Tower Group plunges to record low, loses half of market value

The troubled insurer that agreed to be bought by ACP Re may have that acquisition upset by its recent market drop.

Insurance News


Problems continue for the embattled Tower Group International. After falling 78% last year due to higher-than-expected claims costs, Tower declined another 19% to $1.65 Monday.

That brings Tower’s market value to roughly half of what it was at the start of the year, and may endanger its agreement to be purchased by ACP Re. In fact, the insurer said it requested that ACP reaffirm its commitment to buy Tower for $2.50 a share.

ACP responded that it “reserves all rights under the merger agreement.”

The agreed upon takeover had already been lowered from $3 a share to $2.50.

Doubts elsewhere in the industry over the likelihood of the deal are rife. Massachusetts regulators supervising the deal are said to be skeptical, and already precipitated Tower’s hiring of Greenhill & Co. to advise it on repaying debt if the acquisition falls through.

Ken Billingsley, an analyst with Compass Point Research & Trading, wrote in a research note that scrutiny will likely be heightened due to the near-20% plunge this week.

“TWGP shares will likely be rife with speculation regarding the outcome of its merger with ACP Re,” Billingsley wrote.

Tower Group underwent internal changes in February, when its president and CEO—Michael He. Lee—announced he would leave the company. He was succeeded by Jan R. Van Gorder, but the change didn’t do much to detract from its posting of a third-quarter $344.1 million loss the following week.

Tower Group also disclosed a drop in net written premiums of 43% and in net investment income of 18.5% during the third quarter. Nine-month combined ratio for the group was 142.7%, as compared to 101.5% in 2012.

If the deal does go through as expected, former board member William W. Fox, Jr. is said to be assuming the duties of president and CEO of Tower Group.

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