Enstar gives StarStone US $600m boost, hires Noonan, Consolino from Validus

Enstar Group has agreed a deal to recapitalise specialist insurer StarStone US with more than $600 million in new equity capital and appoint two former senior Validus executives as its CEO and executive chairman.

The $610 million fundraising will be led by SkyKnight Capital, Dragoneer Investment Group and Aquiline Capital Partners. Together with the rollover of Enstar’s existing ownership, and an additional equity commitment of over $20 million from management, this will increase the equity capitalization of StarStone US to over $850 million.

Enstar will receive a combination of cash consideration and shares in the recapitalized StarStone US, valued at what the company called 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, the chief financial officer of American Financial Group and previously a founding executive of Validus has been appointed CEO.

Ed Noonan, most recently the chairman and CEO of Validus, will be executive chairman of the business. 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 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 recapitalization is expected to close in the second half of 2020 after obtaining customary regulatory approvals.

Enstar also announced that 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.

With the signing of the transaction, John Hendrickson stepped down from his role as StarStone Group CEO.

Dominic Silvester, CEO of Enstar, said: “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 said: “I am delighted and honored to take on the role of CEO of StarStone US. 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 said: “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 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.”

Jeff Greenberg, chairman and CEO of Aquiline, said: “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.”

Ebbel said: “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 U.S. to execute on an expansion strategy with both a clean balance sheet and fresh capital.”

Stad said: “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.”