A.M. Best Downgrades Ratings of Tower Group International, Ltd. and Its Subsidiaries
09 Mayo 2014 - 10:46AM
Business Wire
A.M. Best has downgraded the financial strength ratings
(FSR) to C++ (Marginal) from B (Fair) and issuer credit ratings
(ICR) to “b” from “bb” of the pooled and reinsured members of the
Tower US Pool (Tower) and CastlePoint Reinsurance
Company, Ltd. (Bermuda). Concurrently, A.M. Best has downgraded
the ICR to “cc” from “b-” and the debt rating on the $150 million
par 5.00% senior unsecured convertible notes due September of 2014,
for the intermediate holding company, Tower Group, Inc.
Additionally, A.M. Best has downgraded the ICR to “cc” from “b-” of
the ultimate parent, Tower Group International, Ltd. (TWGP)
(Bermuda) [NASDAQ:TWGP]. All ratings are under review with
developing implications. All companies are headquartered in New
York, NY, unless otherwise specified. (See below for detailed
listing of the companies and ratings.)
The rating actions take into consideration TWGP’s most recent
Securities and Exchange Commission 10K filing, which included an
additional $63 million of prior year reserve development, further
reductions in GAAP shareholders’ equity as well as ongoing declines
in statutory policyholders’ surplus and risk-adjusted
capitalization, as measured by Best’s Capital Adequacy Ratio
(BCAR). These rating factors are in addition to the diminished
shareholders’ equity and reserve actions already taken by TWGP
during the year.
These rating actions also consider the material adverse impact
these charges had on all of TWGP’s entities in terms of their
ability to operate as going concerns.
In addition, these rating downgrades reflect the group’s
significantly elevated financial leverage, constrained liquidity
and heightened uncertainty around TWGP’s ability to repay its
senior debt holders in the event its pending merger with ACP Re
Ltd. (ACP Re) (Bermuda) does not occur. Continued delays in
TWGP reporting its quarterly filings are another concern.
The ratings will remain under review pending the planned merger
with ACP Re, which is expected to close in the summer of 2014, but
has a merger termination date of November 15, 2014. The under
review with developing implications status acknowledges the
potential benefits to be garnered from the transaction, as well as
the potential downside from any additional adverse reserve
development (in the event that the merger does not close) or any
unforeseen event that might occur up until the close of the
transaction. Additionally, the ratings could be downgraded further
if certain events and/or unforeseen circumstances occur, which
could cause the merger to fall through.
The FSR of B (Fair) has been downgraded to C++ (Marginal) and
the ICRs have been downgraded to “b” from “bb” for the following
pooled and reinsured members of Tower US Pool:
- CastlePoint Insurance
Company
- CastlePoint National Insurance
Company
- Tower Insurance Company of New
York
- Tower National Insurance
Company
- Preserver Insurance Company
- North East Insurance
Company
- Hermitage Insurance Company
- CastlePoint Florida Insurance
Company
- Kodiak Insurance Company
- York Insurance Company of
Maine
- Massachusetts Homeland Insurance
Company
The methodology used in determining these ratings is Best’s
Credit Rating Methodology, which provides a comprehensive
explanation of A.M. Best’s rating process and contains the
different rating criteria employed in the rating process. Best’s
Credit Rating Methodology can be found at
www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2014 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
A.M. BestKenneth Monahan, 908-439-2200, ext.
5342Financial
Analystkenneth.monahan@ambest.comorDaniel Ryan,
908-439-2200, ext. 5325Vice
Presidentdaniel.ryan@ambest.comorRachelle Morrow,
908-439-2200, ext. 5378Senior Manager, Public
Relationsrachelle.morrow@ambest.comorJim Peavy,
908-439-2200, ext. 5644Assistant Vice President, Public
Relationsjames.peavy@ambest.com
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