion in assets, Enstar offers capital release solutions and specialty underwriting capabilities through its companies in Bermuda, the U.S., the UK, Continental Europe, Australia and other international locations. Enstar is a specialist in legacy acquisitions, having acquired approximately 100 companies and portfolios since its formation in 2001. Enstar Group includes the StarStone group of companies and the Atrium group of companies, which manage and underwrite specialist insurance and reinsurance business for Lloyd’s Syndicate 609.
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