Enstar Group has agreed to a recapitalisation of StarStone US Holdings, led by SkyKnight Capital, Dragoneer Investment Group and Aquiline Capital Partners.
The investors have committed $610 million in new equity capital to Starstone US, together with the rollover of Enstar’s existing ownership and an additional equity commitment of over $20 million from management. This will increase Starstone US’ equity capitalisation to over $850 million.
Enstar receives a combination of cash consideration and shares in the recapitalised business, which is valued at a modest premium to book value.
As part of the deal, Jeff Consolino becomes chief executive of Starstone US, while Ed Noonan becomes executive chairman.
Consolino was formerly executive vice president and chief financial officer, and a director of American Financial Group. He was previously a founding executive of Validus Holdings where he served as president and chief financial officer.
Noonan was until recently chairman and chief executive at Validus Group, a position he held from 2005 to 2018. He also served as president and chief executive at American Re from 1997 to 2002, after joining the firm in 1983.
A new board of directors has been appointed, including both Noonan and Consolino, as well as Paul O’Shea and Robert Campbell from Enstar; Matthew Ebbel, managing partner of SkyKnight; Marc Stad, managing partner of Dragoneer; Chris Watson, partner of Aquiline; and Steve DeCarlo, chief executive at AmWINS Group.
John Hendrickson steps down from his role as StarStone Group CEO.
The deal also sees an Enstar subsidiary 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, chief executive of Enstar, called it “a pivotal moment for StarStone US” as it is positioned for specialty excess and surplus growth. Enstar is committed to realising StarStone US’ full potential as a specialty commercial property and casualty insurer, he added.
Consolino said the market environment was right for specialist insurance companies with the right leadership, financial backing, protection from legacy exposures and niche orientation.
“We observe premium pricing increasing and capacity contracting across multiple classes of business including commercial property, directors and officers, excess casualty, marine and aviation and professional liability,” he said. “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.”
Enstar said StarStone International has contributed its renewal rights to Atrium Underwriters, which manages Lloyd’s Syndicate 609. International business not assumed by Atrium will be placed into an orderly run-off.
Enstar, Starstone US, Jeff Consolino, Ed Noonan, SkyKnight Capital, Dragoneer Investment Group, Aquiline Capital Partners, Dominic Silvester