Enstar recapitalises StarStone US with PE investment

Enstar Group Limited (Enstar) has agreed to a recapitalisation of StarStone US Holdings (StarStone US) led by SkyKnight Capital (SkyKnight), Dragoneer Investment Group (Dragoneer) and Aquiline Capital Partners (Aquiline).

The Investors have committed USD610 million in new equity capital which, together with the rollover of Enstar’s existing ownership, and an additional equity commitment of over USD20 million from management, will increase the equity capitalisation of StarStone US to over USD850 million. Enstar will receive a combination of cash consideration and shares in the recapitalized StarStone US, valued at a modest premium to book value.

As part of the capital infusion, a new management team and Board of Directors will be appointed to StarStone US Jeff Consolino will be CEO and Ed Noonan will be Executive Chairman. The new Board of Directors will include Messrs. Noonan and Consolino; Paul O’Shea and Robert Campbell from Enstar; Steve DeCarlo; Matthew Ebbel, Managing Partner of SkyKnight; Marc Stad, Managing Partner of Dragoneer; and Chris Watson, Partner of Aquiline.

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 US The recapitalisation is expected to close in the second half of 2020 after obtaining customary regulatory approvals.

Dominic Silvester, CEO of Enstar, says: “This is a pivotal moment for StarStone US 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 organisations, Enstar is committed to realising StarStone US’ full potential as a specialty commercial property & casualty insurer. StarStone US will work with Enstar, as opportunities warrant, in our ongoing acquisition activities.”

Jeff Consolino is an experienced insurance industry leader with over 28 years of industry experience. Most recently, Jeff 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 (Validus Group) where he served as President and Chief Financial Officer.

“I am delighted and honoured to take on the role of CEO of StarStone US,” says Consolino. “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. 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 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. Under Noonan’s leadership, Validus Group experienced significant growth, and ultimately was acquired by AIG in 2018 after more than a decade as a leading independent public company. Noonan also served as President and CEO of American Re from 1997 to 2002, after joining the firm in 1983. A recognised market leader, Noonan brings vast expertise to the position of Executive Chairman.

Noonan says: “Having had the chance to work with the StarStone US 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 US 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 says: “We are excited to partner with Jeff, Ed, Steve, and Enstar to build StarStone US 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 US to execute on an expansion strategy with both a clean balance sheet and fresh capital.”

Stad says: “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.”

Jeff Greenberg, Chairman and CEO of Aquiline, says: “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 today 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.

With the signing of the transaction, John Hendrickson stepped down from his role as StarStone Group CEO. Silvester commented, “I would like to thank John for his significant contribution to StarStone, and we all wish him well with his future endeavors.”