Stone Point Capital supports Enstar purchases of Torus, Atrium and Arden

Private equity firm Stone Point Capital LLC has shown its continuing appetite for investing in firms linked to the reinsurance market by supporting a number of purchases made by Enstar Group, the Bermuda based insurance, reinsurance and run-off specialist. Stone Point is supporting Enstar’s acquisitions of Torus Insurance Holdings, Atrium Underwriting Group and Arden Reinsurance Company.

The acquisition of Torus has just been announced today, with Enstar entering into a definitive agreement to acquire global specialty insurer Torus Insurance Holdings Limited, and its six wholly owned insurance vehicles, including a syndicate at Lloyd’s of London. Enstar said it will contribute $69 million in cash and issue about $346 million in stock to help fund the purchase of Torus.

Affiliates of Stone Point Capital will fund the remaining $277 million of the acquisition through an equity co-investment, with the funds coming from the Trident hedge funds that Stone Point Capital manages it is assumed. At the close of the transaction, Enstar will own 60% of Torus while Stone Point Capital and its affiliates will own 40%.

Two private equity firms, First Reserve and Corsair Capital, are being bought out of Torus and will receive Enstar stock as payment, with First Reserve also receiving a place on Enstar’s board as it will own 11.5% of Enstar after the transaction closes.

Enstar also announced today that Stone Point is supporting its previously announced acquisition of Atrium Underwriting Group and Arden Reinsurance Company. The ownership split will be the same as with Torus, Enstar owning 60% and Stone Point Capital 40%.

Dominic Silvester, Enstar’s Chief Executive Officer, commented; “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. In addition, we are excited to be partnering with Stone Point. We have worked with them successfully in the past and we believe their expertise in the insurance industry will add tremendous value to these acquisitions.”

Dermot O’Donohoe, Torus’ new Group Chief Executive Officer a position that was only announced earlier today, said; “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. We have a high regard for both Enstar and Stone Point and are confident in our collective abilities to achieve great results as a result of this deal.”

Charles A. Davis, Stone Point’s Chief Executive Officer, added; “Stone Point is delighted to be partnering with Enstar on the Torus and Atrium transactions. Our successful relationship with Dominic Silvester and the Enstar team dates back to 2000. We have been one of the largest shareholders of Enstar for many years and have worked with Enstar’s senior management on a number of acquisitions. We look forward to joining with Enstar in these investments and working with the Torus and Atrium management teams.”

While this is not strictly on topic for Artemis it is interesting as Stone Point Capital manage a number of equity focused hedge funds which are increasingly containing shares in firms linked to re/insurance market returns. They provide a slightly different example of third-party capital coming into the re/insurance space.

Stone Point has been an investor in Enstar since 2000, first through Trident II and currently through the Trident V fund. Stone Point also holds stakes in many other reinsurance businesses, such as Alterra (now Markel), reinsurer PartnerRe, life reinsurer Wilton Re which it co-founded alongside the CEO and the New Point IV Ltd. sidecar which was set up by Alterra alongside Stone Point’s Trident V fund.

Stone Point Capital raises funds from third-party investors for its flagship Trident range of private equity hedge funds, investing them largely in financial service firms it feels provide the return profile that its investors require. The focus has been increasingly moving into the reinsurance space and with these latest acquisitions alongside Enstar the Trident funds from Stone Point have become increasingly reinsurance-linked.

The Stone Point Capital fund offerings are another example of a way to tap the return of the reinsurance market without directly investing in the sector’s participants or targeting catastrophe risk alone through the typical funds we follow.