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Rebranded Core Specialty completes StarStone U.S. recapitalization

1st December 2020 - Author: Luke Gallin

Bermuda based insurance, reinsurance and run-off specialist Enstar Group has announced the completion of the sale and recapitalization of StarStone U.S. Holdings, Inc., via the sale of StarStone U.S. to Core Specialty Insurance Holdings, Inc.

handshakeThe recapitalization was led by SkyKnight Capital, L.P., Dragoneer Investment Group, and Aquiline Capital Partners LLC. As part of the arrangement, Enstar has received a combination of cash consideration and shares in the rebranded Core Specialty.

The $610 million in new equity provided by the investors, coupled with the rollover of Enstar’s existing ownership, and an additional equity purchase of more than $60 million from management and selected other investors, increases the capitalisation of the new company to over $900 million.

Furthermore, after giving effect to the recapitalization, investors SkyKnight and Dragoneer will each have beneficial ownership of roughly 27%, Enstar 25%, Aquiline 11%, management and Directors 6%, and other investors 4%.

As previously announced, in relation to the injection of capital, a wholly owned subsidiary of Enstar has entered into a combination loss portfolio and adverse development cover reinsurance arrangement with Core Specialty.

RMS

As part of the transaction, the new company has also appointed a new management team and Board of Directors. Jeff Consolino is to serve as President and Chief Executive Officer (CEO), and Ed Noonan will serve as Executive Chairman.

The firm’s Board of Directors will include Consolino and Noonan; Enstar’s Paul O’Shea and Robert Campbell; Steve DeCarlo; Dom Addesso; Don Larson; Matthew Ebbel, Managing Partner of SkyKnight; Marc Stad, Managing Partner of Dragoneer; and Chris Watson, Partner of Aquiline.

Core Specialty has ambitions to become the leading specialty insurance carrier. The company notes that its name represents its purpose – to be the core, or most important, part of their clients’ businesses.

Commenting on the rebranding, Consolino said: “Core Specialty has the expanded capital to take on risk, the underwriting talent in place, a proven and decisive leadership team and a track record of making things happen fast. Collectively and in each of our specialist niche business units, we intend to operate with strong entrepreneurial spirit and drive, speed, agility, and empowered decision-making.”

Adding, “Core Specialty is truly ‘ready to go’, a theme we are emphasizing as part of our Company rebranding. While others in the market struggle with the uncertainties of catastrophe losses and the ultimate cost of the COVID-19 pandemic or are engaged in the time consuming process of raising capital, obtaining licenses and ratings and hiring qualified staff, we have been executing on our clear business plan since arranging for our capital infusion in early June.”

Noonan said: “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 Core Specialty. We are very pleased 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 has again invested with us.”

Ebbel added: “We are excited to partner with Jeff, Ed and Enstar to build Core Specialty 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 the Company to execute on an expansion strategy with both a clean balance sheet and fresh capital.”

Dominic Silvester, CEO of Enstar, commented: “We are impressed with the actions taken to date and Enstar is committed to realizing Core Specialty’s full potential as a specialty commercial property & casualty insurer. Enstar will work with the Company, as opportunities warrant, in our ongoing acquisition activities and we are pleased to maintain our significant investment in the Company.

“In August, we announced an exchange agreement with Trident V, L.P. and its affiliated funds managed by Stone Point Capital. In the exchange transaction, Enstar will acquire all the Trident V Funds’ interest in the recapitalized Core Specialty, resulting in Enstar having approximately 25% beneficial ownership of the Company, subject to regulatory approvals and closing conditions.”

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