SCHEDULE 14A
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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The Enstar Group, Inc.
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(Name of Registrant as Specified In Its Charter)
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(ENSTAR LOGO)
April 20, 2005
To the Shareholders of The Enstar Group, Inc.
Enstar had good results from its existing operations during 2004.
Castlewood Holdings Limited, Enstar's Bermuda-based partially owned affiliate,
more than doubled its assets from $632 million as of December 31, 2003 to $1.3
billion as of December 31, 2004. Castlewood completed acquisitions of Mercantile
Indemnity Company, Harper Insurance (formerly Turegum Insurance Company) and
Longmynd Insurance Company (formerly Security Insurance (UK) Ltd.). All three of
these acquisitions were funded with cash from within Castlewood, requiring no
contributions from Enstar or the other equity participants during 2004.
Castlewood also increased its reach in the run-off management business by
obtaining assignments to arrange the orderly termination of discontinued lines
of insurance and reinsurance for companies in run-off. Castlewood has the
specialized management skills and utilizes the unique approaches necessary to
succeed in this complex sector. Castlewood also expanded operations in insurance
and reinsurance claims brokerage and inspection and adjusting activities.
Castlewood continues to be Enstar's principal strategic business and growth
activity. Enstar's share of Castlewood's net income grew from $9.6 million in
2003 to $11.1 million in 2004.
In July 2004, Enstar completed the sale of its ownership in Green Tree
Investment Holdings and received approximately $24 million for its $15 million
direct investment. Castlewood received $16 million for its $10 million ownership
position in the same transaction. This transaction, as a number of transactions
we pursue, was an opportunity brought to us by J. Christopher Flowers, Enstar's
largest shareholder and a Director.
Enstar continues to actively search for additional acquisitions and
investment opportunities. As of December 31, 2004, Enstar held approximately $82
million in cash, up from approximately $56 million at year-end 2003. As we
pursue acquisition opportunities, we are ever mindful of the need to maintain
price discipline. In particular, acquisitions by Castlewood of insurance
companies and reinsurance companies in run-off offer attractive opportunities
for profitability, but there is little way to profit if too much is paid at
purchase. While we can't offer assurances of our ability to make such
acquisitions or the timing of any transactions, the unsettled legal and
regulatory environment confronting the insurance and reinsurance industries
gives us encouragement that future opportunities should become available.
(ENSTAR LETTERHEAD ADDRESS)
Paul J. Collins, who resides in London, England was elected to our Board of
Directors at the 2004 Annual Meeting and is a member of the Audit Committee. He
retired as a Vice Chairman of Citigroup Inc. in 2000. Mr. Collins is a director
of Nokia Corporation, BG Group, and Actis Capital LLP. He has served as a
director of Kimberly-Clark Corporation and is a Trustee of The University of
Wisconsin Foundation. As reported in the Proxy Statement, Enstar's directors
beneficially own approximately 41% of Enstar's stock.
We do not forecast earnings or make efforts to create predictable reported
earnings trends. While we offer little in the way of future earnings visibility
or consistency, we continue our steadfast commitment to make profits, build net
worth and return significant value over time.
Sincerely,
-s- Nimrod T. Frazer
NIMROD T. FRAZER
Chairman and CEO
-s- JOHN J. OROS
JOHN J. OROS
President and COO