StarStone focusing on clients and capital

April 1, 2014 is a monumental date in the history of London-based specialty player StarStone. It was on that date that Bermuda’s Enstar Group and Stone Point Capital completed their previously announced acquisition of the business that was then known as Torus Insurance Holdings for a total consideration of $692m. Up until that point, the private equity-backed Torus had found it hard to return a profit. Indeed, such were the company’s problems at the time of the Enstar and Stone Point acquisition that there was considerable uncertainty throughout the market about the future prospects of the then Torus business. Torus had also seen the outlook on its A- financial strength rating from AM Best drop to negative from stable in April 2014 following on from Enstar and Stone Point’s deal for the firm, further adding to concerns about the company’s long-term viability. However, the Enstar and Stone Point deal for Torus, news of which had first arose in July 2013, proved to be a catalyst that brought a lot of those worries to an end. In fact, Torus ended up posting a net profit for the final nine months of 2014 – the period of time when the business was under its new owners. That feat was repeated in 2015 and 2016, with Torus – which rebranded as StarStone in 2015 – only posting a combined ratio above 100% in 2017 on the back of the considerable catastrophe activity that occurred last year. Speaking to Reactions, StarStone’s chief executive Demian Smith did not shy away from the problems that had faced his company, but insisted his company always had “what was a fundamentally good business”. “The fundamentals of our business have always been to put clients first and to be able to underwrite effectively and to be consistent through the cycle,” Smith said. “We have had to work hard [because] we didn’t have a brand in 2014 that we could rely on. I think there’s some respect there because we’ve survived, we’ve come through and we’re delivering profit. We don’t have the huge number of back years of reserve releases because we set up at the wrong time in the cycle, and we haven’t lived off huge amounts of cat float because we don’t have a lot of cat exposure. In a challenging market, we’ve really focused on specialty lines and we consistently make money.” Now that StarStone finds itself on a more stable platform, the business is now working to firmly establish its position in an industry that is rapidly changing and evolving. StarStone, like many of its peers, is also battling against a market where the biggest players are getting even larger, with AXIS Capital’s acquisition of Novae and AXA’s deal for XL Group two notable examples. Furthermore, the growing influence of the third party capital space has only further bolstered the capabilities and scale of some re/insurance companies. “Our industry is changing and you have to decide your value proposition,” said Smith. “[Some in the market say] that having a series of small to medium sized companies in the industry is akin to being stuck in the desert with an empty canteen, but I would disagree with that fundamentally. That presupposes that value is based around capital, but capital doesn’t seem to have any value at the moment because of the returns people are expecting on it. “The real value is in managing that capital effectively and managing the returns. We think we’re good at assessing risk and enabling businesses... CLICK HEADLINE TO READ MORE

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