With an eye toward growth in the wake of recent signals that regulators are starting to take a less-welcoming view of private equity deals in the insurance industry, Bermuda-based Enstar Group Limited has entered into a definitive agreement to acquire global specialty insurer Torus Insurance Holdings Limited in a $692 million transaction that also involves affiliates of private equity firm Stone Point Capital LLC. Torus is the holding company of six wholly owned insurance vehicles, including one Lloyd's syndicate, and its two largest shareholders are private equity firms.
Enstar acquires and manages insurance and reinsurance companies in run-off and portfolios of insurance and reinsurance business in run-off, and provides management, consultancy and other services to the insurance and reinsurance industry. The company recently announced its expansion into live underwriting with its June 2013 definitive agreement to acquire Atrium Underwriting Group, an acquisition expected to close by the end of the year.
In a related announcement, Torus announced Dermot O'Donohoe has been appointed Group Chief Executive Officer of the Torus Group, in addition to his current position as Chief Executive, Torus International. He succeeds Clive Tobin, who is retiring and stepping down as an officer and director following four years of leadership. O'Donohoe has more than 25 years of insurance experience across International and Americas markets. He was appointed Chief Executive of Torus International in 2011 having joined Torus in 2009 as Chief Underwriting Officer, Global Specialty, and Chief Operating Officer of Torus in the UK and Europe. Prior to Torus he was most recently Chief Underwriting Officer of XL Insurance's Global Specialty Operations and CEO of its London Market operations.
"We are very pleased with this transaction and the opportunity to join Enstar during this exciting time, as it expands into the live insurance market," O'Donohoe said in a company press release.
According to Dominic Silvester, Enstar's CEO, in a company statement, "Following the recent announcement of our agreement to acquire Atrium, we are pleased to continue our expansion into 'live' underwriting through the acquisition of Torus. Torus provides us with an opportunity to acquire a large, international A- rated group of companies that both diversifies Enstar into the active market and enhances the opportunities available to our core legacy business."
Regarding the Torus deal, Enstar reports it will issue approximately 1,901,000 ordinary voting shares and approximately 711,000 newly created non-voting preferred shares having an aggregate value of approximately $346 million to partially fund the purchase price. Enstar also will contribute approximately $69 million in cash towards the purchase price, with affiliates of private equity firm Stone Point Capital LLC funding the remaining approximately $277 million through an equity co-investment. Following the closing of the transaction, Enstar will own 60% of Torus and Stone Point will own 40%.
Private equity firms First Reserve and Corsair Capital, Torus' largest shareholders, will receive both Enstar shares and cash consideration in the transaction, with the remaining Torus shareholders receiving all cash. Following the closing of the transaction, affiliates of First Reserve will own an approximately 11.5% economic interest in Enstar, and Enstar will nominate one designee of First Reserve to Enstar's Board of Directors. Completion of the transaction, which is expected to take place by the end of the year, is conditioned on, among other things, governmental and regulatory approvals and satisfaction of various customary closing conditions.
Enstar also announced that affiliates of Stone Point have committed to provide up to $106 million of equity capital towards Enstar's previously announced acquisitions of Atrium Underwriting Group and Arden Reinsurance Company. Assuming both of those transactions are consummated, Enstar would own 60% of those companies and Stone Point would own 40%.
Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio