A.M. Best Places Ratings of Torus Insurance Holdings Limited’s U.S. Subsidiaries Under Review With Negative Implications
A.M. Best Co. has placed under review with negative implications the financial strength rating of A- (Excellent) and issuer credit ratings of “a-” of Torus Specialty Insurance Company and Torus National Insurance Company. Both companies are domiciled in Wilmington, DE and are wholly owned subsidiaries of their ultimate parent, Torus Insurance Holdings Limited (Torus) (Bermuda).
The rating actions follow the announcement of July 9, 2013 that Enstar Group Limited (Enstar) has entered into a definitive agreement to acquire Torus. Enstar will issue ordinary voting shares and newly created non-voting preferred shares to an aggregate value of approximately $346 million to partially fund the transaction. In addition, Enstar will contribute approximately $69 million in cash, while affiliates of Stone Point Capital LLC (Stone Point) will contribute approximately $277 million through an equity co-investment. The total consideration for the transaction is $692 million. Following the closing of the transaction, Enstar will own 60% of Torus with Stone Point owning the remaining 40%. The transaction is expected to close in the fourth quarter of 2013.
Torus’ consolidated financial results have been sub-par over the last three years and additional capital injections have been required to support growth and offset retained losses. Management has taken actions to reduce earnings volatility and improve performance but these are not yet fully tested. While the acquisition, once completed, will improve Torus’ financial flexibility and likely lead to expense savings, uncertainty exists surrounding the group’s prospective operating performance, capital position and business strategy under its new ownership. As a result, the ratings have been placed under review with negative implications. A.M. Best expects to resolve the under review status upon completion of the transaction, following discussions with Torus’ management, Enstar and Stone Point.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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