Tower Group International, Ltd. reported a bottom-line loss of $347.6 million for the third-quarter of 2013 on Tuesday, with higher than expected reserve charges contributing to the result.
Adverse loss reserve charges of $143.7 million in the third quarter of 2013 exceeded the previous estimate of $75 million to $105 million announced on Dec. 17, 2013, principally as a result of additional loss emergence information associated with prior accident years.
According to Tower, this information was not available on Dec. 17, 2013, but became available in the period between Dec. 18, 2013and the date of the release of this financial information.
The reserve strengthening in the third quarter arose primarily from accident years 2008-2011 within the workers compensation, commercial multi-peril liability, other liability and commercial auto liability lines of business, Tower said.
The reserve strengthening prompted an analysis of whether Tower’s recorded goodwill was impaired, leading to a non-cash goodwill impairment charge of $57.4 million for the third quarter of 2013, completely wiping goodwill off the consolidated balance sheet as of Sept. 30, 2013.
Additionally, in the third quarter of 2013, the Company impaired $125.8 million of fixed assets, primarily related to capitalized software, including internally developed software.
Proposed Merger with ACP Re
On Jan. 6, 2014, Tower announced that on Jan. 3, 2014 it entered into an Agreement and Plan of Merger (Merger Agreement) with ACP Re, Ltd. (ACP Re), and a wholly-owned subsidiary of ACP Re, pursuant to which Tower would become a wholly-owned subsidiary of ACP Re.
The transaction is expected to close by the summer of 2014.
ACP Re is a Bermuda-based reinsurance company. The controlling shareholder of ACP Re is a trust established by the founder of AmTrust Financial Services, Inc. (AmTrust), National General Holdings Corporation (NGHC) and Maiden Holdings, Ltd.
See related article, AmTrust Acquiring Tower Commercial Renewals; Tower Merging with ACP Re, for more information about Merger Agreement.
Source: Tower Group International, Ltd.