More than $80 million of after-tax net losses from Superstorm Sandy drove bottom-line red ink at New York-based Tower Group, Inc., which reported a net loss of $52.1 million, or $1.36 per share, for the fourth quarter of 2012.
For the year, Tower’s recorded a net loss of $28.2 million, or 73 cents per share, compared to full year 2011 net income of $60.5 million, or $1.48 per share.
Tower had exposure to Sandy through its direct insurance operations, its assumed reinsurance business, and certain of its alternative investments. Including the impact of Sandy and a second-quarter reserve charge, Tower’s combined ratio for the full year 2012 came in at 109.2, compared with 100.3 for 2011. Excluding catastrophes and reserve development, the 2012 combined ratio drops to 97.4, compared with 96.6 in 2011.
Tower’s gross written and managed premiums rose 8.8 percent to $1.97 billion for the year.
On Feb. 21, 2013, the New York Department of Financial Services (DFS) announced that it was investigating certain insurers, including one of Tower’s insurance company subsidiaries, for unacceptable claims practices in New York related to Superstorm Sandy. In connection with such investigation, the DFS issued an Insurance Law Section 308 letter to Tower, which is a request for information to which insurers are legally required to respond. Tower is cooperating with the DFS and believes that any allegations in this matter do not constitute a pattern or practice of Tower and will not have a material adverse effect on Tower’s financial condition or results of operations.
On Feb. 6, 2013, Tower mailed a description of its proposed merger agreement with the Bermuda businesses of Canopius Group Ltd. Tower will have a shareholder meeting and a vote on the proposed merger agreement on March 12, 2013.
Looking ahead, Tower Group expects to report 2013 operating earnings per share in a range of $2.75 to $2.95 including the effect of the proposed merger transaction. This amount is reduced from previous guidance as Tower expects its merger transaction to close in the first quarter 2013, rather than at year end 2012, and as Tower has entered into a quota share reinsurance agreement effective in January 2013 to further protect its homeowners business from catastrophe volatility.
Source: Tower Group