Enstar Group Limited has agreed to a $610 million recapitalisation of StarStone U.S. Holdings, Inc. led by SkyKnight, Dragoneer, and Aquiline, as the company repositions towards specialty excess & surplus (E&S) growth.
Investors SkyKnight Capital, L.P., Dragoneer Investment Group and Aquiline Capital Partners LLC have committed $610 million in fresh equity capital, which combined with the rollover of Enstar’s existing ownership, and a further equity commitment of more than $20 million from management, increases the capitalisation of StarStone U.S. to over $850 million.
Enstar will receive a combination of cash consideration and shares in the recapitalisation of the firm, valued at a modest premium to book value.
The recapitalisation is designed to relaunch StarStone U.S. as a leader in the specialty property & casualty insurance markets, with the company hoping to take advantage of the hardening market environment.
Enstar has also announced that a new management team and Board of Directors is set to be appointed at StarStone U.S., led by Jeff Consolino as Chief Executive Officer (CEO) and Ed Noonan serving as Executive Chairman. The new Board of Directors will include Noonan and Consolino; Paul O’Shea and Robert Campbell from Enstar; Steve DeCarlo; Matthew Ebbel, managing Partner of SkyKnight; Marc Stad, Managing Partner at Dragoneer; and Chris Watson, Partner of Aquiline.
In addition, it’s been revealed that one of Enstar’s wholly owned subsidiaries will enter into a combination of loss portfolio and adverse development cover reinsurance agreement with StarStone U.S.
Enstar notes that this recapitalisation is expected to close in the second-half of 2020 following the receipt of customary regulatory approvals.
Enstar’s CEO, Dominic Silvester, commented: “This is a pivotal moment for StarStone U.S. as we reposition the Company towards specialty E&S growth. In partnership with experienced investors and a talented management team, which have built and led winning organizations, Enstar is committed to realizing StarStone U.S.’ full potential as a specialty commercial property & casualty insurer. StarStone U.S. will work with Enstar, as opportunities warrant, in our ongoing acquisition activities.”
Consolino brings 28 years of industry experience to the CEO role, most recently serving as Executive Vice President, Chief Financial Officer and a Director of American Financial Group, Inc. Previously, he was a founding executive of Validus where he served as President and Chief Financial Officer.
“I am delighted and honored to take on the role of CEO of StarStone U.S. 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.
“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. Social inflation and natural catastrophe losses, including floods and wildfires, have also added to market rate momentum. 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.”
Noonan brings over 40 years of industry experience to the role, and most recently served as Chairman and CEO of Validus, a position he held from 2005 to 2018. Previously, he served as President and CEO of American Re from 1997 to 2002, having joined the firm in 1983.
Noonan commented: “Having had the chance to work with the StarStone U.S. team, I am really pleased to have the opportunity to help them build on the excellent work they have done. We have assembled a Board comprised of company founders and business builders which we believe is second to none. I have worked closely with Jeff and many of the directors for years and believe the mix of their skills and experience will greatly benefit the development of the enhanced StarStone U.S. business plan.
“We are very pleased to have the opportunity to partner with patient, long-term investors Dragoneer and SkyKnight who bring a valuable network across both the technology and insurance industries. Following the formation and successful sale of Validus, we are also excited that Aquiline will again invest with us.”
Ebbel added: “We are excited to partner with Jeff, Ed, Steve, and Enstar to build StarStone U.S. into an exceptional specialty carrier executing across both admitted and E&S lines of business. This partnership has been nearly a decade in the making, and we believe this is the ideal time for StarStone U.S. to execute on an expansion strategy with both a clean balance sheet and fresh capital.”
Stad of Dragoneer commented: “At Dragoneer, we focus on partnering with exceptional teams that are building truly differentiated businesses in large markets. We look forward to working with Jeff and Ed as they build a leading specialty carrier at a time when we see very positive, long-term market trends. We have been impressed by Jeff and Ed’s track record of operational excellence, orientation towards disciplined underwriting, and usage of both data and technology.”
While Jeff Greenberg, Chairman and CEO of Aquiline, added: “Today’s dynamic market conditions have created a need for dedicated underwriting capacity across multiple E&S and admitted lines of business. We witnessed the strength of the Validus management team first-hand and believe Jeff and Ed will build a market leader at StarStone.”
Enstar has also announced that StarStone International has contributed its renewal rights to Atrium Underwriters Limited, which manages Lloyd’s Syndicate 609. International business not assumed by Atrium will be placed into an orderly run-off, says Enstar.
The signing of this transaction saw John Hendrickson step down from his role as CEO of StarStone Group. Commenting on this, Silvester said: “I would like to thank John for his significant contribution to StarStone, and we all wish him well with his future endeavors.”
With capacity tight and rate rises accelerating, it’s an interesting and opportunistic time to enter the U.S. P&C and E&S sector.