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Related Party Transactions
 12 Months Ended
Dec. 31, 2019
Related Party Transactions [Abstract]  
Related Party Transactions 21. RELATED PARTY TRANSACTIONS
Stone Point Capital LLC
Through several private transactions occurring from May 2012 to July 2012 and an additional private transaction that closed in May 2018, investment funds managed by Stone Point Capital LLC ("Stone Point") have acquired an aggregate of 1,635,986 of our Voting Ordinary Shares (which constitutes approximately 9.1% of our outstanding Voting Ordinary Shares). On November 6, 2013, we appointed James D. Carey to our Board of Directors. Mr. Carey is the sole member of an entity that is one of four general partners of the entities serving as general partners for Trident, is a member of the investment committees of such general partners, and is a member and senior principal of Stone Point, the manager of the Trident funds.
In addition, we have entered into certain agreements with Trident with respect to Trident’s co-investments in the Atrium, Arden, and StarStone acquisitions. These include investors’ agreements and shareholders’ agreements, which provide for, among other things: (i) our right to redeem Trident’s equity interest in the Atrium/Arden and StarStone transactions in cash at fair market value within the 90 days following September 6, 2018 and April 1, 2019, respectively, and at any time following September 6, 2020 and April 1, 2021, respectively; and (ii) Trident’s right to have its equity co-investment interests in the Atrium/Arden and StarStone transactions redeemed by us at fair market value (which we may satisfy in either cash or our ordinary shares) following September 6, 2020 and April 1, 2021, respectively. We did not exercise our right to redeem Trident's equity interest in Atrium/Arden during the 90 days following September 6, 2018, nor did we exercise our right to redeem Trident's equity interest in StarStone during the 90 days following April 1, 2019. Pursuant to the terms of the shareholders’ agreements, Mr. Carey serves as a Trident representative on the boards of the holding companies, including North Bay Holdings Limited ("North Bay"), established in connection with the Atrium/Arden and StarStone co-investment transactions. Trident also has a second representative on these boards who is a Stone Point employee.
We, in partnership with StarStone's other shareholders, have recently completed transactions to provide capital support to StarStone in the form of:
(i) a contribution to its contributed surplus account and a loss portfolio transfer, effective October 1, 2018. To fund the transaction, the North Bay shareholders contributed an aggregate amount of $135.0 million to North Bay in proportion to their ownership interests. Trident’s proportionate contribution of $53.1 million was temporarily funded by North Bay and was reimbursed in the first quarter of 2019; and
(ii) a loss portfolio transfer, effective April 1, 2019, for which shareholders agreed to contribute an aggregate amount of $48.0 million.
In addition, Enstar has separately entered into a loss portfolio transfer and adverse development cover with StarStone effective October 1, 2019, whereby StarStone transferred $189.4 million in loss reserves and unearned premium to a wholly-owned Enstar subsidiary in exchange for premium of $189.4 million. Enstar also provided an additional $59.0 million adverse development cover in excess of the $189.4 million.
As of December 31, 2019 and December 31, 2018, the RNCI on our balance sheet relating to these Trident co-investment transactions was as follows:
 
2019
 
2018
Redeemable Noncontrolling Interest
$
420,499

 
$
439,428


As of December 31, 2019, we had the following additional relationships with Stone Point and its affiliates:
•
Investments in funds (carried within other investments) managed by Stone Point, with respect to which we recognized net unrealized gains (losses);
•
Investments in registered investment companies affiliated with entities owned by Trident or otherwise affiliated with Stone Point, with respect to which we recognized net unrealized gains (losses) and interest income;
•
Separate accounts managed by Eagle Point Credit Management, PRIMA Capital Advisors and SKY Harbor Capital Management, which are affiliates of entities owned by Trident, with respect to which we incurred management fees;
•
Investments in funds (carried within other investments) managed by Sound Point Capital, an entity in which Mr. Carey has an indirect minority ownership interest and serves as a director, with respect to which we recognized net unrealized gains (losses);
•
Sound Point Capital has acted as collateral manager for certain of our direct investments in CLO debt and equity securities, with respect to which we recognized net unrealized gains (losses) and interest income;
•
Marble Point Capital, which is an affiliate of an entity owned by Trident, has acted as collateral manager for certain of our direct investments in CLO debt and equity securities, with respect to which we recognized net unrealized gains (losses) and interest income;
•
A separate account managed by Sound Point Capital, with respect to which we incurred management fees in prior periods; and
•
In the fourth quarter of 2018, we invested $25.0 million in Mitchell TopCo Holdings, the parent company of Mitchell International and Genex Services, as a co-investor alongside certain Trident funds.
The following table presents the amounts included in our consolidated balance sheet related to our related party transactions with Stone Point and its affiliated entities:
 
December 31, 2019
 
December 31, 2018
Short-term investments, available-for-sale, at fair value
$
1,431

 
$
—

Fixed maturities, trading, at fair value
269,131

 
176,193

Fixed maturities, available-for-sale, at fair value
160,303

 
—

Equities, at fair value
121,794

 
57,319

Other investments, at fair value:

 

Hedge funds
18,993

 
19,535

Fixed income funds
381,449

 
324,561

Private equity funds
34,858

 
52,925

CLO equities
32,560

 
15,372

CLO equity funds
87,509

 
37,260

Private Debt
16,312

 
10,387

Real estate fund
18,106

 
8,025

Cash and cash equivalents
54,080

 
11,739

Other assets
10

 
5,216

Other liabilities
4,710

 
4,240

The following table presents the amounts included in net earnings related to our related party transactions with Stone Point and its affiliated entities:
 
2019
 
2018
 
2017
Net investment income
$
8,733

 
$
7,424

 
$
5,990

Net realized and unrealized gains (losses)
26,631

 
207

 
24,684

Total net earnings
$
35,364

 
$
7,631

 
$
30,674


KaylaRe
On December 15, 2016, KaylaRe completed an initial capital raise of $620.0 million. We originally owned approximately 48.2% of KaylaRe's common shares and recorded our investment in KaylaRe using the equity method basis of accounting, pursuant to the conclusion that we were not required to consolidate following an analysis based on the guidance in ASC 810 - Consolidation.
On May 14, 2018, we completed a transaction to acquire all of the outstanding shares and warrants of KaylaRe, following the receipt of all required regulatory approvals. In consideration for the acquired shares and warrants of
KaylaRe, we issued an aggregate of 2,007,017 ordinary shares, comprising 1,501,778 voting ordinary shares and 505,239 Series E non-voting ordinary shares to the shareholders of KaylaRe as follows: (i) 1,204,353 voting ordinary shares and 505,239 Series E Shares to a fund managed by Hillhouse Capital Management, Ltd.; (ii) 285,986 voting ordinary shares to Trident; and (iii) 11,439 voting ordinary shares to the minority shareholder. In addition, the Shareholders Agreement between Enstar and the other KaylaRe shareholders was effectively terminated. Effective May 14, 2018 we consolidated KaylaRe into our consolidated financial statements and any balances between KaylaRe and Enstar are now eliminated upon consolidation. Refer to Note 3 - "Acquisitions" for additional information. Effective September 30, 2019, KaylaRe and KaylaRe Ltd. merged with Cavello Bay Reinsurance Limited, a wholly owned subsidiary of the Company, with Cavello Bay Reinsurance Limited as the surviving company.
Through a Quota Share Agreement dated December 15, 2016 (the "KaylaRe-StarStone QS"), several of our StarStone affiliates entered into a Quota Share Treaty with KaylaRe Ltd. pursuant to which KaylaRe Ltd. reinsured 35% of all business written by these StarStone affiliates for risks attaching from January 1, 2016, net of the StarStone affiliates’ external reinsurance programs. The reinsurance of StarStone's U.S. affiliates was non-renewed as of January 1, 2018, and the reinsurance of its U.K. and European affiliates was non-renewed as of January 1, 2019. In addition, Fitzwilliam Insurance Limited ("Fitzwilliam"), one of our non-life run-off subsidiaries, ceded $177.2 million of loss reserves to KaylaRe Ltd. in 2016, on a funds held basis. Under the terms of this reinsurance agreement, Fitzwilliam is entitled to receive a profit commission calculated with reference to reserve savings made during the term of this agreement. Our Non-life Run-off subsidiaries did not cede any new business to KaylaRe Ltd. during years ended December 31, 2019 and 2018.
Our consolidated statement of earnings for the years ended December 31, 2018 and 2017 included the following balances related to transactions between us and KaylaRe and KaylaRe Ltd. up until May 14, 2018, the date of acquisition:
 
2018
 
2017
Fee income due to Enstar Limited
$
1,453

 
$
2,679

 
 
 
 
Transactions under KaylaRe-StarStone QS:
 
 
 
Ceded premium earned
(52,651
)
 
(234,079
)
Net incurred losses
31,654

 
155,433

Acquisition costs
18,774

 
99,500

 
 
 
 
Transactions under Fitzwilliam reinsurance agreement:
 
 
 
Profit Commission
—

 
18,843

 
 
 
 
Total net earnings (loss)
$
(770
)
 
$
42,376


Hillhouse
Investment funds managed by Hillhouse Capital Advisors, Ltd. ("Hillhouse Capital") collectively own approximately 9.7% of Enstar’s voting ordinary shares. These funds also own non-voting ordinary shares and warrants to purchase additional non-voting ordinary shares, which together with their voting ordinary shares, represent an approximate 17.0% economic interest in Enstar. In February 2017, Jie Liu, a Partner of Hillhouse Capital, was appointed to our Board.
We have direct investments in funds managed by Hillhouse Capital and its affiliate, AnglePoint Asset Management Ltd. ("AnglePoint"), (together with such parties' affiliates, "Hillhouse"). As of December 31, 2019, the carrying value of our direct investment in the InRe Fund, L.P. (the "InRe Fund"), which is managed by AnglePoint, was $918.6 million with the fund's assets being invested in approximately 18% in fixed income securities, 6% in North American equities, 96% in international equities and (20)% in financing, derivatives and other items.
As of December 31, 2019 and December 31, 2018, our equity method investee, Enhanzed Re, had investments in a fund managed by AnglePoint, as set forth in the table below.
Our consolidated balance sheet as of December 31, 2019 and 2018 included the following balances related to transactions with Hillhouse:
 
2019
 
2018
Investments in funds managed by AnglePoint, held by Enhanzed Re
$
327,799

 
$
75,192

Our ownership of equity method investments
47.4
%
 
47.4
%
Our share of Enhanzed Re's funds managed by AnglePoint
$
155,377

 
$
35,641

 
 
 
 
Investment in other funds managed by Hillhouse:
 
 
 
InRe Fund
$
918,633

 
$
678,420

Other funds
232,968

 
166,646

 
$
1,151,601

 
$
845,066


On January 1, 2020 Enhanzed Re invested an additional $54.0 million into funds managed by Hillhouse.
The increase in the investment in funds managed by Hillhouse was primarily due to unrealized gains for the year ended December 31, 2019. We incurred fees of approximately $89.0 million, included within the funds' reported NAV, for the year ended December 31, 2019 in relation to the direct investment in funds managed by Hillhouse as described above.
Monument
Monument Insurance Group Limited ("Monument") was established in October 2016 and Enstar has invested a total of $26.6 million in the common and preferred shares of Monument. We have approximately a 26.6% interest in Monument. In connection with our investment in Monument, we entered into a Shareholders Agreement with the other shareholders. We recorded the investment in Monument using the equity method basis of accounting, as we concluded that we are not required to consolidate based on the guidance in ASC 810 - Consolidation.
On August 29, 2017, we sold our wholly-owned subsidiary, Laguna, to a subsidiary of Monument for a total consideration of €25.6 million (approximately $30.8 million). The total loss recorded on the sale of Laguna, for the year ended December 31, 2017 was $16.3 million, which has been included in earnings from continuing operations before taxes in our consolidated statement of earnings. This loss includes a cumulative currency translation adjustment balance of $6.3 million, which has been reclassified from accumulated other comprehensive income and included in earnings as a component of the loss on sale of Laguna during the year ended December 31, 2017, following the closing of the sale.
On May 31, 2019, we completed the transfer of our remaining life assurance policies written by our wholly-owned subsidiary Alpha Insurance SA to a subsidiary of Monument. In this transaction, we transferred policy benefits for life and annuity contracts with a carrying value of €88.8 million (or approximately $99.1 million) and total assets with a fair value of €91.1 million (or approximately $101.6 million) to a subsidiary of Monument.
Our investment in the common and preferred shares of Monument, carried in equity method investments on our consolidated balance sheet, as of December 31, 2019 and 2018 was as follows:
 
2019
 
2018
Investment in Monument
$
60,598

 
$
42,193


Clear Spring (formerly SeaBright)
Effective January 1, 2017, we sold SeaBright Insurance Company (“SeaBright Insurance”) and its licenses to Delaware Life Insurance Company ("Delaware Life"), a subsidiary of Guggenheim Partners, LLC. Following the sale, SeaBright Insurance was renamed Clear Spring Property and Casualty Company (“Clear Spring”). Clear Spring was subsequently capitalized with $56.0 million of equity, with Enstar retaining a 20% indirect equity interest in Clear Spring. We have accounted for our equity interest in Clear Spring as an equity method investment as we have significant influence over its operating and financial policies.
We have recorded the investment in Clear Spring using the equity method basis of accounting, pursuant to the conclusion that we are not required to consolidate following an analysis based on the guidance in ASC 810 - Consolidation. Our investment in the common shares of Clear Spring, carried in equity method investments on our consolidated balance sheet, as of December 31, 2019 and 2018 was as follows:
 
2019
 
2018
Investment in Clear Spring
$
10,645

 
$
10,070


Effective January 1, 2017, StarStone National Insurance Company (“StarStone National”) entered into a ceding quota share treaty with Clear Spring pursuant to which Clear Spring reinsures 33.3% of core workers' compensation business written by StarStone National. This agreement was terminated as of December 31, 2018.
Effective January 1, 2017, we also entered into an assuming quota share treaty with Clear Spring pursuant to which an Enstar subsidiary reinsures 25% of all workers' compensation business written by Clear Spring. This is recorded as other activities.
Our consolidated balance sheet as of December 31, 2019 and 2018 included the following balances between us and Clear Spring:
 
2019
 
2018
Balances under StarStone ceding quota share:
 
 
 
Reinsurance balances recoverable on paid and unpaid losses
$
22,812

 
$
23,718

Prepaid insurance premiums
51

 
13,821

Ceded payable
3,616

 
14,153

Ceded acquisition costs
21

 
3,233

 
 
 
 
Balances under assuming quota share:
 
 
 
Losses and LAE
6,135

 
5,778

Unearned reinsurance premiums
13

 
3,455

Funds held
8,611

 
10,242

Our consolidated statement of earnings for the years ended December 31, 2019 and 2018 included the following amounts between us and Clear Spring:
 
2019
 
2018
 
2017
Amounts under StarStone ceding quota share:
 
 
 
 
 
Ceded premium earned
$
(14,994
)
 
$
(29,520
)
 
(14,256
)
Net incurred losses and LAE
6,567

 
18,143

 
9,533

Acquisition costs
356

 
7,035

 
6,718

 
 
 
 
 
 
Amounts under assuming quota share:
 
 
 
 
 
Premium earned
3,749

 
7,380

 
3,564

Net incurred losses and LAE
(2,202
)
 
(4,536
)
 
(1,181
)
Acquisition costs
(92
)
 
(1,836
)
 
(1,753
)
 
 
 
 
 
 
Total net earnings (loss)
$
(6,616
)
 
$
(3,334
)
 
$
2,625


AmTrust
In November 2018, pursuant to a Subscription Agreement with Evergreen Parent L.P. ("Evergreen"), K-Z Evergreen, LLC and Trident Pine Acquisition LP ("Trident Pine"), we purchased equity in Evergreen in the aggregate amount of $200.0 million. Evergreen is an entity formed by private equity funds managed by Stone Point and the Karfunkel-Zyskind family that acquired the approximately 45% of the issued and outstanding shares of common stock of AmTrust that the Karfunkel-Zyskind Family and certain of its affiliates and related parties did not already own or control. The equity interest was in the form of three separate classes of equity securities issued at the same price and in the same proportion as the equity interest purchased by Trident Pine. In a second transaction in December 2019, Enstar acquired an additional $25.9 million of Evergreen securities from another investor.
Following the closing of the second transaction, Enstar owns approximately 8.5% of the equity interest in Evergreen and Trident Pine owns approximately 21.8%. Evergreen owns all of the equity interest in AmTrust. In addition, upon the successful closing of the transaction we received a fee of $3.3 million, half of which was payable upon closing and the other on the first anniversary of the closing. The fee has been recorded in full in other income within our consolidated statements of earnings for the year ended December 31, 2018.
Our indirect investment in the shares of AmTrust, carried in equities on our consolidated balance sheet, as of December 31, 2019 was as follows:
 
2019
 
2018
Investment in AmTrust
$
240,115

 
$
200,000


During the years ended December 31, 2019 and 2018 we recorded net investment income of $7.7 million and $0.3 million, respectively, and net realized and unrealized gains of $10.1 million and $nil, respectively, related to our indirect equity investment in AmTrust.
Citco
In June 2018, we made a $50.0 million indirect investment in the shares of Citco III Limited ("Citco"), a fund administrator with global operations. Pursuant to an investment agreement and in consideration for participation therein, a related party of Hillhouse provided us with investment support. In a private transaction that preceded our co-investment opportunity, certain Citco shareholders, including Trident, agreed to sell all or a portion of their interests in Citco. As of December 31, 2019, Trident owned an approximate 3.4% interest in Citco. Mr. Carey currently serves as an observer to the board of directors of Citco in connection with Trident's investment therein.
Our indirect investment in the shares of Citco, carried in equity method investments on our consolidated balance sheet, as of December 31, 2019 and 2018 was as follows:
 
2019
 
2018
Investment in Citco
$
51,742

 
$
50,812


Enhanzed Re
Enhanzed Reinsurance Ltd. ("Enhanzed Re") is a joint venture between Enstar, Allianz SE and Hillhouse that was capitalized in December 2018. Enhanzed Re is a Bermuda-based Class 4 and Class E reinsurer of life, non-life run-off, and property and casualty insurance business, initially sourced from Allianz SE and Enstar. Enstar, Allianz and Hillhouse affiliates have made equity investment commitments in aggregate of $470.0 million to Enhanzed Re. Enstar owns 47.4% of the entity, Allianz owns 24.9%, and an affiliate of Hillhouse owns 27.7%. As of December 31, 2019, Enstar contributed $154.1 million of its total capital commitment to Enhanzed Re and had an uncalled amount of $68.7 million. We have accounted for our equity interest in Enhanzed Re as an equity method investment as we have significant influence over its operating and financial policies.
Enstar acts as the (re)insurance manager for Enhanzed Re, for which it receives fee income recorded within other income, Hillhouse acts as primary investment manager, and an affiliate of Allianz SE provides investment management services. Enhanzed Re intends to write business from affiliates of its operating sponsors, Allianz SE and Enstar. It will seek to underwrite business to maximize diversification by risk and geography.
Our investment in the common shares of Enhanzed Re, carried in equity method investments on our consolidated balance sheet, as of December 31, 2019 was as follows:
 
2019
 
2018
Investment in Enhanzed Re
$
182,856

 
$
94,800


We have ceded 10% of the Zurich transaction, as discussed in Note 4 - "Significant New Business", to Enhanzed Re on the same terms and conditions as those received by Enstar.
Our consolidated balance sheet as of December 31, 2019 and 2018 included the following balances between us and Enhanzed Re:
 
2019
Balances under ceding quota share:
 
Insurance balances payables
$
1,443

Reinsurance balances recoverable
59,601

Funds held
50,089

 
 
Other assets
1,033

Our consolidated statement of earnings for the years ended December 31, 2019 and 2018 included the following amounts between us and Enhanzed Re:
 
2019
Amounts under ceding quota share:
 
Acquisition costs
$
73

 
 
Other income
749

 
 
Total net earnings (loss)
$
822