Bermuda-based Enstar Group Ltd. saw its net earnings drop by more than $20 million over the past year, despite its total assets increasing by $0.6 billion for the year ended December 31, 2007.

The financial results include the consolidation of the results from Enstar USA Inc. and Inter-Ocean Holdings Ltd, both of which were acquired during the first quarter of 2007.

Enstar reported net earnings of $61.8 million for the year ended December 31, 2007, compared to net earnings of $82.3 million for 2006. Included as part of net earnings for 2007 and 2006 are extraordinary gains of $15.7 million and $31.0 million, respectively, relating to negative goodwill.

Enstar's total assets increased from approximately $1.8 billion at December 31, 2006 to approximately $2.4 billion at December 31, 2007, which included approximately $1.8 billion of cash and investments and $465.3 million in reinsurance balances receivable.

The increase in total assets was primarily due to the completion of the merger with Enstar USA, Inc. on January 31, 2007 and the acquisition of Inter-Ocean Holdings Ltd in February 2007.

Shareholders' equity was $450.6 million at December 31, 2007, up from $318.6 million at December 31, 2006. The increase in shareholders' equity was primarily a result of additional net assets of approximately $58.4 million acquired following the merger with Enstar USA, Inc., net earnings of $61.8 million, an increase in other paid-in capital arising from employee share awards of $6 million and an increase in net retained earnings of $4.9 million following the adoption of FIN 48.

Enstar also reported that it has received approval from the Australian regulatory authorities to complete the purchase from AMP Ltd. of AMP's Australian-based closed reinsurance and insurance operations. The acquisition is expected to close on March 5 and the purchase price of $417 million will be financed by approximately $285 million from bank financing, approximately $40 million from the Flowers Fund, private investment fund advised by J.C Flowers & Co. LLC, by way of non-voting equity participation, and approximately $92 million from available cash on hand.

The company also completed the acquisition of a UK-based reinsurance company in run-off for a purchase price of approximately $64 million. The acquisition was financed by approximately $33 million from bank financing, approximately $10 million from the Flowers Fund by way of non-voting equity participation, and approximately $21 million from available cash on hand.

Enstar acquires and manages insurance and reinsurance companies in run-off and provides management, consultancy and other services to the insurance and reinsurance industry.