HAMILTON, Bermuda, Feb. 29 /PRNewswire-FirstCall/ -- Enstar Group Limited today reported its earnings and financial position for the year ended December 31, 2007. The financial results include the consolidation of the financial results of Enstar USA, Inc. (formerly The Enstar Group, Inc.) and Inter-Ocean Holdings Ltd, both of which were acquired during the first quarter of 2007.
Enstar reported net earnings of $61.8 million for the year ended December 31, 2007, compared to net earnings of $82.3 million for 2006. Included as part of net earnings for 2007 and 2006 are extraordinary gains of $15.7 million and $31.0 million, respectively, relating to negative goodwill.
Enstar's total assets increased from approximately $1.8 billion at December 31, 2006 to approximately $2.4 billion at December 31, 2007, which included approximately $1.8 billion of cash and investments and $465.3 million in reinsurance balances receivable. The increase in total assets was primarily due to the completion of the merger with Enstar USA, Inc. on January 31, 2007 and the acquisition of Inter-Ocean Holdings Ltd in February 2007. Shareholders' equity was $450.6 million at December 31, 2007, up from $318.6 million at December 31, 2006. The increase in shareholders' equity was primarily a result of additional net assets of approximately $58.4 million acquired following the merger with Enstar USA, Inc., net earnings of $61.8 million, an increase in other paid-in capital arising from employee share awards of $6.0 million and an increase in net retained earnings of $4.9 million following the adoption of FIN 48 ("Accounting for Uncertainty in Income Taxes -- an Interpretation of FASB 109").
In December 2007, Enstar, in conjunction with JCF FPK I L.P. ("JCF FPK") and a newly-hired executive management team, formed U.K.-based Shelbourne Group Limited ("Shelbourne") to invest in Reinsurance To Close ("RITC") transactions (the transferring of liabilities from one Lloyd's syndicate to another) with Lloyd's of London insurance and reinsurance syndicates in run- off. JCF FPK is a joint investment program between Fox-Pitt, Kelton, Cochran, Caronia & Waller LLC ("FPKCCW") and J.C. Flowers II, L.P. (the "Flowers Fund"). The Flowers Fund is a private investment fund advised by J. C. Flowers & Co. LLC. Mr. J. Christopher Flowers (a member of Enstar's board of directors and one of Enstar's largest shareholders) is the founder and Managing Member of J. C. Flowers & Co. LLC. Mr. John J. Oros, Enstar's Executive Chairman and a member of Enstar's board of directors, is a Managing Director of J. C. Flowers & Co. LLC. In addition, an affiliate of the Flowers Fund controls approximately 41% of FPKCCW. Enstar owns 50.1% of Shelbourne, which in turn owns 100% of Shelbourne Syndicate Services Limited, the Managing Agency for Lloyd's Syndicate 2008, which has been approved by Lloyd's to undertake RITC transactions with Lloyd's syndicates in run-off. Enstar reported today that since January 1, 2008, Lloyd's Syndicate 2008 has entered into RITC agreements with four Lloyd's syndicates in run-off with total gross insurance reserves of approximately $455 million. Since January 1, 2008, Enstar has committed capital of approximately $72 million to Lloyd's Syndicate 2008. Enstar's capital commitment was financed by approximately $24 million from bank financing, approximately $22 million from the Flowers Fund (acting in its own capacity and not through JCF FPK) by way of non-voting equity participation, and approximately $26 million from available cash on hand. JCF FPK's capital commitment to Lloyd's Syndicate 2008 is approximately $28 million.
Enstar also reported today that it has received approval from the Australian regulatory authorities to complete the purchase from AMP Limited ("AMP") of AMP's Australian-based closed reinsurance and insurance operations. The acquisition is expected to close on March 5, 2008 and the purchase price of $417 million will be financed by approximately $285 million from bank financing, approximately $40 million from the Flowers Fund by way of non- voting equity participation, and approximately $92 million from available cash on hand.
Enstar also reported that today it completed the acquisition of a U.K.- based reinsurance company in run-off for a purchase price of approximately $64 million. The acquisition was financed by approximately $33 million from bank financing, approximately $10 million from the Flowers Fund by way of non- voting equity participation, and approximately $21 million from available cash on hand.
Enstar filed its annual report on Form 10-K with the SEC earlier today. The Form 10-K contains a more detailed description of Enstar's business and financial results.
Enstar, a Bermuda company, acquires and manages insurance and reinsurance companies in run-off and provides management, consultancy and other services to the insurance and reinsurance industry.
ENSTAR GROUP LIMITED CONDENSED CONSOLIDATED BALANCE SHEETS Dec. 31, Dec. 31, 2007 2006 (dollars in thousands) (unaudited) Total assets $2,417,143 $1,774,252 Total liabilities $1,903,107 $ 1,400,122 Minority interest 63,437 55,520 Total shareholders' equity 450,599 318,610 Total liabilities and shareholders' equity $2,417,143 $1,774,252 ENSTAR GROUP LIMITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS Year Ended December 31, 2007 2006 (dollars in thousands, except per share data) (unaudited) Consulting fees $ 31,918 $ 33,908 Net investment income and net realized gains and losses 64,336 48,001 Net reduction in loss and loss adjustment liabilities 24,482 31,927 General and administrative expenses (78,390) (58,999) Interest expense (4,876) (1,989) Net foreign exchange gain 7,921 10,832 Earnings before income taxes, minority interest, share of net earnings of partly-owned company and extraordinary gain 45,391 63,680 Income taxes recovery 7,441 318 Minority interest (6,730) (13,208) Share of net earnings of partly-owned company - 518 Earnings before extraordinary gain 46,102 51,308 Extraordinary gain- negative goodwill (2006: net of minority interest of $4,329) 15,683 31,038 Net earnings $ 61,785 $ 82,346 Weighted average shares outstanding - basic 11,731,908 9,857,194 Weighted average shares outstanding - diluted 12,009,683 9,966,960 Basic earnings per share $5.27 $8.36 Diluted earnings per share $5.15 $8.26 The weighted average ordinary shares outstanding shown for years ended December 31, 2007 and 2006 reflect the conversion of Class A, B, C and D shares to ordinary shares on January 31, 2007, as part of the recapitalization completed in connection with the merger with The Enstar Group, Inc., as if the conversion occurred on January 1, 2007 and January 1, 2006. For the year ended December 31, 2007, the ordinary shares issued to acquire The Enstar Group, Inc. are reflected in the calculation of the weighted average ordinary shares outstanding from January 31, 2007, the date of issue.
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include statements regarding the intent, belief or current expectations of Enstar and its management team. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Important risk factors regarding Enstar may be found under the heading "Risk Factors" in Enstar's Form 10-K for the year ended December 31, 2007, and are incorporated herein by reference. Furthermore, Enstar undertakes no obligation to update any written or oral forward-looking statements or publicly announce any updates or revisions to any of the forward-looking statements contained herein, to reflect any change in its expectations with regard thereto or any change in events, conditions, circumstances or assumptions underlying such statements, except as required by law.
