A.M. Best Downgrades Ratings of Tower Group International, Ltd. and Its Subsidiaries; Maintains Under Review Status
August 28 2014 - 3:56PM
Business Wire
A.M. Best has downgraded the financial strength ratings
to C (Weak) from C++ (Marginal) and the issuer credit ratings (ICR)
to “ccc” from “b” of the pooled and reinsured members of the
Tower US Pool (Tower) and CastlePoint Reinsurance
Company, Limited (Bermuda). Concurrently, A.M. Best has
downgraded the ICR to “c” from “cc” and the debt rating on the $150
million par 5.00% senior unsecured convertible notes due Sept. 14,
2014, for the intermediate holding company, Tower Group,
Inc. Additionally, A.M. Best has downgraded the ICR to “c” from
“cc” 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 10Q filing, which included a net
loss of $106 million and GAAP shareholders’ equity (excluding
noncontrolling interests) of negative $11 million. In addition,
these rating downgrades reflect the 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 on or before Sept. 15, 2014. These actions also consider the
additional ratings drag placed on all of TWGP’s operating entities
in terms of their ability to pay claims. In addition, A.M. Best
remains concerned with the continued delays in TWGP reporting its
quarterly SEC filings, as well as its ability to operate as a going
concern.
The ratings will remain under review pending the planned merger
with ACP Re, which is anticipated to close in September 2014, but
may be delayed to as late as Nov. 15, 2014, which is the merger
termination date. The under review with developing implications
status on all the ratings acknowledges the potential benefits to be
garnered from the transaction, but also the potential downside from
any additional adverse reserve development or any unforeseen event
that might occur up until the close of the transaction. The ratings
could be downgraded further if certain events or unforeseen
circumstances cause the merger to fall through. Any default on the
payment of principal and/or interest to existing debt holders would
result in an immediate downgrade.
The FSR of C++ (Marginal) has been downgraded to C (Weak) and
the ICRs have been downgraded to “ccc” from “b” 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. Best CompanyKenneth Monahan, 908-439-2200, ext.
5342Financial
Analystkenneth.monahan@ambest.comorDaniel Ryan,
908-439-2200, ext. 5325Vice
Presidentdaniel.ryan@ambest.comorChristopher Sharkey,
908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,
908-439-2200, ext. 5644Assistant Vice President, Public
Relationsjames.peavy@ambest.com
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