National Sep 18, 2014
ACP Re completes acquisition of Tower Group; A.M. Best upgrades its rating
In a discussion with a Tower Group International Ltd. representative, PIA has learned that privately owned, Bermuda-based reinsurer, ACP Re Ltd., has completed its $143 million acquisition of Tower Group International Ltd. As part of the deal, National General Holdings Corp. acquired the new and renewal rights to Towers personal-lines business. It also acquired the attorney-in-fact who manages two reciprocal companies, Adirondack Insurance Exchange and New Jersey Skylands. AmTrust Financial Services Inc. has acquired the renewal rights to Towers commercial-lines business.
In response to Towers acquisition announcement, A.M. Best has upgraded the financial strength rating to "B-" (Fair) from "C" (Weak) and the issuer credit ratings to "bb-" from "ccc" of the former members of the Tower U.S. Pool and CastlePoint Reinsurance Co. Ltd. In addition, A.M. Best has revised the implications on the under-review status for these ratings to positive from developing.
A.M. Best also has withdrawn the issuer credit ratings of "c" of the intermediate holding company, Tower Group Inc., and the debt rating of "c" on the $150 million, 5 percent senior unsecured convertible notes due in 2014, reflective of the retirement of the notes. Furthermore, A.M. Best has withdrawn the ICR of "c" of the ultimate holding company, Tower Group International Ltd.
According to A.M. Bests press release, "The rating actions on Tower and CastlePoint reflect, in part, the reduced financial strain due to the retiring of Tower Group Inc.s senior convertible notes as part of the merger agreement and the implicit and explicit support provided by ACP Re to these entities at the close. These ratings will remain under review with positive implications pending further progress made on the implementation of planned intercompany reinsurance contracts between the former Tower U.S. Pool members and ACP Re, and the potential for further explicit support."
What this means to agents. As with any rating change, it is imperative to check with your E&O carrier, or check your E&O policy, to see how this affects your business. The deal is still too early to know many of the details and whether Tower will remain in the business of writing insurance or how the cut-through endorsements will react. Tower will hold a series of agent meetings to discuss the details of the acquisition and its rating. Please keep an eye out for those meetings.
PIA will continue to keep association members informed about this acquisition, as further details become available. Questions can be directed to PIAs Industry Resource Center at resourcecenter@pia.org.