HAMILTON, Bermuda, Feb. 29 /PRNewswire-FirstCall/ -- Enstar GroupLimited (Nasdaq: ESGR) today reported its earnings and financial positionfor the year ended December 31, 2007. The financial results include theconsolidation of the financial results of Enstar USA, Inc. (formerly TheEnstar Group, Inc.) and Inter-Ocean Holdings Ltd, both of which wereacquired during the first quarter of 2007. Enstar reported net earnings of $61.8 million for the year endedDecember 31, 2007, compared to net earnings of $82.3 million for 2006.Included as part of net earnings for 2007 and 2006 are extraordinary gainsof $15.7 million and $31.0 million, respectively, relating to negativegoodwill. Enstar's total assets increased from approximately $1.8 billion atDecember 31, 2006 to approximately $2.4 billion at December 31, 2007, whichincluded approximately $1.8 billion of cash and investments and $465.3million in reinsurance balances receivable. The increase in total assetswas primarily due to the completion of the merger with Enstar USA, Inc. onJanuary 31, 2007 and the acquisition of Inter-Ocean Holdings Ltd inFebruary 2007. Shareholders' equity was $450.6 million at December 31,2007, up from $318.6 million at December 31, 2006. The increase inshareholders' equity was primarily a result of additional net assets ofapproximately $58.4 million acquired following the merger with Enstar USA,Inc., net earnings of $61.8 million, an increase in other paid-in capitalarising from employee share awards of $6.0 million and an increase in netretained earnings of $4.9 million following the adoption of FIN 48("Accounting for Uncertainty in Income Taxes -- an Interpretation of FASB109"). In December 2007, Enstar, in conjunction with JCF FPK I L.P. ("JCFFPK") and a newly-hired executive management team, formed U.K.-basedShelbourne Group Limited ("Shelbourne") to invest in Reinsurance To Close("RITC") transactions (the transferring of liabilities from one Lloyd'ssyndicate to another) with Lloyd's of London insurance and reinsurancesyndicates in run- off. JCF FPK is a joint investment program betweenFox-Pitt, Kelton, Cochran, Caronia & Waller LLC ("FPKCCW") and J.C. FlowersII, L.P. (the "Flowers Fund"). The Flowers Fund is a private investmentfund advised by J. C. Flowers & Co. LLC. Mr. J. Christopher Flowers (amember of Enstar's board of directors and one of Enstar's largestshareholders) 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'sboard of directors, is a Managing Director of J. C. Flowers & Co. LLC. Inaddition, an affiliate of the Flowers Fund controls approximately 41% ofFPKCCW. Enstar owns 50.1% of Shelbourne, which in turn owns 100% ofShelbourne Syndicate Services Limited, the Managing Agency for Lloyd'sSyndicate 2008, which has been approved by Lloyd's to undertake RITCtransactions with Lloyd's syndicates in run-off. Enstar reported today thatsince January 1, 2008, Lloyd's Syndicate 2008 has entered into RITCagreements with four Lloyd's syndicates in run-off with total grossinsurance reserves of approximately $455 million. Since January 1, 2008,Enstar has committed capital of approximately $72 million to Lloyd'sSyndicate 2008. Enstar's capital commitment was financed by approximately$24 million from bank financing, approximately $22 million from the FlowersFund (acting in its own capacity and not through JCF FPK) by way ofnon-voting equity participation, and approximately $26 million fromavailable cash on hand. JCF FPK's capital commitment to Lloyd's Syndicate2008 is approximately $28 million. Enstar also reported today that it has received approval from theAustralian regulatory authorities to complete the purchase from AMP Limited("AMP") of AMP's Australian-based closed reinsurance and insuranceoperations. The acquisition is expected to close on March 5, 2008 and thepurchase price of $417 million will be financed by approximately $285million from bank financing, approximately $40 million from the FlowersFund by way of non- voting equity participation, and approximately $92million 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 frombank financing, approximately $10 million from the Flowers Fund by way ofnon- voting equity participation, and approximately $21 million fromavailable 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 andfinancial results. Enstar, a Bermuda company, acquires and manages insurance andreinsurance companies in run-off and provides management, consultancy andother 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 withinthe meaning of the Private Securities Litigation Reform Act of 1995. Thesestatements include statements regarding the intent, belief or currentexpectations of Enstar and its management team. Prospective investors arecautioned that any such forward-looking statements are not guarantees offuture performance and involve risks and uncertainties, and that actualresults may differ materially from those projected in the forward-lookingstatements as a result of various factors. Important risk factors regardingEnstar may be found under the heading "Risk Factors" in Enstar's Form 10-Kfor the year ended December 31, 2007, and are incorporated herein byreference. Furthermore, Enstar undertakes no obligation to update anywritten or oral forward-looking statements or publicly announce any updatesor revisions to any of the forward-looking statements contained herein, toreflect any change in its expectations with regard thereto or any change inevents, conditions, circumstances or assumptions underlying suchstatements, except as required by law.
