e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the Quarterly Period Ended
June 30, 2007
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the Transition Period
From to
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001-33289
Commission File Number
ENSTAR GROUP LIMITED
(Exact name of registrant as
specified in its charter)
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Bermuda
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N/A
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer
Identification No.)
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P.O. Box HM 2267
Windsor Place,
3rd
Floor
18 Queen Street
Hamilton HM JX
Bermuda
(Address of principal executive
office including zip code)
(441)
292-3645
(Registrants telephone
number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definitions of accelerated filer and
large accelerated filer in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated
filer o; Accelerated
filer þ; Non-accelerated
filer o
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
As of August 7, 2007, the registrant had outstanding
11,909,969 ordinary shares, par value $1.00 per share.
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Item 1.
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FINANCIAL
STATEMENTS
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as of June 30, 2007 and December 31, 2006
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June 30,
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December 31,
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2007
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2006
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(expressed in thousands of U.S. dollars, except share and per
share data)
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ASSETS
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Short-term investments and fixed
maturities, available for sale, at fair value (amortized cost:
2007 $242,905; 2006 $279,137)
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$
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242,803
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$
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279,137
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Fixed maturities, held to maturity,
at amortized cost (fair value: 2007 $308,063;
2006 $328,183)
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312,435
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332,750
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Fixed maturities, trading, at fair
value (amortized cost: 2007 $302,180;
2006 $93,581)
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296,659
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93,221
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Other investments, at fair value
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68,395
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42,421
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Total investments
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920,292
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747,529
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Cash and cash equivalents
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724,120
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450,817
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Restricted cash and cash equivalents
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178,461
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62,746
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Accrued interest receivable
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10,610
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7,305
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Accounts receivable, net
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11,284
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17,758
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Reinsurance balances receivable, net
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493,064
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408,142
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Investment in partly-owned company
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17,998
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Goodwill
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21,222
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21,222
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Other assets
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97,447
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40,735
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TOTAL ASSETS
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$
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2,456,500
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$
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1,774,252
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LIABILITIES
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Losses and loss adjustment expenses
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$
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1,627,276
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$
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1,214,419
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Reinsurance balances payable
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218,938
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62,831
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Accounts payable and accrued
liabilities
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11,659
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29,191
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Income taxes payable
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126
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1,542
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Loans payable
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70,942
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62,148
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Other liabilities
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55,790
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29,991
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TOTAL LIABLITIES
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1,984,731
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1,400,122
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MINORITY INTEREST
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59,935
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55,520
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SHAREHOLDERS EQUITY
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Share capital
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Authorized issued and fully paid,
par value $1 each (Authorized 2007: 156,000,000; 2006:
99,000,000) Ordinary shares (Issued and Outstanding 2007:
11,920,377; 2006: 18,885)
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11,920
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19
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Non-voting convertible ordinary
shares (Issued 2007: 2,972,892; 2006: Nil)
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2,973
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Treasury stock at cost (non-voting
convertible ordinary shares 2007: 2,972,892; 2006: Nil)
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(421,559
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)
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Additional paid-in capital
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590,504
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111,371
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Accumulated other comprehensive
income
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5,207
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4,565
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Retained earnings
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222,789
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202,655
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TOTAL SHAREHOLDERS EQUITY
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411,834
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318,610
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TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY
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$
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2,456,500
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$
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1,774,252
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See accompanying notes to the unaudited condensed
consolidated financial statements
1
for the Three and Six-Month Periods Ended June 30, 2007
and 2006
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Three Months Ended
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Six Months Ended
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June 30,
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June 30,
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June 30,
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June 30,
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2007
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2006
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2007
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2006
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(expressed in thousands of U.S. dollars,
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except share and per share data)
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INCOME
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Consulting fees
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$
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3,826
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$
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5,251
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$
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8,487
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$
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11,600
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Net investment income
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16,976
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11,145
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34,756
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20,805
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Net realized (losses) gains
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(132
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)
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(79
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)
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439
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(79
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)
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20,670
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|
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16,317
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|
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43,682
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32,326
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EXPENSES
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Net (reduction) increase in loss
and loss adjustment
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expense liabilities
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(805
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)
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(4,323
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)
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1,705
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(6,780
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)
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Salaries and benefits
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10,360
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6,491
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23,162
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14,440
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General and administrative expenses
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7,915
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4,995
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13,588
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8,133
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Interest expense
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1,307
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|
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|
532
|
|
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|
2,325
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532
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Net foreign exchange gain
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(3,069
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)
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(7,497
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)
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(3,015
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)
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(7,967
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)
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15,708
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|
198
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|
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37,765
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8,358
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EARNINGS BEFORE INCOME TAXES,
MINORITY INTEREST AND SHARE OF NET EARNINGS OF PARTLY-OWNED
COMPANY
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4,962
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16,119
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5,917
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23,968
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INCOME TAXES RECOVERY
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8,109
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|
581
|
|
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7,093
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|
795
|
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MINORITY INTEREST
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|
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(2,167
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)
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|
|
(4,974
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)
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|
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(4,415
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)
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(5,186
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)
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SHARE OF NET EARNINGS OF
PARTLY-OWNED COMPANY
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151
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263
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|
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|
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EARNINGS BEFORE EXTRAORDINARY GAIN
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|
10,904
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|
|
|
11,877
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8,595
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|
19,840
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|
EXTRAORDINARY GAIN
NEGATIVE GOODWILL (2006: NET OF MINORITY INTEREST OF $4,329)
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|
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|
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15,683
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|
|
|
4,347
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|
|
|
|
|
|
|
|
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NET EARNINGS
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$
|
10,904
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$
|
11,877
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|
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$
|
24,278
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|
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$
|
24,187
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|
|
|
|
|
|
|
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|
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|
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|
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PER SHARE DATA:
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Basic earnings per share before
extraordinary gain basic
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$
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0.92
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$
|
1.21
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$
|
0.74
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$
|
2.02
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Extraordinary gain per
share basic
|
|
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|
|
|
|
|
|
|
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1.36
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|
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0.44
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|
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Basic earnings per share
|
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$
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0.92
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|
|
$
|
1.21
|
|
|
$
|
2.10
|
|
|
$
|
2.46
|
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|
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|
|
|
|
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|
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Diluted earnings per share before
extraordinary gain diluted
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|
$
|
0.89
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|
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$
|
1.19
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|
|
$
|
0.73
|
|
|
$
|
2.00
|
|
Extraordinary gain per
share diluted
|
|
|
|
|
|
|
|
|
|
|
1.33
|
|
|
|
0.44
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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Diluted earnings per share
|
|
$
|
0.89
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|
|
$
|
1.19
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|
|
$
|
2.06
|
|
|
$
|
2.44
|
|
|
|
|
|
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|
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|
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Dividends declared per ordinary
share
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$
|
|
|
|
$
|
2.92
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|
$
|
|
|
|
$
|
2.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average ordinary shares
outstanding basic
|
|
|
11,916,013
|
|
|
|
9,849,321
|
|
|
|
11,540,318
|
|
|
|
9,802,832
|
|
Weighted average ordinary shares
outstanding diluted
|
|
|
12,204,562
|
|
|
|
9,945,994
|
|
|
|
11,817,225
|
|
|
|
9,930,359
|
|
See accompanying notes to the unaudited condensed
consolidated financial statements
2
for the Three and Six-Month Periods Ended June 30, 2007
and 2006
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
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Three Months
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|
Six Months
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Ended
|
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|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
(expressed in thousands of U.S. dollars)
|
|
|
NET EARNINGS
|
|
$
|
10,904
|
|
|
$
|
11,877
|
|
|
$
|
24,278
|
|
|
$
|
24,187
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding (losses) gains
on investments arising during the period
|
|
|
(176
|
)
|
|
|
1,511
|
|
|
|
395
|
|
|
|
1,391
|
|
Reclassification adjustment for
net realized losses (gains) included in net earnings
|
|
|
132
|
|
|
|
79
|
|
|
|
(439
|
)
|
|
|
79
|
|
Currency translation adjustment
|
|
|
46
|
|
|
|
492
|
|
|
|
686
|
|
|
|
577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
2
|
|
|
|
2,082
|
|
|
|
642
|
|
|
|
2,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME
|
|
$
|
10,906
|
|
|
$
|
13,959
|
|
|
$
|
24,920
|
|
|
$
|
26,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited condensed
consolidated financial statements
3
ENSTAR
GROUP LIMITED
(FORMERLY KNOWN AS CASTLEWOOD HOLDINGS LIMITED)
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
for the Six-Month Periods Ended June 30, 2007 and 2006
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(expressed in thousands of U.S. dollars)
|
|
|
Share capital
ordinary shares
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
19
|
|
|
$
|
22,661
|
|
Redemption of Class E shares
|
|
|
|
|
|
|
(22,642
|
)
|
Conversion of shares
|
|
|
6,029
|
|
|
|
|
|
Issue of shares
|
|
|
5,775
|
|
|
|
|
|
Shares repurchased
|
|
|
(7
|
)
|
|
|
|
|
Share awards granted/vested
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
11,920
|
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
Share capital
non-voting convertible ordinary shares
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
|
|
|
$
|
|
|
Conversion of shares
|
|
|
2,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
2,973
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
|
|
|
$
|
|
|
Shares acquired, at cost
|
|
|
(421,559
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
(421,559
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in
capital
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
111,371
|
|
|
$
|
89,090
|
|
Reclassification of deferred
compensation
|
|
|
|
|
|
|
(112
|
)
|
Share awards granted/vested
|
|
|
3,665
|
|
|
|
21,210
|
|
Shares repurchased
|
|
|
(16,755
|
)
|
|
|
|
|
Issue of shares
|
|
|
490,269
|
|
|
|
|
|
Amortization of share awards
|
|
|
1,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
590,504
|
|
|
$
|
110,188
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
|
|
|
$
|
(112
|
)
|
Reclassification of deferred
compensation
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive
income
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
4,565
|
|
|
$
|
1,010
|
|
Other comprehensive income (loss)
|
|
|
642
|
|
|
|
2,047
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
5,207
|
|
|
$
|
3,057
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
202,655
|
|
|
$
|
148,257
|
|
Adjustment to initially apply
FIN 48
|
|
|
4,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted balance, beginning of
period
|
|
|
207,513
|
|
|
|
148,257
|
|
Conversion of shares
|
|
|
(9,002
|
)
|
|
|
|
|
Dividend paid
|
|
|
|
|
|
|
(27,948
|
)
|
Net earnings
|
|
|
24,278
|
|
|
|
24,187
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
222,789
|
|
|
$
|
144,496
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited condensed
consolidated financial statements
4
for the Six-Month Periods Ended June 30, 2007 and 2006
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(expressed in thousands of U.S. dollars)
|
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
24,278
|
|
|
$
|
24,187
|
|
Adjustments to reconcile net
earnings to cash flows provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
4,415
|
|
|
|
5,186
|
|
Negative goodwill (2006: net of
minority interest of $4,329)
|
|
|
(15,683
|
)
|
|
|
(4,347
|
)
|
Share of net earnings of
partly-owned companies
|
|
|
|
|
|
|
(263
|
)
|
Amortization of deferred
compensation
|
|
|
|
|
|
|
112
|
|
Amortization of bond premiums or
discounts
|
|
|
(104
|
)
|
|
|
1,362
|
|
Share-based compensation expense
|
|
|
1,954
|
|
|
|
21,098
|
|
Net realized and unrealized
investments (gain) loss
|
|
|
(439
|
)
|
|
|
79
|
|
Other items
|
|
|
1,217
|
|
|
|
310
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Sales of trading securities
|
|
|
133,227
|
|
|
|
|
|
Reinsurance balances receivable
|
|
|
66,151
|
|
|
|
4,604
|
|
Other assets
|
|
|
484
|
|
|
|
24,381
|
|
Losses and loss adjustment expenses
|
|
|
(24,276
|
)
|
|
|
(27,881
|
)
|
Reinsurance balances payable
|
|
|
(39,783
|
)
|
|
|
4,522
|
|
Accounts payable and accrued
liabilities
|
|
|
(15,387
|
)
|
|
|
(23,142
|
)
|
Other liabilities
|
|
|
89
|
|
|
|
(14,820
|
)
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by
operating activities
|
|
|
136,143
|
|
|
|
15,388
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Acquisition, net of cash acquired
|
|
|
29,651
|
|
|
|
29,015
|
|
Purchase of available-for-sale
securities
|
|
|
(52,148
|
)
|
|
|
(62,358
|
)
|
Sales and maturities of
available-for-sale securities
|
|
|
147,073
|
|
|
|
197,263
|
|
Purchase of held-to-maturity
securities
|
|
|
(2,476
|
)
|
|
|
|
|
Maturity of held-to-maturity
securities
|
|
|
77,492
|
|
|
|
30,066
|
|
Movement in restricted cash and
cash equivalents
|
|
|
(69,334
|
)
|
|
|
14,100
|
|
Funding of other investments
|
|
|
(267
|
)
|
|
|
|
|
Other investing activities
|
|
|
(453
|
)
|
|
|
(721
|
)
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by
investing activities
|
|
|
129,538
|
|
|
|
207,365
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Redemption of shares
|
|
|
|
|
|
|
(22,642
|
)
|
Distribution of capital to minority
shareholders
|
|
|
|
|
|
|
(11,765
|
)
|
Contribution to surplus of
subsidiary by minority interest
|
|
|
|
|
|
|
22,918
|
|
Dividend paid
|
|
|
|
|
|
|
(27,948
|
)
|
Receipt of loan
|
|
|
26,825
|
|
|
|
44,356
|
|
Repayment of loan
|
|
|
(2,571
|
)
|
|
|
(25,156
|
)
|
Repayment of vendor loan note
|
|
|
|
|
|
|
(20,970
|
)
|
Repurchase of shares
|
|
|
(16,762
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by (used
in) financing activities
|
|
|
7,492
|
|
|
|
(41,207
|
)
|
|
|
|
|
|
|
|
|
|
Translation adjustment
|
|
|
130
|
|
|
|
330
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH
EQUIVALENTS
|
|
|
273,303
|
|
|
|
181,876
|
|
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD
|
|
|
450,817
|
|
|
|
280,212
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF
PERIOD
|
|
$
|
724,120
|
|
|
$
|
462,088
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow
Information
|
|
|
|
|
|
|
|
|
Income taxes (paid) recovered
|
|
$
|
(2,598
|
)
|
|
$
|
603
|
|
Interest (paid)
|
|
$
|
(2,571
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited condensed
consolidated financial statements
5
ENSTAR
GROUP LIMITED
(FORMERLY KNOWN AS CASTLEWOOD HOLDINGS LIMITED)
June 30, 2007 and December 31, 2006
(expressed in thousands of U.S. dollars, except share and
per share data)
(unaudited)
|
|
1.
|
BASIS OF
PREPARATION AND CONSOLIDATION
|
Our condensed consolidated financial statements have not been
audited. These statements have been prepared in accordance with
U.S. Generally Accepted Accounting Principles
(U.S. GAAP) for interim financial information
and with the instructions to
Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by
U.S. GAAP for complete financial statements. In the opinion
of management, these financial statements reflect all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation of our financial position and
results of operations as at the end of and for the periods
presented. The results of operations for any interim period are
not necessarily indicative of the results for a full year. All
significant inter-company accounts and transactions have been
eliminated. In these notes, the terms we,
us, our, or the Company
refer to Enstar Group Limited and its direct and indirect
subsidiaries. The following information is unaudited and should
be read in conjunction with our Annual Report on
Form 10-K
for the year ended December 31, 2006.
Accounting
Standards Not Yet Adopted
The term FAS used in these notes refers to
Statements of Financial Accounting Standards issued by the
United States Financial Accounting Standards Board
(FASB).
In September 2006, the FASB issued FAS No. 157,
Fair Value Measurement (FAS 157).
This Statement provides guidance for using fair value to measure
assets and liabilities. Under this standard, the definition of
fair value focuses on the price that would be received to sell
the asset or paid to transfer the liability (an exit price), not
the price that would be paid to acquire the asset or received to
assume the liability (an entry price). FAS 157 clarifies
that fair value is a market based measurement, not an
entity-specific measurement, and sets out a fair value hierarchy
with the highest priority being quoted prices in active markets
and the lowest priority being unobservable data. Further,
FAS 157 requires tabular disclosures of the fair value
measurements by level within the fair value hierarchy.
FAS 157 is effective for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal
years. Although early adoption is permitted as of
January 1, 2007, we have not yet adopted FAS 157 and
are evaluating the potential impact of adoption on our financial
condition, results of operations and cash flows.
In February 2007, the FASB issued FAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities (FAS 159). This standard
permits an entity to irrevocably elect fair value on a
contract-by-contract
basis as the initial and subsequent measurement attribute for
many financial instruments and certain other items including
insurance contracts. An entity electing the fair value option
would be required to recognize changes in fair value in earnings
and provide disclosure that will assist investors and other
users of financial information to more easily understand the
effect of the companys choice to use fair value on its
earnings. Further, the entity is required to display the fair
value of those assets and liabilities for which the company has
chosen to use fair value on the face of the balance sheet. This
standard does not eliminate the disclosure requirements about
fair value measurements included in FAS 157 and
FAS No. 107, Disclosures about Fair Value of
Financial Instruments. FAS 159 is effective for
fiscal years beginning after November 15, 2007. Although
early adoption is permitted as of January 1, 2007, we have
not yet adopted FAS 159 and are evaluating the potential
adoption impact on our financial condition, results of
operations and cash flows.
6
ENSTAR
GROUP LIMITED
(FORMERLY KNOWN AS CASTLEWOOD HOLDINGS LIMITED)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In June 2006, a subsidiary of the Company entered into a
definitive agreement for the purchase of a minority interest in
a U.S. holding company that owns two property and casualty
insurers based in Rhode Island, both of which are in run-off.
Completion of the transaction is conditioned on, among other
things, governmental and regulatory approvals and satisfaction
of various other closing conditions. As a consequence, the
Company cannot predict if or when this transaction will be
completed.
On January 31, 2007, the Company completed the merger (the
Merger) of CWMS Subsidiary Corp., a Georgia
corporation and its wholly-owned subsidiary (CWMS),
with and into The Enstar Group, Inc. (EGI). As a
result of the Merger, EGI, renamed Enstar USA, Inc., is now a
direct wholly-owned subsidiary of the Company.
On January 31, 2007, the Company also acquired the 55% of
the shares of B.H. Acquisition Ltd. (BH) that it
previously did not own. The Company acquired 22% of BH from an
affiliate of Trident II, L.P. for total cash consideration of
$10,164 and acquired EGIs 33% interest in BH as part of
the Merger. BH wholly owns two insurance companies in run-off,
Brittany Insurance Company Ltd., incorporated in Bermuda, and
Compagnie Européenne dAssurances Industrielles S.A.,
incorporated in Belgium. After completion of the acquisition and
the Merger, the Company owns all outstanding shares in BH.
The acquisitions have been accounted for using the purchase
method of accounting, which requires that the acquirer record
the assets and liabilities acquired at their estimated fair
value.
The purchase price and fair value of assets acquired for the EGI
and BH acquisitions were as follows:
|
|
|
|
|
Purchase price
|
|
$
|
506,189
|
|
Direct costs of acquisition
|
|
|
3,149
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
509,338
|
|
|
|
|
|
|
Net assets acquired at fair value
|
|
$
|
514,986
|
|
|
|
|
|
|
Excess of net assets over purchase
price
|
|
$
|
(5,648
|
)
|
|
|
|
|
|
7
ENSTAR
GROUP LIMITED
(FORMERLY KNOWN AS CASTLEWOOD HOLDINGS LIMITED)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
2.
|
ACQUISITIONS (contd)
|
The following summarizes the estimated fair values of the assets
acquired and the liabilities assumed at the date of the
acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of
|
|
|
|
|
|
|
Net Assets
|
|
|
Excess of Net
|
|
|
Adjusted Net
|
|
|
|
Acquired at
|
|
|
Assets Over
|
|
|
Assets Acquired
|
|
|
|
Fair Value
|
|
|
Purchase Price
|
|
|
at Fair Value
|
|
|
Cash
|
|
$
|
83,111
|
|
|
$
|
|
|
|
$
|
83,111
|
|
Other investments
|
|
|
18,139
|
|
|
|
(223
|
)
|
|
|
17,916
|
|
Investment in Enstar Group Limited
|
|
|
426,797
|
|
|
|
(5,238
|
)
|
|
|
421,559
|
|
Investment in BH
|
|
|
15,246
|
|
|
|
(187
|
)
|
|
|
15,059
|
|
Accounts receivable
|
|
|
4,931
|
|
|
|
|
|
|
|
4,931
|
|
Reinsurance balances payable (net)
|
|
|
(509
|
)
|
|
|
|
|
|
|
(509
|
)
|
Losses and loss adjustment expenses
|
|
|
(11,901
|
)
|
|
|
|
|
|
|
(11,901
|
)
|
Accounts payable
|
|
|
(20,828
|
)
|
|
|
|
|
|
|
(20,828
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired at fair value
|
|
$
|
514,986
|
|
|
$
|
(5,648
|
)
|
|
$
|
509,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On February 23, 2007, the Company completed the acquisition
of Inter-Ocean Holdings Ltd. (Inter-Ocean) for total
consideration of $57,504. Inter-Ocean owns two reinsurance
companies, one based in Bermuda and the other based in Ireland.
The purchase price and fair value of assets acquired for
Inter-Ocean was as follows:
|
|
|
|
|
Purchase price
|
|
$
|
57,201
|
|
Direct costs of acquisition
|
|
|
303
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
57,504
|
|
|
|
|
|
|
Net assets acquired at fair value
|
|
$
|
73,187
|
|
|
|
|
|
|
Excess of net assets over purchase
price (negative goodwill)
|
|
$
|
(15,683
|
)
|
|
|
|
|
|
The negative goodwill of $15,683 relating to the acquisition of
Inter-Ocean arose primarily as a result of the strategic desire
of the vendors to achieve an exit from such operations and
therefore to dispose of Inter-Ocean at a discount to fair value.
The following summarizes the estimated fair values of the assets
acquired and the liabilities assumed at the date of the
acquisition:
|
|
|
|
|
Cash, restricted cash and
investments
|
|
$
|
479,760
|
|
Accounts receivable and accrued
interest
|
|
|
5,620
|
|
Reinsurance balances receivable
|
|
|
149,043
|
|
Losses and loss adjustment expenses
|
|
|
(415,551
|
)
|
Insurance and reinsurance balances
payable
|
|
|
(145,317
|
)
|
Accounts payable
|
|
|
(368
|
)
|
|
|
|
|
|
Net assets acquired at fair value
|
|
$
|
73,187
|
|
|
|
|
|
|
8
ENSTAR
GROUP LIMITED
(FORMERLY KNOWN AS CASTLEWOOD HOLDINGS LIMITED)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
2.
|
ACQUISITIONS (contd)
|
The fair values of reinsurance assets and liabilities acquired
are derived from probability weighted ranges of the associated
projected cash flows, based on actuarially prepared information
and managements run-off strategy. Any amendment to the
fair values resulting from changes in such information or
strategy will be recognized when they occur.
The following unaudited proforma condensed combined income
statement for the three and six months ended June 30, 2007
and 2006 combines the historical consolidated statements of
income of the Company, EGI, BH and Inter-Ocean giving effect to
the business combinations and related transactions as if they
had occurred on January 1 of 2007 and 2006, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enstar
|
|
|
|
Enstar
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
|
Group
|
|
|
|
|
|
|
|
|
Proforma
|
|
|
|
|
|
|
|
|
Proforma
|
|
|
Limited
|
|
Three Months Ended June 30, 2007:
|
|
Limited
|
|
|
BH
|
|
|
EGI
|
|
|
Adjustment
|
|
|
Sub-Total
|
|
|
Inter-Ocean
|
|
|
Adjustment
|
|
|
Proforma
|
|
|
Total Income
|
|
$
|
16,972
|
|
|
|
1,567
|
|
|
|
1,222
|
|
|
|
(1,492
|
)
|
|
|
18,269
|
|
|
|
679
|
|
|
|
(187
|
)
|
|
|
18,761
|
|
Total Expenses
|
|
|
(16,865
|
)
|
|
|
(773
|
)
|
|
|
7,820
|
|
|
|
1,072
|
|
|
|
(8,746
|
)
|
|
|
(206
|
)
|
|
|
187
|
|
|
|
(8,765
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings
|
|
$
|
107
|
|
|
|
794
|
|
|
|
9,042
|
|
|
|
(420
|
)
|
|
|
9,523
|
|
|
|
473
|
|
|
|
|
|
|
|
9,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings per Ordinary
Share Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings per Ordinary
Share Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,916,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,204,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Income
|
|
$
|
16,317
|
|
|
|
613
|
|
|
|
1,173
|
|
|
|
(119
|
)
|
|
|
17,984
|
|
|
|
1,219
|
|
|
|
(188
|
)
|
|
|
19,015
|
|
Total Expenses
|
|
|
(4,440
|
)
|
|
|
(277
|
)
|
|
|
(41
|
)
|
|
|
(3,947
|
)
|
|
|
(8,705
|
)
|
|
|
(718
|
)
|
|
|
188
|
|
|
|
(9,235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings
|
|
$
|
11,877
|
|
|
|
336
|
|
|
|
1,132
|
|
|
|
(4,066
|
)
|
|
|
9,279
|
|
|
|
501
|
|
|
|
|
|
|
|
9,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings per Ordinary
Share Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings per Ordinary
Share Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,849,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,945,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
ENSTAR
GROUP LIMITED
(FORMERLY KNOWN AS CASTLEWOOD HOLDINGS LIMITED)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
2.
|
ACQUISITIONS (contd)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enstar
|
|
|
|
Enstar
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
|
Group
|
|
|
|
|
|
|
|
|
Proforma
|
|
|
|
|
|
|
|
|
Proforma
|
|
|
Limited
|
|
Six Months Ended June 30, 2007:
|
|
Limited
|
|
|
BH
|
|
|
EGI
|
|
|
Adjustment
|
|
|
Sub-Total
|
|
|
Inter-Ocean
|
|
|
Adjustment
|
|
|
Proforma
|
|
|
Total Income
|
|
$
|
38,769
|
|
|
|
2,819
|
|
|
|
2,280
|
|
|
|
(2,025
|
)
|
|
|
41,843
|
|
|
|
1,837
|
|
|
|
(375
|
)
|
|
|
43,305
|
|
Total Expenses
|
|
|
(41,993
|
)
|
|
|
(1,547
|
)
|
|
|
907
|
|
|
|
1,605
|
|
|
|
(41,028
|
)
|
|
|
(244
|
)
|
|
|
375
|
|
|
|
(40,897
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Earnings before
Extraordinary Gain
|
|
|
(3,224
|
)
|
|
|
1,272
|
|
|
|
3,187
|
|
|
|
(420
|
)
|
|
|
815
|
|
|
|
1,593
|
|
|
|
|
|
|
|
2,408
|
|
Extraordinary Gain
|
|
|
15,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,683
|
|
|
|
|
|
|
|
|
|
|
|
15,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings
|
|
$
|
12,459
|
|
|
|
1,272
|
|
|
|
3,187
|
|
|
|
(420
|
)
|
|
|
16,498
|
|
|
|
1,593
|
|
|
|
|
|
|
|
18,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings per Ordinary Share
before Extraordinary Gains Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.21
|
|
Extraordinary Gain Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings per Ordinary
Share Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings per Ordinary Share
before Extraordinary Gains Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.20
|
|
Extraordinary Gain
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings per Ordinary
Share Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,540,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,817,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Income
|
|
$
|
32,326
|
|
|
|
1,156
|
|
|
|
2,257
|
|
|
|
(626
|
)
|
|
|
35,113
|
|
|
|
2,271
|
|
|
|
(376
|
)
|
|
|
37,008
|
|
Total Expenses
|
|
|
(12,486
|
)
|
|
|
(572
|
)
|
|
|
703
|
|
|
|
(6,232
|
)
|
|
|
(18,587
|
)
|
|
|
(2,191
|
)
|
|
|
376
|
|
|
|
(20,402
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings (Loss) before
Extraordinary Gain
|
|
|
19,840
|
|
|
|
584
|
|
|
|
2,960
|
|
|
|
(6,858
|
)
|
|
|
16,526
|
|
|
|
80
|
|
|
|
|
|
|
|
16,606
|
|
Extraordinary Gain
|
|
|
4,347
|
|
|
|
|
|
|
|
875
|
|
|
|
(875
|
)
|
|
|
4,347
|
|
|
|
|
|
|
|
|
|
|
|
4,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings (Loss)
|
|
$
|
24,187
|
|
|
|
584
|
|
|
|
3,835
|
|
|
|
(7,733
|
)
|
|
|
20,873
|
|
|
|
80
|
|
|
|
|
|
|
|
20,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings per Ordinary Share
before Extraordinary Gains Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.69
|
|
Extraordinary gain Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings per Ordinary
Share Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings per Ordinary Share
before Extraordinary Gains Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.67
|
|
Extraordinary
Gain Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings per Ordinary
Share Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,802,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,930,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On June 12, 2007, the Company completed the acquisition of
Tate & Lyle Reinsurance Ltd. (Tate &
Lyle) for total consideration of $5,873. Tate &
Lyle is a Bermuda-based reinsurance company in run-off. The
purchase price and fair value of assets acquired for
Tate & Lyle was as follows:
|
|
|
|
|
Purchase price
|
|
$
|
5,788
|
|
Direct costs of acquisition
|
|
|
85
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
5,873
|
|
|
|
|
|
|
Net assets acquired at fair value
|
|
$
|
5,873
|
|
|
|
|
|
|
10
ENSTAR
GROUP LIMITED
(FORMERLY KNOWN AS CASTLEWOOD HOLDINGS LIMITED)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
2.
|
ACQUISITIONS (contd)
|
The following summarizes the estimated fair values of the assets
acquired and the liabilities assumed at the date of the
acquisition:
|
|
|
|
|
Cash, restricted cash and
investments
|
|
$
|
16,794
|
|
Reinsurance balances receivable
|
|
|
223
|
|
Losses and loss adjustment expenses
|
|
|
(11,144
|
)
|
|
|
|
|
|
Net assets acquired at fair value
|
|
$
|
5,873
|
|
|
|
|
|
|
Our share-based compensation plans provide for the grant of
various awards to our employees and to members of the Board of
Directors. These are described, with the exception of the
Options and the Deferred Compensation and Stock Plan for
Non-employee Directors, in Note 12 to the Consolidated
Financial Statements contained in our Annual Report on
Form 10-K
for the year ended December 31, 2006. The information below
includes both the employee and director components of our
share-based compensation.
a) Employee
share plans
|
|
|
|
|
Nonvested
January 1, 2007
|
|
|
92,293
|
|
Granted
|
|
|
38,357
|
|
Vested
|
|
|
(104,788
|
)
|
Forfeited
|
|
|
|
|
|
|
|
|
|
Nonvested
June 30, 2007
|
|
|
25,862
|
|
|
|
|
|
|
On May 23, 2006, the Company entered into a merger
agreement and a recapitalization agreement. These agreements
provided for the cancellation of the then current annual
incentive compensation plan and replaced it with a new annual
incentive compensation plan.
i) 2004
-2005 employee share plan
As a result of the execution of these agreements, the accounting
treatment for share-based awards under our employee share plan
changed from book value to fair value. The determination of the
share-award expenses was based on the fair-market value per
common share of EGI as of the grant date and is recognized over
the vesting period.
Compensation costs of $216 and $1,954 relating to the issuance
of share-awards to employees of the Company in 2004 and 2005
have been recognized in the Companys statement of earnings
for the three and six months ended June 30, 2007,
respectively, as compared to $19,161 and $19,598 for the three
and six months ended June 30, 2006, respectively. Included
in the amounts for the three and six months ended June 30,
2006 is $15,584 relating to the modification of the
Companys employee share plan from a book value plan to a
fair value plan.
As of June 30, 2007, total unrecognized compensation costs
related to the non-vested share awards amounted to $1,039. These
costs are expected to be recognized over a weighted average
period of 0.69 years.
ii) 2006-2010
Annual Incentive Plan and 2006 Equity Incentive Plan
For the six months ended June 30, 2007, 38,387 shares
were awarded to a director, officers and employees under the
2006 Equity Incentive Plan. The total value of the awards were
$3,788 of which $500 was charged as an
11
ENSTAR
GROUP LIMITED
(FORMERLY KNOWN AS CASTLEWOOD HOLDINGS LIMITED)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
3.
|
EMPLOYEE
BENEFITS (contd)
|
expense for the six months ended June 30, 2007 and $3,288
was charged against the
2006-2010
Annual Incentive Plan accrual established for the year ended
December 31, 2006.
As a result of the cancellation of the previous annual incentive
compensation plan, $21,193 of unpaid bonus accrual was reversed
during the three and six months ended June 30, 2006.
The accrued expense relating to the
2006-2010
Annual Incentive Plan for the three and six months ended
June 30, 2007 was $1,925 and $4,285, respectively, as
compared to $2,096 and $4,268 for the three and six months ended
June 30, 2006, respectively.
(b) Options
Prior to the Merger, the Company had no options outstanding to
purchase any of its share capital. In accordance with the Merger
Agreement, on January 31, 2007, fully vested options were
granted by the Company to replace options previously issued by
EGI with the same fair value as the EGI options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
|
Shares
|
|
|
Price
|
|
|
Outstanding
January 1, 2007
|
|
|
|
|
|
$
|
|
|
Granted
|
|
|
490,371
|
|
|
|
25.40
|
|
Exercised
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
June 30, 2007
|
|
|
490,371
|
|
|
$
|
25.40
|
|
|
|
|
|
|
|
|
|
|
Stock options outstanding and exercisable as of June 30,
2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Ranges of
|
|
|
|
|
|
Weighted Average
|
Exercise
|
|
Number of
|
|
Weighted Average
|
|
Remaining
|
Prices
|
|
Options
|
|
Exercise Price
|
|
Contractual Life
|
|
$10 - 20
|
|
|
323,645
|
|
|
$
|
17.20
|
|
|
|
3.6 years
|
|
40 - 60
|
|
|
166,726
|
|
|
|
41.32
|
|
|
|
6.2 years
|
|
(c) Deferred
Compensation and Stock Plan for Non-Employee
Directors
EGI, prior to the Merger, had in place a Deferred Compensation
and Stock Plan for Non-Employee Directors which permitted
non-employee directors to receive all or a portion of their
retainer and meeting fees in common stock and to defer all or a
portion of their retainer and meeting fees in stock units. Upon
completion of the Merger, each stock unit was converted from a
right to receive a share of EGI common stock into a right to
receive an Enstar Group Limited ordinary share.
On June 5, 2007, the Compensation Committee of the Board of
Directors of the Company approved the Enstar Group Limited
Deferred Compensation and Ordinary Share Plan for Non-Employee
Directors (the EGL Deferred Compensation Plan). The
EGL Deferred Compensation Plan became effective immediately. The
EGL Deferred Compensation Plan provides each member of the
Companys Board of Directors who is not an officer or
employee of the Company or any of its subsidiaries (each, a
Non-Employee Director) with the opportunity to elect
(i) to receive all or a portion of his or her compensation
for services as a director in the form of the Companys
ordinary shares instead of cash and (ii) to defer receipt
of all or a portion of such compensation until retirement or
termination.
12
ENSTAR
GROUP LIMITED
(FORMERLY KNOWN AS CASTLEWOOD HOLDINGS LIMITED)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Non-Employee Directors electing to receive compensation in the
form of ordinary shares will receive whole ordinary shares (with
any fractional shares payable in cash) as of the date
compensation would otherwise have been payable. Non-Employee
Directors electing to defer compensation will have such
compensation converted into share units payable as a lump sum
distribution after the directors separation from
service as defined under Section 409A of the Internal
Revenue Code of 1986, as amended. The lump sum share unit
distribution will be made in the form of ordinary shares, with
fractional shares paid in cash.
The following table sets forth the comparison of basic and
diluted earnings per share for the three and six-month periods
ended June 30, 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Basic earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
10,904
|
|
|
$
|
11,877
|
|
|
$
|
24,278
|
|
|
$
|
24,187
|
|
Weighted average shares
outstanding basic
|
|
|
11,916,013
|
|
|
|
9,849,321
|
|
|
|
11,540,318
|
|
|
|
9,802,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.92
|
|
|
$
|
1.21
|
|
|
$
|
2.10
|
|
|
$
|
2.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
10,904
|
|
|
$
|
11,877
|
|
|
$
|
24,278
|
|
|
$
|
24,187
|
|
Weighted average shares
outstanding basic
|
|
|
11,916,013
|
|
|
|
9,849,321
|
|
|
|
11,540,318
|
|
|
|
9,802,832
|
|
Share equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested shares
|
|
|
30,242
|
|
|
|
96,673
|
|
|
|
61,096
|
|
|
|
127,527
|
|
Options
|
|
|
258,307
|
|
|
|
|
|
|
|
215,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding diluted
|
|
|
12,204,562
|
|
|
|
9,945,994
|
|
|
|
11,817,225
|
|
|
|
9,930,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.89
|
|
|
$
|
1.19
|
|
|
$
|
2.06
|
|
|
$
|
2.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average ordinary shares outstanding shown for the
three and six months ended June 30, 2007 and June 30,
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, as if
the conversion occurred on January 1, 2007 and
January 1, 2006. For the three and six months ended
June 30, 2007, the ordinary shares issued to acquire EGI
are reflected in the calculation of the weighted average
ordinary shares outstanding from January 31, 2007, the date
of issue.
On April 15, 2007, the Company entered into a Third Party
Equity Commitment Letter (the Commitment Letter)
with J.C. Flowers II L.P. (the Flowers Fund).
The Commitment Letter provides for the Company to contribute up
to an aggregate of $200,000 to one or more co-investment
vehicles (the Co-Investment Vehicles) that will be
created to participate alongside the Flowers Fund and certain
other investors in the proposed acquisition of SLM Corporation,
commonly known as Sallie Mae. The Companys investment is
conditioned upon the conditions to the closing of the proposed
acquisition of Sallie Mae being satisfied or waived by the
Flowers Fund. Pursuant to the terms of the Commitment Letter, in
the event that the transaction is consummated, a Flowers Fund
designee would be named general partner and managing member of
each Co-Investment Vehicle.
The Companys current commitment to the Sallie Mae
transaction has reduced to approximately $130 million.
Although this commitment may be reduced further, the Company
currently intends to hold a substantial investment
13
ENSTAR
GROUP LIMITED
(FORMERLY KNOWN AS CASTLEWOOD HOLDINGS LIMITED)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
in Sallie Mae, should the transaction be completed. In the event
the transaction closes, the Company expects to receive
underwriting fees for that portion of its original commitment
which is taken up by other investors. In the event that the
transaction is not completed, the Company would receive a
portion of any termination fees paid by Sallie Mae and would
also be responsible for a portion of termination fees due to
Sallie Mae, if any.
The Company has previously committed to invest an aggregate of
$100,000 in the Flowers Fund. The commitment to invest in the
Co-Investment Vehicles pursuant to the Commitment Letter is in
addition to that prior $100,000 commitment.
J.C. Flowers II L.P. is a private investment fund for which
JCF Associates II L.P. is the general partner and J.C.
Flowers & Co. LLC is the investment advisor. JCF
Associates II L.P. and J.C. Flowers & Co. LLC are
controlled by J. Christopher Flowers, a director and one of the
largest shareholders of the Company. In addition, John J. Oros,
a director and Executive Chairman of the Company, is a Managing
Director of J.C. Flowers & Co. LLC.
On June 1, 2007, a wholly-owned subsidiary of the Company
entered into a definitive agreement for the acquisition of a UK
based reinsurance company in run-off for a purchase price of
approximately $30,750. Completion of the transaction, expected
during the third quarter, is conditioned on receipt of
regulatory approval.
|
|
6.
|
RELATED
PARTY TRANSACTIONS
|
The Company has entered into certain transactions with companies
and partnerships that are affiliated with Messrs. J.
Christopher Flowers and John J. Oros. Messrs Flowers and Oros
are members of the Companys Board of Directors and
Mr. Flowers is one of the largest shareholders of Enstar.
The transactions involving companies and partnerships where
Mr. Flowers and Mr. Oros have an involvement are, with
the exception of those disclosed elsewhere in the unaudited
condensed consolidated financial statements, as follows:
|
|
|
|
|
On June 19, 2007 and December 22, 2006, the Company
received management fees for advisory services provided to J.C.
Flowers II L.P. (the Flowers Fund), a private
investment fund, totaling $1,365. Of this amount $455 was earned
during the six months ended June 30, 2007.
|
|
|
|
On June 7, 2006, the commitment made by the Company in
March 2006 to invest an aggregate of $75,000 in the Flowers Fund
was accepted by the Flowers Fund. In addition, as a result of
the merger with EGI, the commitment made by EGI of $25,000 to
the Flowers Fund increases the Companys total commitment
to $100,000. The Companys commitment may be drawn down by
the Flowers Fund over approximately the next six years. As at
June 30, 2007 the Flowers Fund had drawn down a total of
$21,664 of the Companys $100,000 commitment to the Flowers
Fund.
|
The Company adopted the provisions of FASB Interpretation
No. 48, Accounting for Uncertainty in Income
Taxes (FIN 48), on January 1, 2007.
As a result of the implementation of FIN 48, the Company
recognized a $4,858 increase to the January 1, 2007 balance
of retained earnings.
As a result of the Companys merger with EGI on
January 31, 2007, the Company assumed approximately $15,208
of liabilities for unrecognized tax benefits related to various
U.S., state and local income tax matters, and $2,491 of accrued
interest related to uncertain tax positions as a result of
EGIs adoption of FIN 48 on January 1, 2007. The
total amount of unrecognized tax benefits that, if recognized,
would affect the effective tax rate is $4,856.
Within specific countries, the Companys subsidiaries may
be subject to audit by various tax authorities and may be
subject to different statutes of limitations expiration dates.
With limited exceptions, the Companys major
14
ENSTAR
GROUP LIMITED
(FORMERLY KNOWN AS CASTLEWOOD HOLDINGS LIMITED)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
subsidiaries which operate in the U.S. and U.K. are no
longer subject to audits for years before 2003 and 2005,
respectively.
During the quarter, there were reductions to the unrecognized
tax benefit due to the expiration of statutes of limitations of
$8,495.
It is reasonably possible that the amount of the unrecognized
tax benefit with respect to certain of the unrecognized tax
positions could significantly decrease by up to approximately
$3,515 within the next 12 months if the statute of
limitations expires on certain tax periods.
The determination of reportable segments is based on how senior
management monitors the Companys operations. The Company
measures the results of its operations under two major business
categories: reinsurance and consulting.
15
ENSTAR
GROUP LIMITED
(FORMERLY KNOWN AS CASTLEWOOD HOLDINGS LIMITED)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
8.
|
SEGMENT
INFORMATION (contd)
|
Consulting fees for the reinsurance segment are intercompany
fees paid to the consulting segment. Salary and benefits for the
reinsurance segment relate to the discretionary bonus expense on
the net income after taxes of the reinsurance segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2007
|
|
|
|
Consulting
|
|
|
Reinsurance
|
|
|
Total
|
|
|
Consulting fees
|
|
$
|
10,479
|
|
|
$
|
(6,653
|
)
|
|
$
|
3,826
|
|
Net investment income
|
|
|
778
|
|
|
|
16,198
|
|
|
|
16,976
|
|
Net realized losses
|
|
|
|
|
|
|
(132
|
)
|
|
|
(132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,257
|
|
|
|
9,413
|
|
|
|
20,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net reduction in loss and loss
adjustment expense liabilities
|
|
|
|
|
|
|
(805
|
)
|
|
|
(805
|
)
|
Salaries and benefits
|
|
|
8,121
|
|
|
|
2,239
|
|
|
|
10,360
|
|
General and administrative expenses
|
|
|
5,217
|
|
|
|
2,698
|
|
|
|
7,915
|
|
Interest expense
|
|
|
|
|
|
|
1,307
|
|
|
|
1,307
|
|
Net foreign exchange loss (gain)
|
|
|
26
|
|
|
|
(3,095
|
)
|
|
|
(3,069
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,364
|
|
|
|
2,344
|
|
|
|
15,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income
taxes and minority interest
|
|
|
(2,107
|
)
|
|
|
7,069
|
|
|
|
4,962
|
|
Income taxes
|
|
|
175
|
|
|
|
7,934
|
|
|
|
8,109
|
|
Minority interest
|
|
|
|
|
|
|
(2,167
|
)
|
|
|
(2,167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings
|
|
$
|
(1,932
|
)
|
|
$
|
12,836
|
|
|
$
|
10,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
ENSTAR
GROUP LIMITED
(FORMERLY KNOWN AS CASTLEWOOD HOLDINGS LIMITED)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
8.
|
SEGMENT
INFORMATION (contd)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2006
|
|
|
|
Consulting
|
|
|
Reinsurance
|
|
|
Total
|
|
|
Consulting fees
|
|
$
|
10,487
|
|
|
$
|
(5,236
|
)
|
|
$
|
5,251
|
|
Net investment income
|
|
|
336
|
|
|
|
10,809
|
|
|
|
11,145
|
|
Net realized losses
|
|
|
|
|
|
|
(79
|
)
|
|
|
(79
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,823
|
|
|
|
5,494
|
|
|
|
16,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net reduction in loss and loss
adjustment expense liabilities
|
|
|
|
|
|
|
(4,323
|
)
|
|
|
(4,323
|
)
|
Salaries and benefits
|
|
|
4,723
|
|
|
|
1,768
|
|
|
|
6,491
|
|
General and administrative expenses
|
|
|
3,543
|
|
|
|
1,452
|
|
|
|
4,995
|
|
Interest expense
|
|
|
|
|
|
|
532
|
|
|
|
532
|
|
Net foreign exchange loss (gain)
|
|
|
1,275
|
|
|
|
(8,772
|
)
|
|
|
(7,497
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,541
|
|
|
|
(9,343
|
)
|
|
|
198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes,
minority interest and share of income of partly-owned company
|
|
|
1,282
|
|
|
|
14,837
|
|
|
|
16,119
|
|
Income taxes
|
|
|
574
|
|
|
|
7
|
|
|
|
581
|
|
Minority interest
|
|
|
|
|
|
|
(4,974
|
)
|
|
|
(4,974
|
)
|
Share of income of partly-owned
company
|
|
|
|
|
|
|
151
|
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings before extraordinary
gain
|
|
|
1,856
|
|
|
|
10,021
|
|
|
|
11,877
|
|
Extraordinary gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
1,856
|
|
|
$
|
10,021
|
|
|
$
|
11,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
ENSTAR
GROUP LIMITED
(FORMERLY KNOWN AS CASTLEWOOD HOLDINGS LIMITED)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
8.
|
SEGMENT
INFORMATION (contd)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2007
|
|
|
|
Consulting
|
|
|
Reinsurance
|
|
|
Total
|
|
|
Consulting fees
|
|
$
|
21,338
|
|
|
$
|
(12,851
|
)
|
|
$
|
8,487
|
|
Net investment income
|
|
|
1,471
|
|
|
|
33,285
|
|
|
|
34,756
|
|
Net realized gains
|
|
|
|
|
|
|
439
|
|
|
|
439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,809
|
|
|
|
20,873
|
|
|
|
43,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in loss and loss
adjustment expense liabilities
|
|
|
|
|
|
|
1,705
|
|
|
|
1,705
|
|
Salaries and benefits
|
|
|
18,059
|
|
|
|
5,103
|
|
|
|
23,162
|
|
General and administrative expenses
|
|
|
8,585
|
|
|
|
5,003
|
|
|
|
13,588
|
|
Interest expense
|
|
|
|
|
|
|
2,325
|
|
|
|
2,325
|
|
Net foreign exchange loss (gain)
|
|
|
73
|
|
|
|
(3,088
|
)
|
|
|
(3,015
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,717
|
|
|
|
11,048
|
|
|
|
37,765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income
taxes and minority interest
|
|
|
(3,908
|
)
|
|
|
9,825
|
|
|
|
5,917
|
|
Income taxes
|
|
|
(733
|
)
|
|
|
7,826
|
|
|
|
7,093
|
|
Minority interest
|
|
|
|
|
|
|
(4,415
|
)
|
|
|
(4,415
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings before
extraordinary gain
|
|
|
(4,641
|
)
|
|
|
13,236
|
|
|
|
8,595
|
|
Extraordinary gain
|
|
|
|
|
|
|
15,683
|
|
|
|
15,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings
|
|
$
|
(4,641
|
)
|
|
$
|
28,919
|
|
|
$
|
24,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
ENSTAR
GROUP LIMITED
(FORMERLY KNOWN AS CASTLEWOOD HOLDINGS LIMITED)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
8.
|
SEGMENT
INFORMATION (contd)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2006
|
|
|
|
Consulting
|
|
|
Reinsurance
|
|
|
Total
|
|
|
Consulting fees
|
|
$
|
20,422
|
|
|
$
|
(8,822
|
)
|
|
$
|
11,600
|
|
Net investment income
|
|
|
577
|
|
|
|
20,228
|
|
|
|
20,805
|
|
Net realized losses
|
|
|
|
|
|
|
(79
|
)
|
|
|
(79
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,999
|
|
|
|
11,327
|
|
|
|
32,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net reduction in loss and loss
adjustment expense liabilities
|
|
|
|
|
|
|
(6,780
|
)
|
|
|
(6,780
|
)
|
Salaries and benefits
|
|
|
10,821
|
|
|
|
3,619
|
|
|
|
14,440
|
|
General and administrative expenses
|
|
|
6,004
|
|
|
|
2,129
|
|
|
|
8,133
|
|
Interest expense
|
|
|
|
|
|
|
532
|
|
|
|
532
|
|
Net foreign exchange loss (gain)
|
|
|
1,249
|
|
|
|
(9,216
|
)
|
|
|
(7,967
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,074
|
|
|
|
(9,716
|
)
|
|
|
8,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes,
minority interest and share of income of partly-owned company
|
|
|
2,925
|
|
|
|
21,043
|
|
|
|
23,968
|
|
Income taxes
|
|
|
751
|
|
|
|
44
|
|
|
|
795
|
|
Minority interest
|
|
|
|
|
|
|
(5,186
|
)
|
|
|
(5,186
|
)
|
Share of income of partly-owned
company
|
|
|
|
|
|
|
263
|
|
|
|
263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings before extraordinary
gain
|
|
|
3,676
|
|
|
|
16,164
|
|
|
|
19,840
|
|
Extraordinary gain
|
|
|
|
|
|
|
4,347
|
|
|
|
4,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
3,676
|
|
|
$
|
20,511
|
|
|
$
|
24,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
of Enstar Group Limited (formerly known as Castlewood Holdings
Limited)
We have reviewed the accompanying condensed consolidated balance
sheet of Enstar Group Limited and subsidiaries (the
Company) as of June 30, 2007, and the related
condensed consolidated statements of earnings and comprehensive
income for the three-month and the six-month periods ended
June 30, 2007 and 2006, and changes in shareholders
equity and statements of cash flows for the six-month periods
ended June 30, 2007 and 2006. These interim financial
statements are the responsibility of the Companys
management.
We conducted our review in accordance with standards of the
Public Company Accounting Oversight Board (United States). A
review of interim financial information consists principally of
applying analytical procedures and making inquiries of persons
responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in
accordance with standards of the Public Company Accounting
Oversight Board (United States), the objective of which is the
expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to such condensed consolidated
interim financial statements for them to be in conformity with
accounting principles generally accepted in the United States of
America.
We have previously audited, in accordance with standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheet of Enstar Group Limited and
subsidiaries as of December 31, 2006 and the related
consolidated statements of earnings, comprehensive income,
changes in shareholders equity, and cash flows for the
year then ended; and in our report dated March 16, 2007, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of
December 31, 2006 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from
which it has been derived.
Hamilton, Bermuda
August 9, 2007
20
|
|
Item 2.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The following is a discussion and analysis of our results of
operations for the three and six months ended June 30, 2007
and 2006. This discussion and analysis should be read in
conjunction with the attached unaudited condensed consolidated
financial statements and notes thereto and the audited
consolidated financial statements and notes thereto contained in
our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006.
Business
Overview
Enstar Group Limited (formerly Castlewood Holdings Limited) was
formed in August 2001 under the laws of Bermuda to acquire and
manage insurance and reinsurance companies in run-off, and to
provide management, consulting and other services to the
insurance and reinsurance industry. Since our formation, we,
through our subsidiaries, have completed several acquisitions of
insurance and reinsurance companies and are now administering
those businesses in run-off. We derive our net earnings from the
ownership and management of these companies primarily by
settling insurance and reinsurance claims below the recorded
loss reserves and from returns on the portfolio of investments
retained to pay future claims. In addition, we have formed other
businesses that provide management and consultancy services,
claims inspection services and reinsurance collection services
to our affiliates and third-party clients for both fixed and
success-based fees.
Recent
Transactions
On January 31, 2007, we completed the merger, or the
Merger, of our wholly-owned subsidiary, CWMS Subsidiary Corp.,
with and into The Enstar Group, Inc., a Georgia corporation, or
EGI. As a result of the Merger, EGI, renamed Enstar USA, Inc.,
is now our direct wholly-owned subsidiary.
On February 23, 2007, Oceania Holdings Ltd., our
wholly-owned subsidiary, completed the previously announced
acquisition of Inter-Ocean Holdings Ltd., or Inter-Ocean. We
acquired Inter-Ocean by purchasing all of the outstanding
capital stock of Inter-Ocean from its stockholders for a total
purchase price of approximately $57 million, which was
funded with available cash on hand and the proceeds of
approximately $26.8 million in new bank debt. Inter-Ocean
owns two reinsurance companies, one based in Bermuda and the
other based in Ireland. Both companies wrote international
reinsurance and had in place retrocessional policies providing
for the full reinsurance of all of the risks they assumed. In
April 2005, the board of directors of Inter-Ocean decided to
cease underwriting. We provided management services to
Inter-Ocean for approximately 13 months prior to the
completion of the acquisition.
On June 1, 2007, a wholly-owned subsidiary of the Company
entered into a definitive agreement for the acquisition of a
U.K. based reinsurance company in run-off for a purchase price
of approximately $30.7 million. Completion of the
transaction, expected during the third quarter, is conditioned
on receipt of regulatory approval.
On June 12, 2007, Kenmare Holdings Ltd., our wholly-owned
subsidiary, completed the acquisition of
Tate & Lyle Reinsurance Ltd., or Tate &
Lyle, a Bermuda based reinsurance company in run-off. We
acquired Tate & Lyle by purchasing all of the
outstanding capital stock of Tate & Lyle from its
stockholders for a total purchase price of approximately
$5.9 million.
21
Results
of Operations
The following table sets forth Enstars selected
consolidated statement of operations data for each of the
periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Three Months Ended June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting fees
|
|
$
|
3,826
|
|
|
$
|
5,251
|
|
|
$
|
8,487
|
|
|
$
|
11,600
|
|
Net investment income
|
|
|
16,976
|
|
|
|
11,145
|
|
|
|
34,756
|
|
|
|
20,805
|
|
Net realized (losses)/gains
|
|
|
(132
|
)
|
|
|
(79
|
)
|
|
|
439
|
|
|
|
(79
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL INCOME
|
|
|
20,670
|
|
|
|
16,317
|
|
|
|
43,682
|
|
|
|
32,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (reduction) increase in loss
and loss adjustment expense liabilities
|
|
|
(805
|
)
|
|
|
(4,323
|
)
|
|
|
1,705
|
|
|
|
(6,780
|
)
|
Salaries and benefits
|
|
|
10,360
|
|
|
|
6,491
|
|
|
|
23,162
|
|
|
|
14,440
|
|
General and administrative expenses
|
|
|
7,915
|
|
|
|
4,995
|
|
|
|
13,588
|
|
|
|
8,133
|
|
Interest expense
|
|
|
1,307
|
|
|
|
532
|
|
|
|
2,325
|
|
|
|
532
|
|
Net foreign exchange (gain)
|
|
|
(3,069
|
)
|
|
|
(7,497
|
)
|
|
|
(3,015
|
)
|
|
|
(7,967
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL EXPENSES
|
|
|
15,708
|
|
|
|
198
|
|
|
|
37,765
|
|
|
|
8,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes,
minority interest and share of net earnings of partly-owned
company
|
|
|
4,962
|
|
|
|
16,119
|
|
|
|
5,917
|
|
|
|
23,968
|
|
Income tax recovery
|
|
|
8,109
|
|
|
|
581
|
|
|
|
7,093
|
|
|
|
795
|
|
Minority interest
|
|
|
(2,167
|
)
|
|
|
(4,974
|
)
|
|
|
(4,415
|
)
|
|
|
(5,186
|
)
|
Share of net earnings of
partly-owned company
|
|
|
0
|
|
|
|
151
|
|
|
|
0
|
|
|
|
263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before extraordinary gain
|
|
|
10,904
|
|
|
|
11,877
|
|
|
|
8,595
|
|
|
|
19,840
|
|
Extraordinary gain
Negative goodwill (2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of minority interest of $4,329)
|
|
|
0
|
|
|
|
0
|
|
|
|
15,683
|
|
|
|
4,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
|
|
$
|
10,904
|
|
|
$
|
11,877
|
|
|
$
|
24,278
|
|
|
$
|
24,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparison
of Three Months Ended June 30, 2007 and 2006
We reported consolidated net earnings of approximately
$10.9 million for the three months ended June 30, 2007
compared to approximately $11.9 million for the same period
in 2006. The decrease of approximately $1.0 million was
primarily a result of the following:
(i) an increase in salary and general administrative
expenses of $6.8 million partially offset by an increase in
net investment income of $5.8 million;
(ii) reductions in consulting fee income of
$1.4 million, primarily due to the expiry of one consulting
fee engagement;
(iii) lower reduction in loss and loss adjustment expense
liabilities of $3.5 million largely due to increased cost
of amortizing fair value adjustments relating to companies
acquired subsequent to June 30, 2006;
(iv) reduced foreign exchange gains of $4.4 million
partially offset by reduced minority interest costs of
$2.8 million related to 2006 foreign exchange gains;
(v) increased interest expense of $0.8 million due to
additional borrowings since June 30, 2006; largely offset by
22
(vi) an increase in income tax recovery of
$7.5 million relating primarily to the expiry of the
statute of limitations on certain of our previously recorded
uncertain tax liabilities.
Consulting
Fees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Consulting
|
|
$
|
10,479
|
|
|
$
|
10,487
|
|
|
$
|
(8
|
)
|
Reinsurance
|
|
|
(6,653
|
)
|
|
|
(5,236
|
)
|
|
|
(1,417
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,826
|
|
|
$
|
5,251
|
|
|
$
|
(1,425
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We earned consulting fees of approximately $3.8 million and
$5.3 million for the three months ended June 30, 2007 and
2006, respectively. The reduction in consulting fees primarily
relates to the expiry of one external consulting fee engagement
which had generated total fees of $1.5 million for the
three months ended June 30, 2006.
Internal management fees of $6.7 million and
$5.2 million were paid in the three months ended
June 30, 2007 and 2006, respectively, by our reinsurance
companies to our consulting companies. The increase in fees paid
by the reinsurance segment was due primarily to the fees paid by
reinsurance companies that were acquired subsequent to
June 30, 2006.
Net
Investment Income and Net Realized Gains/(Losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Net Investment Income
|
|
|
|
|
|
Net Realized Gains/(Losses)
|
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Consulting
|
|
$
|
778
|
|
|
$
|
336
|
|
|
$
|
442
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Reinsurance
|
|
|
16,198
|
|
|
|
10,809
|
|
|
|
5,389
|
|
|
|
(132
|
)
|
|
|
(79
|
)
|
|
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
16,976
|
|
|
$
|
11,145
|
|
|
$
|
5,831
|
|
|
$
|
(132
|
)
|
|
$
|
(79
|
)
|
|
$
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income for the three month period ended
June 30, 2007 increased by $5.8 million to
$17.0 million, as compared to $11.2 million for the
three-month period ended June 30, 2006. The increase was
primarily attributable to the increase in average cash and
investments balances from $1,132.5 million to
$1,470.3 million for the three months ended June 30,
2006 and 2007. The increase in average cash and investment
balances was due to the merger and acquisitions completed
subsequent to June 30, 2006.
Net realized losses for the three months ended June 30,
2007 and 2006 were $0.1 million and $0.1 million,
respectively. Based on our current investment strategy, we do
not expect net realized gains and losses to be significant in
the foreseeable future.
The average return on the cash and fixed maturities investments
for the three month period ended June 30, 2007 was 4.58%,
as compared to the average return of 3.91% for the three-month
period ended June 30, 2006. The increase in yield was
primarily the result of increasing U.S. interest
rates the U.S. Federal Funds Rate has increased
from an average of 4.97% for the quarter ended June 30,
2006 to an average of 5.25% for the quarter ended June 30,
2007. In respect of our fixed income investments at
June 30, 2007, 91.8% had a Standard & Poors
credit rating of AAA.
Net
Reduction in Loss and Loss Adjustment Expense
Liabilities:
The net reduction in loss and loss adjustment expense
liabilities for the three months ended June 30, 2007 and
2006 was $0.8 million and $4.3 million, respectively.
The change between the periods is attributable to the
amortization, over the estimated payout period, of fair value
adjustments relating to companies acquired of $6.1 million,
compared to $1.3 million for the same period in 2006,
partially offset by the reduction in estimates of ultimate
losses of $1.1 million, compared to an increase of
$0.2 million for the same period in 2006. The following
23
table shows the components of the movement in net reduction in
loss and loss adjustment expense liabilities for the three
months ended June 30, 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Net Losses Paid
|
|
$
|
(13,179
|
)
|
|
$
|
(23,244
|
)
|
Net Change in Case and LAE Reserves
|
|
|
6,399
|
|
|
|
8,229
|
|
Net Change in IBNR
|
|
|
7,585
|
|
|
|
19,338
|
|
|
|
|
|
|
|
|
|
|
Net Reduction in Loss and Loss
Adjustment
|
|
|
|
|
|
|
|
|
Expense Liabilities
|
|
$
|
805
|
|
|
$
|
4,323
|
|
|
|
|
|
|
|
|
|
|
The table below provides a reconciliation of the beginning and
ending reserves for losses and loss adjustment expenses for the
three months ended June 30, 2007 and 2006. Losses incurred
and paid are reflected net of reinsurance recoverables.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Balance as of April 1
|
|
$
|
1,622,061
|
|
|
$
|
1,042,608
|
|
Less: Reinsurance Recoverables
|
|
|
316,487
|
|
|
|
251,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,305,574
|
|
|
|
791,607
|
|
Incurred Related to Prior Years
|
|
|
(805
|
)
|
|
|
(4,323
|
)
|
Paids Related to Prior Years
|
|
|
(13,179
|
)
|
|
|
(23,244
|
)
|
Effect of Exchange Rate Movement
|
|
|
7,531
|
|
|
|
7,970
|
|
Acquired on Acquisition of
Subsidiaries
|
|
|
11,029
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Net Balance as at June 30
|
|
|
1,310,150
|
|
|
|
772,010
|
|
Plus: Reinsurance Recoverables
|
|
|
317,126
|
|
|
|
253,961
|
|
|
|
|
|
|
|
|
|
|
Balance as at June 30
|
|
$
|
1,627,276
|
|
|
$
|
1,025,971
|
|
|
|
|
|
|
|
|
|
|
Salaries
and Benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Consulting
|
|
$
|
8,121
|
|
|
$
|
4,723
|
|
|
$
|
(3,398
|
)
|
Reinsurance
|
|
|
2,239
|
|
|
|
1,768
|
|
|
|
(471
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,360
|
|
|
$
|
6,491
|
|
|
$
|
(3,869
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits, which include expenses relating to our
discretionary bonus and employee share plans, were
$10.4 million and $6.5 million for the three month
periods ended June 30, 2007 and 2006, respectively. The
increase in salaries and benefits for the consulting segment was
due to the following factors: 1) the growth in staff
numbers from 182, as of June 30, 2006, to 203, as of
June 30, 2007; and 2) on May 23, 2006 the Company
entered into a merger agreement and a recapitalization agreement
which resulted in the existing annual incentive compensation
plan being cancelled and the modification of the accounting
treatment for share-based awards from a book value plan to a
fair value plan. The net effect of these changes was to reduce
the total salaries and benefits expense for the three-months
ended June 30, 2006 by $2.0 million.
We expect that staff costs will continue to increase moderately
during 2007 as we continue to grow and add staff. Bonus accrual
expenses will be variable and dependent on our overall
profitability.
24
General
and Administrative Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Consulting
|
|
$
|
5,217
|
|
|
$
|
3,543
|
|
|
$
|
(1,674
|
)
|
Reinsurance
|
|
|
2,698
|
|
|
|
1,452
|
|
|
|
(1,246
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,915
|
|
|
$
|
4,995
|
|
|
$
|
(2,920
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses attributable to the
consulting segment increased by $1.7 million during the
three months ended June 30, 2007, as compared to the three
months ended June 30, 2006 due primarily to increased
professional fees relating to legal and accounting costs
associated with our reporting obligations as a public company.
General and administrative expenses attributable to the
reinsurance segment increased by $1.3 million during the
three months ended June 30, 2007, as compared to the three
months ended June 30, 2006. The increased costs for the
current quarter related primarily to additional general and
administrative expenses of $1.4 million incurred in
relation to companies that we acquired subsequent to
June 30, 2006.
Interest
Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Consulting
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Reinsurance
|
|
|
1,307
|
|
|
|
532
|
|
|
|
(775
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,307
|
|
|
$
|
532
|
|
|
$
|
(775
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense of $1.3 million and $0.5 million was
recorded for the three months ended June 30, 2007 and 2006,
respectively. This amount relates to the interest on the funds
that were borrowed from a London-based bank to assist with the
financing of the Brampton Insurance Company Limited, or
Brampton, Cavell Holdings Limited, or Cavell, and Inter-Ocean
acquisitions. The increase in 2007 over 2006 was due to the
Cavell and Inter-Ocean facilities that were entered into
subsequent to June 30, 2006.
Foreign
Exchange Gain/(Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Consulting
|
|
$
|
(26
|
)
|
|
$
|
(1,275
|
)
|
|
$
|
1,249
|
|
Reinsurance
|
|
|
3,095
|
|
|
|
8,772
|
|
|
|
(5,677
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,069
|
|
|
$
|
7,497
|
|
|
$
|
(4,428
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded a foreign exchange gain of $3.1 million for the
three month period ended June 30, 2007, as compared to a
foreign exchange gain of $7.5 million for the same period
in 2006. For the three months ended June 30, 2007, the
foreign exchange gain arose primarily as a result of:
1) the holding of surplus British Pounds; and 2) the
holding by Cavell of surplus net Canadian and Australian
dollars, as required by local regulatory obligations, at a time
when these currencies have been appreciating against the
U.S. Dollar.
The gain for the three-month period ended June 30, 2006
arose as a result of having a short-term surplus of British
Pounds following our acquisition of Brampton during a period of
strengthening of the British Pound against the U.S. Dollar.
25
Income
Taxes Recovery:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Consulting
|
|
$
|
175
|
|
|
$
|
574
|
|
|
$
|
(399
|
)
|
Reinsurance
|
|
|
7,934
|
|
|
|
7
|
|
|
|
7,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,109
|
|
|
$
|
581
|
|
|
$
|
7,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded an income tax recovery of $8.1 million and
$0.6 million for the three months ended June 30, 2007
and 2006, respectively. During the quarter ended June 30,
2007, the statute of limitations expired on certain previously
recorded uncertain tax liabilities. The benefit of the
expiration of tax recoveries was $8.5 million.
Minority
Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Consulting
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Reinsurance
|
|
|
(2,167
|
)
|
|
|
(4,974
|
)
|
|
|
2,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(2,167
|
)
|
|
$
|
(4,974
|
)
|
|
$
|
2,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded a minority interest in earnings of $2.2 million
and $5.0 million for the three months ended June 30,
2007 and 2006, respectively, reflecting the 49.9% minority
economic interest held by a third party in the earnings from
Hillcot and Brampton. The decrease in minority interest was due
to the decrease in the combined net earnings for the quarter of
Brampton and Hillcot primarily as a result of reduced foreign
exchange gains in Brampton.
Comparison
of Six Months Ended June 30, 2007 and 2006
We reported consolidated net earnings of approximately
$24.3 million for the six months ended June 30, 2007
compared to approximately $24.2 million for the same period
in 2006. Included as part of net earnings for 2007 and 2006 are
extraordinary gains relating to negative goodwill of
$15.7 million and $4.3 million (net of minority
interest of $4.3 million), respectively. For the six months
ended June 30, 2007, we reported earnings before
extraordinary gains of approximately $8.6 million compared
to earnings before extraordinary gains of approximately
$19.8 million for the same period in 2006. The decrease of
approximately $11.2 million was primarily a result of the
following:
(i) an increase in salary and general administrative
expenses of $14.2 million offset by an increase in net
investment income of $14.0 million;
(ii) reductions in consulting fee income of
$3.1 million, primarily due to the expiry of one consulting
fee engagement and the reduction in external fee income
generated from companies that were subsequently acquired;
(iii) lower reduction in loss and loss adjustment expense
liabilities of $8.5 million largely due to increased cost
of amortizing fair value adjustments partially offset by
increased reductions in provisions for run-off expenses, both
relating to companies acquired subsequent to June 30, 2006,
together with the costs of commuting one of the companys
largest reinsurance receivables in the first quarter of 2007;
(iv) reduced foreign exchange gains of $5.0 million
partially offset by reduced minority interest costs of
$0.8 million related to 2006 foreign exchange gains;
(v) increased interest expense of $1.8 million due to
additional borrowings since June 30, 2006; partially offset
by
(vi) an increase in income tax recovery of
$6.3 million relating primarily to the expiry of the
statute of limitations on certain of our previously recorded
uncertain tax liabilities.
26
Consulting
Fees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Consulting
|
|
$
|
21,338
|
|
|
$
|
20,422
|
|
|
$
|
916
|
|
Reinsurance
|
|
|
(12,851
|
)
|
|
|
(8,822
|
)
|
|
|
(4,029
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,487
|
|
|
$
|
11,600
|
|
|
$
|
(3,113
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We earned consulting fees of approximately $8.5 million and
$11.6 million for the six months ended June 30, 2007
and 2006, respectively. The reduction in consulting fees
primarily relates to the expiry of one external consulting fee
arrangement which had generated total fees of $2.0 million
for the six months ended June 30, 2006 along with
$1.0 million in fees from third party companies earned to
June 30, 2006 that were subsequently acquired and now form
part of internal management fee income.
Internal management fees of $12.9 million and
$8.8 million were paid in the six months ended
June 30, 2007 and 2006, respectively, by our reinsurance
companies to our consulting companies. The increase in fees paid
by the reinsurance segment was due primarily to the fees paid by
reinsurance companies that were acquired subsequent to
June 30, 2006.
Net
Investment Income and Net Realized Gains/(Losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
Net Realized
|
|
|
|
|
|
|
Net Investment Income
|
|
|
|
|
|
Gains/(Losses)
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Consulting
|
|
$
|
1,471
|
|
|
$
|
577
|
|
|
$
|
894
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Reinsurance
|
|
|
33,285
|
|
|
|
20,228
|
|
|
|
13,057
|
|
|
|
439
|
|
|
|
(79
|
)
|
|
|
518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
34,756
|
|
|
$
|
20,805
|
|
|
$
|
13,951
|
|
|
$
|
439
|
|
|
$
|
(79
|
)
|
|
$
|
518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income for the six month period ended
June 30, 2006 increased by $14.0 million to
$34.8 million, as compared to $20.8 million for the
six month period ended June 30, 2006. The increase was
primarily attributable to the increase in average cash and
investment balances from $996.9 million to
$1,439.7 million for the six months ended June 30,
2006 and 2007, respectively. The increase in average cash and
investment balances was due to the merger and acquisitions that
were completed subsequent to June 30, 2006.
The average return on the cash and fixed maturities investments
for the six month period ended June 30, 2007 was 4.89%, as
compared to the average return of 4.16% for the six month period
ended June 30, 2006. The increase in yield was primarily
the result of increasing U.S. interest rates
the U.S. Federal Funds Rate increased from an average of
4.66% for the six months ended June 30, 2006 to an average
of 5.25% for the six months ended June 30, 2007.
Net realized gains/(losses) for the six months ended
June 30, 2006 and 2005 were $0.4 million and
$(0.1) million, respectively. Based on our current
investment strategy, we do not expect net realized gains and
losses to be significant in the foreseeable future.
Net
Increase (Reduction) in Loss and Loss Adjustment Expense
Liabilities:
Net increase (reduction) in loss and loss adjustment expense
liabilities for the six months ended June 30, 2007 and 2006
were $1.7 million and $(6.8) million, respectively.
The change in the period is attributable to the amortization,
over the estimated payout period, of fair value adjustments
relating to companies acquired amounting to $11.8 million
compared to $2.6 million for the same period in 2006, an
increase in loss and loss adjustment expense liabilities of
$0.7 million, primarily caused by a $2.2 million loss
in the first quarter of 2007 following the commutation of one of
the Companys largest reinsurance receivables, partially
offset by the reduction in estimates
27
of loss adjustment expense liabilities of $11.1 million, to
reflect 2007 run-off activity, compared to $9.7 million for
the same period in 2006.
The following table shows the components of the movement in net
reduction in loss and loss adjustment expense liabilities for
the six months ended June 30, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Net Losses Paid
|
|
$
|
(12,656
|
)
|
|
$
|
(27,456
|
)
|
Net Change in Case and LAE Reserves
|
|
|
(1,768
|
)
|
|
|
16,121
|
|
Net Change in IBNR
|
|
|
12,719
|
|
|
|
18,115
|
|
|
|
|
|
|
|
|
|
|
Net (Increase) Reduction in Loss
and Loss Adjustment
|
|
|
|
|
|
|
|
|
Expense Liabilities
|
|
$
|
(1,705
|
)
|
|
$
|
6,780
|
|
|
|
|
|
|
|
|
|
|
The table below provides a reconciliation of the beginning and
ending reserves for losses and loss adjustment expenses for the
six months ended June 30, 2007 and 2006. Losses incurred
and paid are reflected net of reinsurance recoverables.
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Balance as of January 1,
|
|
$
|
1,214,419
|
|
|
$
|
806,559
|
|
Less: Reinsurance Recoverables
|
|
|
342,160
|
|
|
|
213,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
872,259
|
|
|
|
593,160
|
|
Incurred Related to Prior Years
|
|
|
1,705
|
|
|
|
(6,780
|
)
|
Paids Related to Prior Years
|
|
|
(12,656
|
)
|
|
|
(27,456
|
)
|
Effect of Exchange Rate Movement
|
|
|
8,892
|
|
|
|
4,838
|
|
Acquired on Acquisition of
Subsidiaries
|
|
|
439,950
|
|
|
|
208,248
|
|
|
|
|
|
|
|
|
|
|
Net Balance as at June 30,
|
|
|
1,310,150
|
|
|
|
772,010
|
|
Plus: Reinsurance Recoverables
|
|
|
317,126
|
|
|
|
253,961
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30
|
|
$
|
1,627,276
|
|
|
$
|
1,025,971
|
|
|
|
|
|
|
|
|
|
|
Salaries
and Benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Consulting
|
|
$
|
18,059
|
|
|
$
|
10,821
|
|
|
$
|
(7,238
|
)
|
Reinsurance
|
|
|
5,103
|
|
|
|
3,619
|
|
|
|
(1,484
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
23,162
|
|
|
$
|
14,440
|
|
|
$
|
(8,722
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits, which include expenses relating to our
discretionary bonus and employee share plans, were
$23.2 million and $14.4 million for the six month
periods ended June 30, 2007 and 2006, respectively. The
increase in salaries and benefits for the consulting segment was
due to the following factors: 1) the growth in staff
numbers from 182, as of June 30, 2006, to 203, as of
June 30, 2007, 2) on May 23, 2006 the Company
entered into a merger agreement and a recapitalization agreement
which resulted in the existing annual incentive compensation
plan being cancelled and the modification of the accounting
treatment for share-based awards from a book value plan to a
fair value plan the net effect of these changes was
to reduce the total salaries and benefits by $2.0 million;
and 3) payment of a special bonus to Mr. John J. Oros
and Mr. Nimrod T. Frazer, totaling $2.0 million, in
recognition of their contributions to the successful completion
of the merger. We expect that staff costs will
28
continue to increase moderately during 2007 as we continue to
grow and add staff. Bonus accrual expenses will be variable and
dependent on our overall profitability.
General
and Administrative Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Consulting
|
|
$
|
8,585
|
|
|
$
|
6,004
|
|
|
$
|
(2,581
|
)
|
Reinsurance
|
|
|
5,003
|
|
|
|
2,129
|
|
|
|
(2,874
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
13,588
|
|
|
$
|
8,133
|
|
|
$
|
(5,455
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses attributable to the
consulting segment increased by $2.6 million during the six
months ended June 30, 2007, as compared to the six months
ended June 30, 2006 due primarily to increased professional
fees relating to legal and accounting costs associated with our
reporting obligations as a public company.
General and administrative expenses attributable to the
reinsurance segment increased by $2.9 million during the
six months ended June 30, 2007, as compared to the six
months ended June 30, 2006. The increased costs for the
period related primarily to additional general and
administrative expenses of $1.6 million incurred in
relation to companies that we acquired subsequent to
June 30, 2006 together with an increase in professional
fees.
Interest
Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Consulting
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Reinsurance
|
|
|
2,325
|
|
|
|
532
|
|
|
|
(1,793
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,325
|
|
|
$
|
532
|
|
|
$
|
(1,793
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense of $2.3 million and $0.5 million was
recorded for the six months ended June 30, 2007 and 2006,
respectively. This amount relates to the interest on the funds
that were borrowed from a London-based bank to assist with the
financing of the Brampton, Cavell and Inter-Ocean acquisitions.
The increase in 2007 over 2006 was due to the Cavell and
Inter-Ocean facilities that were entered into subsequent to
June 30, 2006.
Foreign
Exchange Gain/(Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Consulting
|
|
$
|
(73
|
)
|
|
$
|
(1,249
|
)
|
|
$
|
1,176
|
|
Reinsurance
|
|
|
3,088
|
|
|
|
9,216
|
|
|
|
(6,128
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,015
|
|
|
$
|
7,967
|
|
|
$
|
4,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded a foreign exchange gain of $3.0 million for the
six month period ended June 30, 2007, as compared to a
foreign exchange gain of $8.0 million for the same period
in 2006. For the six months ended June 30, 2007, the
foreign exchange gain arose primarily as a result of:
1) the holding of surplus British Pounds; and 2) the
holding by Cavell of surplus net Canadian and Australian
dollars, as required by local regulatory obligations, at a time
when these currencies have been appreciating against the
U.S. Dollar.
The gain for the six-month period ended June 30, 2006 arose
as a result of having a short-term surplus of British Pounds
following our acquisition of Brampton during a period of
strengthening of the British Pound against the U.S. Dollar.
29
Income
Tax (Expense)/Recovery:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Consulting
|
|
|
|
|
|
$
|
(733
|
)
|
|
$
|
751
|
|
|
$
|
(1,484
|
)
|
|
|
|
|
Reinsurance
|
|
|
|
|
|
|
7,826
|
|
|
|
44
|
|
|
|
7,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
7,093
|
|
|
$
|
795
|
|
|
$
|
6,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded an income tax recovery of $7.1 million and
$0.8 million for the six months ended June 30, 2007
and 2006, respectively.
Income tax (expense) recovery of $(0.7) million and
$0.8 million were recorded in the consulting segment for
the six months ended June 30, 2007 and 2006, respectively.
The variance between the two periods arose because, in 2006, we
applied available loss carryforwards from our U.K. insurance
companies to relieve profits in our U.K. consulting companies.
During the quarter ended June 30, 2007, in the reinsurance
segment, the statute of limitations expired on certain
previously recorded uncertain tax liabilities. The benefit was
$8.5 million.
Minority
Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Consulting
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Reinsurance
|
|
|
(4,415
|
)
|
|
|
(5,186
|
)
|
|
|
771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(4,415
|
)
|
|
$
|
(5,186
|
)
|
|
$
|
771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded a minority interest in earnings of $4.4 million
and $5.2 million for the six months ended June 30,
2007 and 2006, respectively, reflecting the 49.9% minority
economic interest held by a third party in the earnings from
Hillcot and Brampton. The decrease in minority interest was
primarily as a result of reduced foreign exchange gains in
Brampton partially offset by increased earnings.
Negative
Goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Variance
|
|
|
|
(in thousands of U.S. dollars)
|
|
|
Consulting
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Reinsurance
|
|
|
15,683
|
|
|
|
4,347
|
|
|
|
11,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
15,683
|
|
|
$
|
4,347
|
|
|
$
|
11,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Negative goodwill of $15.7 million and $4.3 million
(net of minority interest of $4.3 million) was recorded for
the six months ended June 30, 2007 and 2006, respectively.
For the six months ended June 30, 2007 the negative
goodwill of $15.7 million was earned in connection with our
acquisition of Inter-Ocean and represents the excess of the
cumulative fair value of net assets acquired of
$73.2 million over the cost of $57.5 million. This
excess has, in accordance with SFAS 141 Business
Combinations, been recognized as an extraordinary gain in
2007. The negative goodwill arose primarily as a result of the
strategic desire of the vendors to achieve an exit from such
operations and therefore to dispose of the companies at a
discount to fair value. The negative goodwill of
$4.3 million (net of minority interest of
$4.3 million) for the six months ended June 30, 2006
related to the acquisition of Brampton and arose primarily as a
result of the income earned by Brampton between the date of the
balance sheet on which the agreed purchase price was based,
December 31, 2004, and the date the acquisition closed,
March 30, 2006.
30
Liquidity
and Capital Resources
As we are a holding company and have no substantial operations
of our own, our assets consist primarily of our investments in
subsidiaries. The potential sources of the cash flows to the
holding company consist of dividends, advances and loans from
our subsidiary companies.
Our future cash flows depend upon the availability of dividends
or other statutorily permissible payments from our subsidiaries.
The ability to pay dividends and make other distributions is
limited by the applicable laws and regulations of the
jurisdictions in which our insurance and reinsurance
subsidiaries operate, including Bermuda, the United Kingdom and
Europe, which subject these subsidiaries to significant
regulatory restrictions. These laws and regulations require,
among other things, certain of our insurance and reinsurance
subsidiaries to maintain minimum solvency requirements and limit
the amount of dividends and other payments that these
subsidiaries can pay to us, which in turn may limit our ability
to pay dividends and make other payments.
As of June 30, 2007, the insurance and reinsurance
subsidiaries solvency and liquidity were in excess of the
minimum levels required. Retained earnings of our insurance and
reinsurance subsidiaries are not currently restricted as minimum
capital solvency margins are covered by share capital and
additional
paid-in-capital
with the exception of one subsidiary where retained earnings of
$22.3 million requires regulatory approval prior to
distribution.
Our capital management strategy is to preserve sufficient
capital to enable us to make future acquisitions while
maintaining a conservative investment strategy. We believe that
restrictions on liquidity resulting from restrictions on the
payments of dividends by our subsidiary companies will not have
a material impact on our ability to meet our cash obligations.
Our sources of funds primarily consist of the cash and
investment portfolios acquired on the completion of the
acquisition of an insurance or reinsurance company in run-off.
These acquired cash balances are classified as cash provided by
investing activities. We expect to use these funds acquired,
together with collections from reinsurance debtors, consulting
income, investment income and proceeds from sales and redemption
of investments, to pay losses and loss expenses, salaries and
benefits and general and administrative expenses, with the
remainder used for acquisitions, additional investments and, in
the past, for dividend payments to shareholders. We expect that
our reinsurance segment will have a net use of cash from
operations as total net claim settlements and operating expenses
will generally be in excess of investment income earned. We
expect that our consulting segment operating cash flows will
generally be breakeven. We expect our operating cash flows,
together with our existing capital base and cash and investments
acquired on the acquisition of our insurance and reinsurance
subsidiaries, to be sufficient to meet cash requirements and to
operate its business. We currently do not intend to pay cash
dividends on our ordinary shares.
Our total assets were $2,457 million at June 30, 2007,
including $920.3 million in investments,
$902.6 million in cash and cash equivalents, and
$493.1 million in reinsurance balances receivable as
compared to total assets of $1,774 million at
December 31, 2006. The increase in total assets was due
primarily to the completion of the merger with EGI on
January 31, 2007 and the completion of the acquisition of
Inter-Ocean on February 23, 2007. Shareholders equity
was $411.8 million at June 30, 2007, up from
$318.6 million at December 31, 2006. The increase in
shareholders equity was primarily a result of additional
paid-in capital of approximately $58.4 million acquired in
connection with the merger with EGI on January 31, 2007,
net earnings of $24.3 million for the six months ended
June 30, 2007, an increase in other paid-in capital arising
from employee share awards of $5.7 million recorded in the
six months ended June 30, 2007 and an increase in net
retained earnings of $4.8 million following the adoption of
FIN 48 (Accounting for Uncertainty in Income
Taxes an Interpretation of FASB 109).
Source
of Funds
Operating
Net cash provided by operating activities for the six months
ended June 30, 2007 was $136.1 million compared to
$15.4 million for the six months ended June 30, 2006.
This increase in cash flows is attributable to higher investment
income and the sales of trading securities, offset by higher
general and administrative and interest
31
expenses and lower consulting fee income for the six months
ended June 30, 2007 as compared to the same period in 2006.
Investing
Investing cash flows consist primarily of cash acquired and used
for acquisitions along with net proceeds on the sale and
purchase of investments. Net cash provided by investing
activities was $129.5 million during the six months ended
June 30, 2007 compared to $207.4 million during the
six months ended June 30, 2006. The decrease in the cash
flows was primarily due to the increase of restricted cash
balances during the six months ended June 30, 2007 as
compared to the same period of 2006.
Financing
Net cash provided by (used in) financing activities was
$7.5 million during the six months ended June 30, 2007
compared to ($41.2) million during the six months ended
June 30, 2006. Cash provided by financing activities was
primarily attributable to the combination of the receipt of a
bank loan, offset by our repurchase of our ordinary shares in
respect of the merger. In 2006, cash flow used in financing
activities represented the combination of redemption of shares,
dividends paid and repayment of bank and vendor loans offset by
net capital contributions by the minority interest shareholder
of a subsidiary.
Commitments
and Contingencies
On April 15, 2007, we entered into a Third Party Equity
Commitment Letter, or the Commitment Letter, with J.C.
Flowers II L.P., or the Flowers Fund. The Commitment Letter
provides for us to contribute up to an aggregate of
$200 million to one or more co-investment vehicles, or the
Co-Investment Vehicles, that will be created to participate
alongside the Flowers Fund and certain other investors in the
proposed acquisition of SLM Corporation, commonly known as
Sallie Mae. Our investment is conditioned upon the conditions to
the closing of the proposed acquisition of Sallie Mae being
satisfied or waived by the Flowers Fund. Pursuant to the terms
of the Commitment Letter, in the event that the transaction is
consummated, a Flowers Fund designee would be named general
partner and managing member of each Co-Investment Vehicle.
Our current commitment to the Sallie Mae transaction has reduced
to approximately $130 million. Although this commitment may
be reduced further, we currently intend to hold a substantial
investment in Sallie Mae, should the transaction be completed.
In the event the transaction closes, we expect to receive
underwriting fees for that portion of our original commitment
which is taken up by other investors. In the event that the
transaction is not completed, we would receive a portion of any
termination fees paid by Sallie Mae and would also be
responsible for a portion of termination fees due to Sallie Mae,
if any.
Critical
Accounting Estimates
Our critical accounting estimates are discussed in
Managements Discussion and Analysis of Results of
Operations and Financial Condition contained in our Annual
Report on
Form 10-K
for the year ended December 31, 2006, filed with the SEC on
March 16, 2007.
Off-Balance
Sheet and Special Purpose Entity Arrangements
At June 30, 2007, we have not entered into any off-balance
sheet arrangements, as defined by Item 303(a)(4) of
Regulation S-K.
Cautionary
Note Regarding Forward-Looking Statements
This quarterly report and the documents incorporated by
reference contain statements that constitute
forward-looking statements within the meaning of
Section 21E of the Securities and Exchange Act of 1934, as
amended, or the Exchange Act, with respect to our financial
condition, results of operations, business strategies, operating
efficiencies, competitive positions, growth opportunities, plans
and objectives of our management, as well as the markets for our
ordinary shares and the insurance and reinsurance sectors in
general. Statements that include words
32
such as estimate, project,
plan, intend, expect,
anticipate, believe, would,
should, could, seek, and
similar statements of a future or forward-looking nature
identify forward-looking statements for purposes of the federal
securities laws or otherwise. All forward-looking statements are
necessarily estimates or expectations, and not statements of
historical fact, reflecting the best judgment of our management
and involve a number of risks and uncertainties that could cause
actual results to differ materially from those suggested by the
forward-looking statements. These forward-looking statements
should, therefore, be considered in light of various important
factors, including those set forth in and incorporated by
reference in this quarterly report.
Factors that could cause actual results to differ materially
from those suggested by the forward-looking statements include:
|
|
|
|
|
risks associated with implementing our business strategies and
initiatives;
|
|
|
|
the adequacy of our loss reserves and the need to adjust such
reserves as claims develop over time;
|
|
|
|
risks relating to the availability and collectibility of our
reinsurance;
|
|
|
|
tax, regulatory or legal restrictions or limitations applicable
to us or the insurance and reinsurance business generally;
|
|
|
|
increased competitive pressures, including the consolidation and
increased globalization of reinsurance providers;
|
|
|
|
emerging claim and coverage issues;
|
|
|
|
lengthy and unpredictable litigation affecting assessment of
losses
and/or
coverage issues;
|
|
|
|
loss of key personnel;
|
|
|
|
changes in our plans, strategies, objectives, expectations or
intentions, which may happen at any time at managements
discretion;
|
|
|
|
operational risks, including system or human failures;
|
|
|
|
risks that we may require additional capital in the future which
may not be available or may be available only on unfavorable
terms;
|
|
|
|
the risk that ongoing or future industry regulatory developments
will disrupt our business, or mandate changes in industry
practices in ways that increase our costs, decrease our revenues
or require us to alter aspects of the way we do business;
|
|
|
|
changes in Bermuda law or regulation or the political stability
of Bermuda;
|
|
|
|
changes in regulations or tax laws applicable to us or our
subsidiaries, or the risk that we or one of our
non-U.S. subsidiaries
become subject to significant, or significantly increased,
income taxes in the United States or elsewhere;
|
|
|
|
losses due to foreign currency exchange rate fluctuations;
|
|
|
|
changes in accounting policies or practices; and
|
|
|
|
changes in economic conditions, including interest rates,
inflation, currency exchange rates, equity markets and credit
conditions which could affect our investment portfolio.
|
The foregoing review of important factors should not be
construed as exhaustive and should be read in conjunction with
the other cautionary statements and Risk Factors that are
included in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed with the
SEC on March 16, 2007, as well as in the materials filed
and to be filed with the SEC. We undertake no obligation to
publicly update or review any forward-looking statement, whether
as a result of new information, future developments or
otherwise.
33
|
|
Item 3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
There have been no material changes in the Companys market
risk exposures since December 31, 2006. Please refer to
Item 7A of our Annual Report on
Form 10-K
for the year ended December 31, 2006, filed with the SEC on
March 16, 2007, for our quantitative and qualitative
disclosures about market risk.
|
|
Item 4.
|
CONTROLS
AND PROCEDURES
|
Evaluation
of Disclosure Controls and Procedures
Our management has performed an evaluation, with the
participation of our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and
procedures (as defined in
Rules 13a-15(e)
and
15d-15(e) of
the Exchange Act) as of June 30, 2007. Based upon that
evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures
are effective to ensure that information that we are required to
disclose in reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the SEC and is
accumulated and communicated to management, including its
principal executive and principal financial officers, as
appropriate to allow timely decisions regarding required
disclosure.
Changes
in Internal Controls
Our management has performed an evaluation, with the
participation of our Chief Executive Officer and our Chief
Financial Officer, of changes in our internal control over
financial reporting that occurred during the quarter ended
June 30, 2007. Based upon that evaluation there were no
changes in our internal control over financial reporting that
occurred during the quarter ended June 30, 2007 that have
materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART II
OTHER INFORMATION
|
|
Item 1.
|
LEGAL
PROCEEDINGS
|
We are, from time to time, involved in various legal proceedings
in the ordinary course of business, including litigation
regarding claims. We do not believe that the resolution of any
currently pending legal proceedings, either individually or
taken as a whole, will have a material adverse effect on our
business, results of operations or financial condition.
Nevertheless, we cannot assure you that lawsuits, arbitrations
or other litigation will not have a material adverse effect on
our business, financial condition or results of operations. We
anticipate that, similar to the rest of the insurance and
reinsurance industry, we will continue to be subject to
litigation and arbitration proceedings in the ordinary course of
business, including litigation generally related to the scope of
coverage with respect to asbestos and environmental claims.
There can be no assurance that any such future litigation will
not have a material adverse effect on our business, financial
condition or results of operations.
Our results of operations and financial condition are subject to
numerous risks and uncertainties described in Part I,
Item 1A. Risk Factors in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed with the
SEC on March 16, 2007. The risk factors identified therein
have not materially changed.
34
|
|
Item 4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
The following matters were submitted to a vote of shareholders
at our Annual General Meeting of Shareholders on June 5,
2007:
1. Election of the following nominees to serve as
Class I Directors of our Board of Directors.
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominee
|
|
Votes For
|
|
Votes Against
|
|
Votes Abstained
|
|
Gregory L. Curl
|
|
|
11,320,920
|
|
|
|
4,257
|
|
|
|
5,886
|
|
Nimrod T. Frazer
|
|
|
11,281,676
|
|
|
|
43,626
|
|
|
|
5,261
|
|
Paul J. OShea
|
|
|
11,282,268
|
|
|
|
43,134
|
|
|
|
5,161
|
|
The continuing members of our Board of Directors following the
Annual General Meeting of Shareholders include Dominic F.
Silvester, John J. Oros, J. Christopher Flowers, Nicholas A.
Packer, T. Whit Armstrong, T. Wayne Davis and Paul J.
Collins.
2. Ratification of the selection of Deloitte &
Touche, Hamilton, Bermuda, to act as our independent registered
public accounting firm for the fiscal year ending
December 31, 2007 and authorization of our Board of
Directors, acting through the Audit Committee, to approve the
fees for the independent registered public accounting firm.
|
|
|
|
|
|
|
|
|
|
|
Votes For
|
|
Votes Against
|
|
Votes Abstained
|
|
|
11,320,012
|
|
|
|
5,460
|
|
|
|
5,091
|
|
3. Election of directors of each of our subsidiaries
identified in Proposal Number Three in the proxy statement
(nominees for the respective subsidiaries and the results of
voting are set forth below).
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Paul J. OShea
|
|
|
9,190,251
|
|
|
|
1,883
|
|
|
|
11,933
|
|
Richard J. Harris
|
|
|
9,190,251
|
|
|
|
1,883
|
|
|
|
11,933
|
|
Adrian Kimberley
|
|
|
9,190,251
|
|
|
|
1,833
|
|
|
|
11,933
|
|
Elizabeth Dasilva
|
|
|
9,190,251
|
|
|
|
1,883
|
|
|
|
11,933
|
|
Michael Smellie
|
|
|
9,190,251
|
|
|
|
1,883
|
|
|
|
11,933
|
|
|
|
2.
|
CASTLEWOOD
(EU) HOLDINGS LTD.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
David Hackett
|
|
|
9,190,050
|
|
|
|
1,909
|
|
|
|
12,108
|
|
Alan Turner
|
|
|
9,190,050
|
|
|
|
1,909
|
|
|
|
12,108
|
|
|
|
3.
|
CASTLEWOOD
BROKERS LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Richard J. Harris
|
|
|
9,190,251
|
|
|
|
1,883
|
|
|
|
11,933
|
|
Elizabeth Dasilva
|
|
|
9,190,076
|
|
|
|
1,883
|
|
|
|
12,108
|
|
Adrian Kimberley
|
|
|
9,190,076
|
|
|
|
1,883
|
|
|
|
12,108
|
|
David Rocke
|
|
|
9,190,251
|
|
|
|
1,883
|
|
|
|
11,933
|
|
35
|
|
4.
|
CASTLEWOOD
(EU) LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
David Hackett
|
|
|
9,190,076
|
|
|
|
1,883
|
|
|
|
12,108
|
|
Alan Turner
|
|
|
9,190,076
|
|
|
|
1,883
|
|
|
|
12,108
|
|
Steve Aldous
|
|
|
9,190,076
|
|
|
|
1,883
|
|
|
|
12,108
|
|
Duncan McLaughlin
|
|
|
9,190,076
|
|
|
|
1,883
|
|
|
|
12,108
|
|
Derek Reid
|
|
|
9,190,076
|
|
|
|
1,883
|
|
|
|
12,108
|
|
Paul Thomas
|
|
|
9,190,076
|
|
|
|
1,883
|
|
|
|
12,108
|
|
David Grisley
|
|
|
9,190,076
|
|
|
|
1,883
|
|
|
|
12,108
|
|
David Atkins
|
|
|
9,190,076
|
|
|
|
1,883
|
|
|
|
12,108
|
|
Steve Given
|
|
|
9,190,076
|
|
|
|
1,883
|
|
|
|
12,108
|
|
|
|
5.
|
CRANMORE
(BERMUDA) LTD.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Paul J. OShea
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Richard J. Harris
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Adrian Kimberley
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
|
|
6.
|
CRANMORE
ADJUSTERS LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
David Hackett
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Alan Turner
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Steve Norrington
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Phil Cooper
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Mark Wood
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
David Ellis
|
|
|
9,189,880
|
|
|
|
1,883
|
|
|
|
12,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Tim Houston
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Duncan Scott
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Adrian Kimberley
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
|
|
8.
|
BLACKROCK
HOLDINGS LTD.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Tim Houston
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Duncan Scott
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Adrian Kimberley
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
36
|
|
9.
|
KENMARE
HOLDINGS LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Paul J. OShea
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Richard J. Harris
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Adrian Kimberley
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Dominic F. Silvester
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Nicholas A. Packer
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
|
|
10.
|
KINSALE
BROKERS LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Phil Hernon
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Steve Western
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Alan Turner
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Steve Norrington
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Derek Reid
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
|
|
11.
|
REGIS
AGENCIES LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Alan Turner
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Steve Aldous
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
|
|
12.
|
FITZWILLIAM
(SAC) INSURANCE LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Paul J. OShea
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Richard J. Harris
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Adrian Kimberley
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Nicholas A. Packer
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Richard J. Harris
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Adrian Kimberley
|
|
|
9,190,081
|
|
|
|
1,883
|
|
|
|
12,103
|
|
Elizabeth Dasilva
|
|
|
9,189,880
|
|
|
|
1,883
|
|
|
|
12,304
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
|
|
14.
|
RIVER
THAMES INSURANCE COMPANY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Alan Turner
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Steve Aldous
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Max Lewis
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
37
|
|
15.
|
OVERSEAS
REINSURANCE COMPANY LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Paul J. OShea
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Richard J. Harris
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Adrian Kimberley
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,898
|
|
|
|
12,103
|
|
|
|
16.
|
HUDSON
REINSURANCE COMPANY LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Paul J. OShea
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Richard J. Harris
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Adrian Kimberley
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Duncan Scott
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
David Rocke
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
|
|
17.
|
CAVELL
HOLDINGS LIMITED (U.K.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Alan Turner
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Steve Aldous
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Derek Reid
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Nicholas A. Packer
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Jean Baptiste Brekelmans
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Marc Torbick
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
|
|
19.
|
DENMAN
HOLDINGS LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Richard J. Harris
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
John J. Oros
|
|
|
9,190,081
|
|
|
|
1,883
|
|
|
|
12,103
|
|
Cameron Leamy
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Kenneth Thomson
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
|
|
20.
|
HARPER
INSURANCE LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Richard J. Harris
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Nicholas A. Packer
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Michael Handler
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Florian von Meiss
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Walter Boss
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
38
|
|
21.
|
HARPER
FINANCING LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Derek Reid
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Brian Walker
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Alan Turner
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Cheryl D. Davis
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
John J. Oros
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Karl Wall
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Donna Stolz
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
|
|
23.
|
CASTLEWOOD
HOLDINGS (US) INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Cheryl D. Davis
|
|
|
9,190,050
|
|
|
|
1,909
|
|
|
|
12,108
|
|
John J. Oros
|
|
|
9,190,225
|
|
|
|
1,909
|
|
|
|
11,933
|
|
Karl Wall
|
|
|
9,190,225
|
|
|
|
1,909
|
|
|
|
12,108
|
|
Donna Stolz
|
|
|
9,190,050
|
|
|
|
1,909
|
|
|
|
12,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Cheryl D. Davis
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
John J. Oros
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Karl Wall
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Donna Stolz
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
|
|
25.
|
CASTLEWOOD
INVESTMENTS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Cheryl D. Davis
|
|
|
9,190,050
|
|
|
|
1,909
|
|
|
|
12,108
|
|
John J. Oros
|
|
|
9,190,225
|
|
|
|
1,909
|
|
|
|
11,933
|
|
Karl Wall
|
|
|
9,190,050
|
|
|
|
1,909
|
|
|
|
12,108
|
|
Donna Stolz
|
|
|
9,190,050
|
|
|
|
1,909
|
|
|
|
12,108
|
|
|
|
26.
|
LONGMYND
INSURANCE COMPANY LTD.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
David Hackett
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Steve Aldous
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Alan Turner
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
39
|
|
27.
|
MERCANTILE
INDEMNITY COMPANY LTD.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
David Hackett
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Alan Turner
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Steve Aldous
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Derek Reid
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
|
|
28.
|
FIELDMILL
INSURANCE COMPANY LTD.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
David Hackett
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Steve Aldous
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Alan Turner
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
|
|
29.
|
VIRGINIA
HOLDINGS LTD.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Paul J. OShea
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Richard J. Harris
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Adrian Kimberley
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
|
|
30.
|
UNIONE
ITALIANA (UK) REINSURANCE COMPANY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Alan Turner
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Steve Aldous
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Derek Reid
|
|
|
9,189,880
|
|
|
|
1,883
|
|
|
|
12,278
|
|
|
|
31.
|
CAVELL
INSURANCE COMPANY LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Alan Turner
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Steve Aldous
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Derek Reid
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Darren Truman
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
|
|
32.
|
OCEANIA
HOLDINGS LTD.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Paul J. OShea
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Richard J. Harris
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Adrian Kimberley
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Tim Houston
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
40
|
|
33.
|
CIRRUS RE
COMPANY A/S
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Alan Turner
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Steve Aldous
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Jan Endressen
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
|
|
34.
|
INTER-OCEAN
HOLDINGS LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Paul J. OShea
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Tim Houston
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Orla Gregory
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,103
|
|
Richard J. Harris
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Adrian Kimberley
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
John J. Oros
|
|
|
9,190,050
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Cheryl D. Davis
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Karl J. Wall
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
|
|
36.
|
INTER-OCEAN
SERVICES LTD.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Paul J. OShea
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Tim Houston
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Orla Gregory
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Richard J. Harris
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Adrian Kimberley
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
|
|
37.
|
INTER-OCEAN
CREDIT PRODUCTS LTD.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Paul J. OShea
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Orla Gregory
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Richard J. Harris
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Adrian Kimberley
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
|
|
38.
|
HILLCOT
UNDERWRITING MANAGEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Alan Turner
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Steve Aldous
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
41
|
|
39.
|
INTER-OCEAN
REINSURANCE COMPANY LTD.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Paul J. OShea
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Tim Houston
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Orla Gregory
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Richard J. Harris
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Adrian Kimberley
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
|
|
40.
|
INTER-OCEAN
REINSURANCE (IRELAND) LTD.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Richard J. Harris
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Nicholas A. Packer
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Orla Gregory
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Kevin OConnor
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
|
|
41.
|
ENSTAR
FINANCIAL SERVICES, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
John J. Oros
|
|
|
9,189,880
|
|
|
|
2,228
|
|
|
|
11,959
|
|
Cheryl D. Davis
|
|
|
9,190,050
|
|
|
|
1,909
|
|
|
|
12,108
|
|
|
|
42.
|
HILLCOT
HOLDINGS LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Paul J. OShea
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Richard J. Harris
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Adrian Kimberley
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Mark Cutis
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Masazumi Kato
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
|
|
43.
|
HILLCOT
REINSURANCE LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Alan Turner
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Steve Aldous
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Masazumi Kato
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
Max Lewis
|
|
|
9,189,906
|
|
|
|
1,883
|
|
|
|
12,278
|
|
|
|
44.
|
BRAMPTON
INSURANCE COMPANY LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Alan Turner
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Steve Aldous
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Max Lewis
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
42
|
|
45.
|
ENSTAR
GROUP OPERATIONS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
John J. Oros
|
|
|
9,189,880
|
|
|
|
2,228
|
|
|
|
11,959
|
|
Cheryl D. Davis
|
|
|
9,190,050
|
|
|
|
1,909
|
|
|
|
12,108
|
|
|
|
46.
|
B.H.
ACQUISITION LTD.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Adrian Kimberley
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Richard J. Harris
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Paul J. OShea
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
|
|
47.
|
BRITTANY
INSURANCE COMPANY LTD.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Paul J. OShea
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Richard J. Harris
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Adrian Kimberley
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
Duncan Scott
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
Richard J. Harris
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Adrian Kimberley
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
|
|
49.
|
COMPAGNIE
EUROPEENE DASSURANCES INDUSTRIELLES SA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
|
Against
|
|
|
Abstain
|
|
|
David Rocke
|
|
|
9,190,055
|
|
|
|
1,909
|
|
|
|
12,103
|
|
Paul Thomas
|
|
|
9,189,880
|
|
|
|
1,909
|
|
|
|
12,278
|
|
As described in our Proxy Statement (filed with the SEC on
April 30, 2007), broker non-votes are counted towards the
presence of a quorum, but are not counted as votes in the
election of any director or for any other proposal.
43
|
|
Item 5.
|
OTHER
INFORMATION
|
Director
Compensation
On August 8, 2007, the Compensation Committee and the Board
of Directors approved changes to the fees payable to the
Companys non-employee directors as follows: (1) the
quarterly retainer fee for each non-employee director was
increased from $6,250 to $15,000; (2) the fee for each
Board meeting attended other than a telephone Board meeting was
increased from $2,500 to $3,500; (3) the fee for each Audit
Committee meeting attended by a committee member was increased
from $1,000 to $1,500; (4) the fee for each Compensation
Committee meeting attended by a committee member was increased
from $1,000 to $1,250; (5) for the Audit Committee
chairperson, the quarterly retainer fee was increased from $500
to $2,500; and (f) for the Compensation Committee
chairperson, the quarterly retainer fee was increased from $500
to $1,250. All retainers will be paid at the increased rate
beginning with the payments for the fourth quarter of 2007. All
meeting fees will be paid at the increased rate for fees earned
during the third quarter of 2007. The $1,000 fee for each
telephone Board meeting attended remains in place and has not
increased.
Resignations
of Directors
On August 7, 2007, Nimrod T. Frazer and Nicholas A. Packer
resigned from the Board of Directors of the Company. Neither
Mr. Frazer nor Mr. Packer has any disagreement with
the Company, its operations, policies or practices. Their
resignations, together with the appointment of Robert J.
Campbell discussed below, will enable the Company to satisfy the
Nasdaq Marketplace Rule that requires a majority of the
Companys directors to be independent.
Mr. Packer will remain with the Company in his capacity as
an Executive Vice President, Joint Chief Operating Officer, and
a director of several of the Companys subsidiaries. In
recognition of Mr. Frazers many years of service, he
was bestowed the title of Chairman Emeritus of the Company.
Appointment
of Director
On August 8, 2007, Robert J. Campbell was appointed to
the Board of Directors to fill a vacancy created by the
resignation of Nimrod T. Frazer. Mr. Campbell was also
appointed to serve as a member of the Audit Committee.
Mr. Campbell will receive as compensation the director fees
set forth above payable to non-employee directors and he will be
eligible to participate in the Companys Deferred
Compensation and Ordinary Share Plan for Non-Employee Directors.
He also entered into an Indemnification Agreement with the
Company on August 8, 2007, which includes the same terms as
the indemnification agreements executed with each of the other
current directors.
Mr. Campbell has been an investment advisor with the firm
of Beck, Mack & Oliver, LLC in New York City, New York
since 1980. Beck, Mack & Oliver, LLC purchased,
on behalf of its clients, 750,000 ordinary shares of the
Company from Trident II, L.P. and certain of its
affiliates, or Trident, pursuant to a stock purchase agreement
dated as of May 23, 2007. The Company was a party to that
agreement pursuant to its obligations to Trident under the
Registration Rights Agreement, dated as of January 31,
2007, and for the purpose of making certain representations
regarding the registration statement on
Form S-3
and the Companys listing on the Nasdaq Global Select
Market.
44
|
|
|
|
|
|
10
|
.1+
|
|
Deferred Compensation and Ordinary
Share Plan for Non-Employee Directors (incorporated by reference
to Exhibit 10.1 of the Companys
Form 8-K,
as filed with the Securities and Exchange Commission on
June 11, 2007).
|
|
10
|
.2*+
|
|
Amended and Restated Employment
Agreement, effective May 1, 2007 and amended and restated
June 4, 2007, by and among Enstar Group Limited and Dominic
F. Silvester.
|
|
10
|
.3
|
|
Third Party Equity Commitment
Letter, dated as of April 15, 2007, by and between Enstar
Group Limited and J.C. Flowers II L.P (incorporated by
reference to Exhibit 10.1 of the Companys
Form 8-K,
as filed with the Securities and Exchange Commission on
April 19, 2007).
|
|
10
|
.4+
|
|
Form of Award Agreement under the
Castlewood Holdings Limited 2006 Equity Incentive Plan
(incorporated by reference to Exhibit 10.1 of the
Companys
Form 8-K,
as filed with the Securities and Exchange Commission on
April 6, 2007).
|
|
10
|
.5+
|
|
Amendment No. 1 to the
Castlewood Holdings Limited 2006 Equity Incentive Plan
(incorporated by reference to Exhibit 10.2 of the
Companys
Form 8-K,
as filed with the Securities and Exchange Commission on
April 6, 2007).
|
|
10
|
.6+
|
|
Amendment No. 1 to the
Castlewood Holdings Limited
2006-2010
Annual Incentive Compensation Program (incorporated by reference
to Exhibit 10.3 of the Companys
Form 8-K,
as filed with the Securities and Exchange Commission on
April 6, 2007).
|
|
15
|
.1*
|
|
Deloitte & Touche Letter
Regarding Unaudited Interim Financial Information.
|
|
31
|
.1*
|
|
Certification pursuant to
Rule 13a-14(a)/15d-14(a)
of the Securities Exchange Act of 1934, as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31
|
.2*
|
|
Certification pursuant to
Rule 13a-14(a)/15d-14(a)
of the Securities Exchange Act of 1934, as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
.1**
|
|
Certification pursuant to 18 U.S.C
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
32
|
.2**
|
|
Certification pursuant to 18 U.S.C
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
|
|
* |
|
Filed herewith |
|
** |
|
Furnished herewith |
|
+ |
|
Denotes management contract or compensatory arrangement |
45
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on
August 9, 2007.
ENSTAR GROUP LIMITED
|
|
|
|
By:
|
/s/ Richard
J. Harris
|
Richard J. Harris
Chief Financial Officer, Authorized Signatory and
Principal Accounting and Financial Officer
46
EXHIBIT INDEX
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
10
|
.1+
|
|
Deferred Compensation and Ordinary
Share Plan for Non-Employee Directors (incorporated by reference
to Exhibit 10.1 of the Companys
Form 8-K,
as filed with the Securities and Exchange Commission on
June 11, 2007).
|
|
10
|
.2*+
|
|
Amended and Restated Employment
Agreement, effective May 1, 2007 and amended and restated
June 4, 2007, by and among Enstar Group Limited and Dominic
F. Silvester.
|
|
10
|
.3
|
|
Third Party Equity Commitment
Letter, dated as of April 15, 2007, by and between Enstar
Group Limited and J.C. Flowers II L.P (incorporated by
reference to Exhibit 10.1 of the Companys
Form 8-K,
as filed with the Securities and Exchange Commission on
April 19, 2007).
|
|
10
|
.4+
|
|
Form of Award Agreement under the
Castlewood Holdings Limited 2006 Equity Incentive Plan
(incorporated by reference to Exhibit 10.1 of the
Companys
Form 8-K,
as filed with the Securities and Exchange Commission on
April 6, 2007).
|
|
10
|
.5+
|
|
Amendment No. 1 to the
Castlewood Holdings Limited 2006 Equity Incentive Plan
(incorporated by reference to Exhibit 10.2 of the
Companys
Form 8-K,
as filed with the Securities and Exchange Commission on
April 6, 2007).
|
|
10
|
.6+
|
|
Amendment No. 1 to the
Castlewood Holdings Limited
2006-2010
Annual Incentive Compensation Program (incorporated by reference
to Exhibit 10.3 of the Companys
Form 8-K,
as filed with the Securities and Exchange Commission on
April 6, 2007).
|
|
15
|
.1*
|
|
Deloitte & Touche Letter
Regarding Unaudited Interim Financial Information.
|
|
31
|
.1*
|
|
Certification pursuant to
Rule 13a-14(a)/15d-14(a)
of the Securities Exchange Act of 1934, as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31
|
.2*
|
|
Certification pursuant to
Rule 13a-14(a)/15d-14(a)
of the Securities Exchange Act of 1934, as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
.1**
|
|
Certification pursuant to 18 U.S.C
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
32
|
.2**
|
|
Certification pursuant to 18 U.S.C
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
|
|
* |
|
Filed herewith |
|
** |
|
Furnished herewith |
|
+ |
|
Denotes management contract or compensatory arrangement |
47