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Enstar Group Closes Atrium Buy

Zacks Equity Research

Enstar Group Limited (ESGR) with Stone Point Capital jointly announced the acquisition of Atrium Underwriting Group Ltd. from Arden Holdings Ltd for $158 million. Following the declaration, share price of Enstar Group inched up 1.1% to close at $138.86 on Monday with optimism over the acquisition.

Atrium is acquired by Alopuc Limited, where a subsidiary of Enstar Group has 60% stake and Trident V, L.P. and its affiliated co-investment funds, managed by Stone Point, has the remaining 40% stake. Atrium is an underwriting business at Lloyd's of London, a specialist insurance market. It offers accident and health, aviation, marine property, non-marine property, professional liability, property and casualty binding authorities, reinsurance, upstream energy, war and terrorism insurance, cargo and fine art.

The acquisition was announced on Jun 5, 2013 for a purchase consideration of $183 million. However, subsequent to the dividend payment of $25 million, the consideration was reduced by the same amount. The purchase price was paid by both Enstar Group and Stone Point based on their ownership proportions. Enstar funded the payment by a drawing under its revolving credit facility.

Enstar believes that the addition of Atrium’s live underwriting platform will boost development of its own business. Atrium will add a proficient underwriting and management team to Enstar.

Previously on Sep 9, Enstar Group in partnership with Stone Point Capital LLC’s affiliates had completed the acquisition of Arden Reinsurance Company Ltd. from Arden Holdings Ltd for $79.6 million. Northshore Holdings Limited, the purchaser of Arden Reinsurance is indirectly owned 60% by Enstar Group’s Subsidiary and 40% by Stone Point’s affiliated funds.

Enstar Group has been continually undertaking acquisitions to ramp up its inorganic growth profile. In the first nine months of 2013, Enstar Group also completed the acquisition of Arden Reinsurance, U.S. and Canadian Closed-Life Insurance Operations from HSBC Finance and SeaBright Holdings Inc. Additionally, the company will also acquire Torus Insurance Holdings Limited.     

Among the other multi line insurers following the inorganic growth route, Assurant Inc. (AIZ) acquired Field Asset Services when and for how much. The acquisition will help it expand its presence in restoration, property preservation and inspection services business.

Enstar Group presently carries a Zacks Rank #3 (Hold). Some better ranked multi line insurers Old Republic International Corp. (ORI) with a Zacks Rank #1 (Strong Buy) and Cigna Corp. (CI) with a Zacks Rank #2 (Buy), among others, are worth considering.

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