[November 07, 2012] |
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Tower Group Reports Third Quarter Results
NEW YORK --(Business Wire)--
Tower Group, Inc. (NASDAQ: TWGP) today reported third quarter 2012 net
income attributable to common shareholders of $21.6 million, or $0.56
per diluted share. Net loss attributable to common shareholders in the
third quarter of 2011 was $16.4 million, or ($0.40) per diluted share.
Operating income(1) was $23.8 million in the third quarter of
2012, or $0.62 per diluted share, compared to an operating loss of $15.3
million in the third quarter of 2011, or ($0.38) per diluted share. The
operating loss in the third quarter of 2011 included losses from
Hurricane Irene which were estimated at $60.1 million ($39.1 million
after-tax, or $0.96 per diluted share) in the third quarter 2011 and
revised to $45.0 million ($29.2 million after tax, or $0.72 per diluted
share) in the fourth quarter of 2011. The Company experienced $15.1
million of favorable development from Hurricane Irene claims in the
fourth quarter of 2011.
During the quarter, Tower settled its previously disclosed litigation
with Munich Reinsurance America, Inc. ("Munich") for $2.9 million
after-tax ($0.08 per share), which is included as a charge against its
third quarter 2012 operating results. This settlement pertained to
business that was sourced prior to 2001 from Tower's Insurance Services
segment.
Highlights (all figures compare third quarter 2012 results to the
results for the same period in 2011 except as noted):
-
Net premiums earned increased by 4.2% from $413.4 million to $430.7
million.
-
Gross premiums written and managed decreased by 6.6% to $484.8 million
primarily due to our termination of a program in the third quarter
2012 which generated $51.7 million of written premiums in the third
quarter of 2011. The third quarter of 2011 also included written
premiums of $23.3 million from an assumed reinsurance treaty which was
commuted in the fourth quarter of 2011. Excluding these two actions,
gross premiums written and managed increased by 8.2%.
-
For the combined insurance segments, the net combined ratio improved
to 96.0% from 109.9%. (Excluding the business that Tower manages on
behalf of the reciprocal exchanges, the net combined ratio improved to
96.3% from 112.0 %.)
-
The net loss ratio improved to 59.5% from 75.0%. The net loss
ratio excluding the reciprocal exchanges improved to 60.8% from
77.6%.
-
The net expense ratio was 36.5% compared to 34.9%.
-
Net investment income was flat at $31.4 million.
-
Book value per share was $27.49 at September 30, 2012 compared to
$26.37 at December 31, 2011. During the quarter, Tower paid cash
dividends of 18.75 cents per share, and year to date Tower has paid
cash dividends of 56.25 cents per share.
-
Tower Group, Inc. stockholders' equity was $1.1 billion at September
30, 2012.
Michael H. Lee, President and Chief Executive Officer of Tower Group,
Inc., said, "During the quarter, we continued to see positive trends in
our business in terms of growth and underwriting profitability as well
as improving market conditions. Our growth during the quarter was driven
by our organic initiatives which are focused on expanding our products,
improving existing business units and creating new business units and
improving the various operating processes associated with generating
growth. We saw continued strength in our assumed reinsurance business
and are beginning to see significant demand for customized product
solutions with key distribution sources. In addition to seeing robust
growth opportunities, we made significant progress in non-renewing
unprofitable business and continued to drive rate increases across all
business units. Because of this, we are confident about the
profitability of our on-going business and remain well positioned to
take advantage of the improving market conditions. We are also
progressing well with our proposed merger transaction with the Bermuda
reinsurance business of Canopius. Our fourth quarter operating results
will be adversely affected by Superstorm Sandy, which will easily cause
the largest catastrophic event in our history. Our sympathies go out to
those who have been severely impacted by this event, including our
policyholders, agents and employees situated in the affected areas.
While it is premature to estimate the full extent of our insured losses,
we are confident that our capital position for the year will not be
materially impaired based on the claims reporting pattern thus far, our
underwriting profile and robust reinsurance program, which was
substantially strengthened after Hurricane Irene last year. Despite the
obvious challenges arising from this event, we are proud of the
performance and the dedication of our staff, who have been working
around the clock to service our customers and agents."
On October 29, 2012, Superstorm Sandy made landfall in New Jersey and
caused significant property damages which are still being determined.
Tower has exposure to Superstorm Sandy through its direct insurance
operations and its reinsurance assumed and ceded businesses. Losses from
its insurance operations are covered by reinsurance after certain loss
thresholds are incurred by the company. For Tower's companies, excluding
the reciprocal exchanges, losses incurred in excess of $75 million are
ceded to Tower's reinsurance program up to a gross loss of $150 million.
Tower also maintains reinsurance for losses in excess of $150 million to
$925 million; in these reinsured programs, Tower retains 30% of the
losses between $150 million and $225 million. Tower expects its direct
insurance losses to be contained within the first layer of its
reinsurance program based on currently available information. Tower
expects its pre-tax net loss from its direct insurance business to be
between $90 million and $95 million pre-tax including reinstatement
premiums. Tower's assumed reinsurance business expects its losses to be
between $15 million and $20 million pre-tax, based on its evaluation of
currently available information. Tower also expects to recover $10
million if industry losses exceed $10 billion and an additional $10
million if industry losses exceed $15 billion through industry loss
warranties that its ceded reinsurance business put in place in July 2012
to manage risk associated with its exposure in the Northeast. Tower
believes that its alternative investments will not be materially
affected by the losses associated with Superstorm Sandy. In aggregate,
Tower's current estimate of loss ranges from $55.3 million to $68.3
million, after-tax, based on its estimate of an industry loss between
$10 billion and $15 billion. Tower expects that the reciprocal exchanges
will have a net loss between $6.2 million and $7.5 million, after-tax,
but such loss will not be included in Net Income Available to Tower
Shareholders.
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Financial Summary ($ in thousands, except per share data):
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Three Months Ended September 30,
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2012
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2011
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Reciprocal
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Elimina-
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Reciprocal
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Elimina-
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Tower
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Exchanges
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tions
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Total
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Tower
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Exchanges
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tions
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Total
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Net premiums written
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$
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382,655
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$
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41,831
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$
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-
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$
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424,486
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$
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423,813
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$
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44,891
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$
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-
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$
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468,704
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Revenues
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Net premiums earned
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$
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388,090
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$
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42,623
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$
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-
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$
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430,713
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$
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366,874
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$
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46,573
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$
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-
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$
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413,447
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Ceding commission revenue
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4,990
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3,190
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(477
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)
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7,703
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4,956
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2,011
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-
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6,967
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Insurance services revenue
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8,678
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-
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(7,870
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)
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808
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8,057
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-
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(7,644
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)
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413
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Policy billing fees
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2,980
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153
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-
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3,133
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2,688
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142
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-
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2,830
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Net investment income
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29,924
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3,141
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(1,676
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)
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31,389
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29,817
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3,268
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(1,674
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)
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31,411
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Total net realized investment gains
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(losses)
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80
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1,065
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-
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1,145
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(1,135
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)
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1,362
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-
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227
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Total revenues
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434,742
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50,172
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(10,023
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)
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474,891
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411,257
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53,356
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(9,318
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)
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455,295
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Expenses
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Loss and loss adjustment expenses
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235,782
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20,314
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-
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256,096
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284,661
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25,376
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-
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310,037
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Direct and ceding
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commission expense
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79,637
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8,367
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(477
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)
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87,527
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73,066
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7,188
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-
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80,254
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Other operating expenses
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78,760
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14,514
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(7,870
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85,404
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68,498
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13,029
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(7,644
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)
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73,883
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Acquisition-related transaction costs
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2,679
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-
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-
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2,679
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|
|
425
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-
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-
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425
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Interest expense
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8,224
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1,676
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(1,676
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)
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8,224
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8,633
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1,674
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(1,674
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)
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8,633
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Total expenses
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405,082
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44,871
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(10,023
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)
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439,930
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435,283
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47,267
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(9,318
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)
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|
473,232
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Income (loss) before income taxes
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|
29,660
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|
|
|
5,301
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-
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|
|
|
34,961
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(24,026
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)
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6,089
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-
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(17,937
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)
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Income tax expense (benefit)
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|
8,031
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|
|
1,469
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|
|
|
|
-
|
|
|
|
|
9,500
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|
|
|
(7,587
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)
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|
|
1,606
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|
|
|
|
-
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|
|
|
|
(5,981
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)
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Net income (loss)
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|
$
|
21,629
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|
|
$
|
3,832
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|
|
|
$
|
-
|
|
|
|
$
|
25,461
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|
$
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(16,439
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)
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|
$
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4,483
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|
|
|
$
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-
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|
$
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(11,956
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)
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Ratios
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|
Net calendar year loss and LAE
|
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|
60.8
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%
|
|
|
47.7
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%
|
|
|
|
|
|
|
|
59.5
|
%
|
|
|
77.6
|
%
|
|
|
54.5
|
%
|
|
|
|
|
|
|
|
75.0
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%
|
Net underwriting expenses
|
|
|
|
35.5
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%
|
|
|
45.8
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%
|
|
|
|
|
|
|
|
36.5
|
%
|
|
|
34.4
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%
|
|
|
38.8
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%
|
|
|
|
|
|
|
|
34.9
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%
|
Net Combined
|
|
|
|
96.3
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%
|
|
|
93.5
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%
|
|
|
|
|
|
|
|
96.0
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%
|
|
|
112.0
|
%
|
|
|
93.3
|
%
|
|
|
|
|
|
|
|
109.9
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%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on Average Equity
|
|
|
|
8.4
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%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-6.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Summary ($ in thousands, except per share data):
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|
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|
|
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|
|
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|
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|
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|
|
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|
|
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|
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|
|
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Nine Months Ended September 30,
|
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|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
Reciprocal
|
|
|
Elimina-
|
|
|
|
|
|
|
|
Reciprocal
|
|
|
Elimina-
|
|
|
|
|
|
|
|
Tower
|
|
Exchanges
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|
|
tions
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Total
|
|
|
Tower
|
|
Exchanges
|
|
|
tions
|
|
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Total
|
Net premiums written
|
|
|
$
|
1,211,859
|
|
|
$
|
124,544
|
|
|
|
$
|
-
|
|
|
|
$
|
1,336,403
|
|
|
$
|
1,127,068
|
|
|
$
|
130,649
|
|
|
|
$
|
-
|
|
|
|
$
|
1,257,717
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|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
|
|
$
|
1,184,371
|
|
|
$
|
126,653
|
|
|
|
$
|
-
|
|
|
|
$
|
1,311,024
|
|
|
$
|
1,044,201
|
|
|
$
|
142,571
|
|
|
|
$
|
-
|
|
|
|
$
|
1,186,772
|
|
Ceding commission revenue
|
|
|
|
13,923
|
|
|
|
9,500
|
|
|
|
|
(477
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)
|
|
|
|
22,946
|
|
|
|
20,898
|
|
|
|
4,905
|
|
|
|
|
-
|
|
|
|
|
25,803
|
|
Insurance services revenue
|
|
|
|
25,361
|
|
|
|
-
|
|
|
|
|
(22,697
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)
|
|
2,664
|
|
|
|
22,985
|
|
|
|
-
|
|
|
|
|
(22,043
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)
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|
942
|
|
Policy billing fees
|
|
|
|
8,853
|
|
|
|
414
|
|
|
|
|
-
|
|
|
|
|
9,267
|
|
|
|
7,234
|
|
|
|
433
|
|
|
|
|
-
|
|
|
|
|
7,667
|
|
Net investment income
|
|
|
|
92,448
|
|
|
|
9,668
|
|
|
|
|
(5,003
|
)
|
|
97,113
|
|
|
|
90,924
|
|
|
|
9,663
|
|
|
|
|
(5,000
|
)
|
|
95,587
|
|
Total net realized investment gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(losses)
|
|
|
|
1,108
|
|
|
|
3,384
|
|
|
|
|
-
|
|
|
|
|
4,492
|
|
|
|
4,245
|
|
|
|
1,028
|
|
|
|
|
-
|
|
|
|
|
5,273
|
|
Total revenues
|
|
|
|
1,326,064
|
|
|
|
149,619
|
|
|
|
|
(28,177
|
)
|
|
|
|
1,447,506
|
|
|
|
1,190,487
|
|
|
|
158,600
|
|
|
|
|
(27,043
|
)
|
|
|
|
1,322,044
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expenses
|
|
|
|
801,873
|
|
|
|
71,491
|
|
|
|
|
-
|
|
|
|
|
873,364
|
|
|
|
715,080
|
|
|
|
75,979
|
|
|
|
|
-
|
|
|
|
|
791,059
|
|
Direct and ceding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
commission expense
|
|
|
|
238,573
|
|
|
|
24,302
|
|
|
|
|
(477
|
)
|
|
|
|
262,398
|
|
|
|
208,840
|
|
|
|
24,227
|
|
|
|
|
-
|
|
|
|
|
233,067
|
|
Other operating expenses
|
|
|
|
223,114
|
|
|
|
42,058
|
|
|
|
|
(22,697
|
)
|
|
242,475
|
|
|
|
192,311
|
|
|
|
39,703
|
|
|
|
|
(22,043
|
)
|
|
209,971
|
|
Acquisition-related transaction costs
|
|
|
|
4,661
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
4,661
|
|
|
|
437
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
437
|
|
Interest expense
|
|
|
|
23,702
|
|
|
|
5,003
|
|
|
|
|
(5,003
|
)
|
|
23,702
|
|
|
|
24,990
|
|
|
|
5,000
|
|
|
|
|
(5,000
|
)
|
|
24,990
|
|
Total expenses
|
|
|
|
1,291,923
|
|
|
|
142,854
|
|
|
|
|
(28,177
|
)
|
|
|
|
1,406,600
|
|
|
|
1,141,658
|
|
|
|
144,909
|
|
|
|
|
(27,043
|
)
|
|
|
|
1,259,524
|
|
Income before income taxes
|
|
|
|
34,141
|
|
|
|
6,765
|
|
|
|
|
-
|
|
|
|
|
40,906
|
|
|
|
48,829
|
|
|
|
13,691
|
|
|
|
|
-
|
|
|
|
|
62,520
|
|
Income tax expense (benefit)
|
|
|
|
6,991
|
|
|
|
(2,880
|
)
|
|
|
|
-
|
|
|
|
|
4,111
|
|
|
|
15,462
|
|
|
|
4,192
|
|
|
|
|
-
|
|
|
|
|
19,654
|
|
Net income
|
|
|
$
|
27,150
|
|
|
$
|
9,645
|
|
|
|
$
|
-
|
|
|
|
$
|
36,795
|
|
|
$
|
33,367
|
|
|
$
|
9,499
|
|
|
|
$
|
-
|
|
|
|
$
|
42,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net calendar year loss and LAE
|
|
|
|
67.7
|
%
|
|
|
56.4
|
%
|
|
|
|
|
|
|
|
66.6
|
%
|
|
|
68.5
|
%
|
|
|
53.3
|
%
|
|
|
|
|
|
|
|
66.7
|
%
|
Net underwriting expenses
|
|
|
|
34.7
|
%
|
|
|
44.6
|
%
|
|
|
|
|
|
|
|
35.6
|
%
|
|
|
33.5
|
%
|
|
|
41.1
|
%
|
|
|
|
|
|
|
|
34.4
|
%
|
Net Combined
|
|
|
|
102.4
|
%
|
|
|
101.0
|
%
|
|
|
|
|
|
|
|
102.2
|
%
|
|
|
102.0
|
%
|
|
|
94.4
|
%
|
|
|
|
|
|
|
|
101.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on Average Equity
|
|
|
|
3.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of non-GAAP financial measures ($ in thousands,
except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
Net income (loss) attributable to Tower Group, Inc.
|
|
|
|
$
|
21,629
|
|
|
$
|
(16,439
|
)
|
|
$
|
27,150
|
|
|
$
|
33,367
|
|
|
Net realized (gains) losses on investments
|
|
|
|
|
(80
|
)
|
|
|
1,135
|
|
|
|
(1,108
|
)
|
|
|
(4,245
|
)
|
|
Acquisition-related transaction costs
|
|
|
|
|
2,679
|
|
|
|
425
|
|
|
|
4,661
|
|
|
|
437
|
|
|
Income tax
|
|
|
|
|
(456
|
)
|
|
|
(428
|
)
|
|
|
(461
|
)
|
|
|
1,454
|
|
|
Operating income (loss) attributable to Tower Group, Inc.
|
|
|
|
$
|
23,772
|
|
|
$
|
(15,307
|
)
|
|
$
|
30,242
|
|
|
$
|
31,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss) per share - Basic
|
|
|
|
$
|
0.62
|
|
|
$
|
(0.38
|
)
|
|
$
|
0.78
|
|
|
$
|
0.75
|
|
|
Operating earnings (loss) per share - Diluted
|
|
|
|
$
|
0.62
|
|
|
$
|
(0.38
|
)
|
|
$
|
0.78
|
|
|
$
|
0.75
|
|
|
Operating return on average equity
|
|
|
|
|
9.2
|
%
|
|
|
-5.9
|
%
|
|
|
3.9
|
%
|
|
|
4.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter 2012 Highlights
Consolidated
Gross premiums written and managed decreased to $484.8 million in the
third quarter, 6.6% lower than in the third quarter of 2011. The
decrease in the three months ended September 30, 2012 is primarily
attributable to the non-renewal of one program that generated $51.7
million of gross written premium in the third quarter in 2011. The third
quarter 2011 also included $23.3 million of premium from an assumed
reinsurance treaty that was commuted in the fourth quarter 2011.
Excluding these two actions, gross premiums written and managed
increased by 8.2%. Policies in-force decreased by 0.8% as of September
30, 2012, compared to September 30, 2011, without programs. For the
three months ended September 30, 2012, premiums on renewed Commercial
Insurance business excluding programs increased 4.0% and premiums on
renewed Personal Insurance business increased 4.5%, resulting in an
overall premium increase on renewal business of 4.3%. During the same
time period, our Commercial Insurance business renewal retention rate
excluding programs was 83.7% and our Personal Insurance business renewal
retention rate was 88.9%, resulting in an overall retention rate of
88.0%.
Total revenues increased 4.3% to $474.9 million in the third quarter of
2012 as compared to $455.3 million in the prior year's third quarter.
The growth was primarily due to increased net premiums earned. Net
premiums earned represented 90.7% of total revenues for the three months
ended September 30, 2012 compared to 90.8% for 2011.
Net investment income was flat at $31.4 million. The tax equivalent book
yield on our investment portfolio, excluding the reciprocal exchanges,
was 4.6% at September 30, 2012 compared to 4.5% at September 30, 2011.
Net realized investment gains were $1.1 million for the quarter ended
September 30, 2012 compared to gains of $0.2 million in the same period
last year. Total commission and fee income increased 14.0% to $11.6
million in the third quarter of 2012 compared to $10.2 million in the
third quarter of 2011.
The net loss ratio was 59.5% for the three months ended September 30,
2012 compared to 75.0% for the same period in 2011. (Excluding the
business that we manage on behalf of the reciprocal exchanges, the net
loss ratio was 60.8% for the third quarter of 2012 compared to 77.6% for
the third quarter of 2011.) Included in the third quarter loss ratio
were 12.5 points associated with Hurricane Irene (12.3 points excluding
the business that we manage on behalf of the reciprocal exchanges). Our
net expense ratio was 36.5% for the three months ended September 30,
2012 compared to 34.9% for the same period in 2011. (Excluding the
business that we manage on behalf of the reciprocal exchanges, the net
expense ratio was 35.5% for the third quarter of 2012 compared to 34.4%
for the third quarter of 2011.) The increase in the three months ended
September 30, 2012 is primarily due to the assumed reinsurance business
which has a higher commission ratio than other lines of business and an
increase in the OUE ratio as a result of ongoing efforts to build-out
the information technology infrastructure to support policy
administration and claims processing needs. Acquisition-related
transaction costs for the three and nine months ended September 30, 2012
were $2.7 million and $4.7 million, respectively, primarily attributed
to the acquisition of our equity interest in Canopius Group and expenses
associated with our recently announced proposed merger. These costs were
negligible for the same periods in 2011.
Excluding the reciprocal exchanges, for the three months ended September
30, 2012, Tower's effective tax rate was 27.1% in the third quarter 2012
compared to 31.6% in the same period in the prior year. Interest expense
decreased by $0.4 million for the three months ended September 30, 2012,
compared to the same period in 2011.
Additional Highlights and Disclosures
Dividend Declaration
Tower's Board of Directors approved a quarterly dividend on November 6,
2012, of 18.75 cents per share payable on December 21, 2012, to
stockholders of record as of December 10, 2012.
Guidance
Tower expects full year 2013 operating earnings per share to be in a
range of $2.85 to $3.05 excluding any benefits of the proposed merger
transaction.
Notes on Non-GAAP Financial Measures
(1) Operating income (loss) excludes realized gains and losses,
acquisition-related transaction costs and the results of the reciprocal
business, net of tax. Operating income is a common measurement for
property and casualty insurance companies. We believe this presentation
enhances the understanding of our results of operations by highlighting
the underlying profitability of our insurance business. Additionally,
these measures are a key internal management performance standard.
Operating earnings (loss) per share is operating income (loss) divided
by diluted weighted average shares outstanding. Operating return on
equity is annualized operating income (loss) divided by average common
stockholders' equity.
Conference Call
Tower will host a conference call and webcast to discuss these results
on November 8, 2012 at 9:00 a.m. ET. This conference call will be
broadcast live over the Internet. To access a listen-only webcast over
the Internet, please visit the Investor Information section of Tower
Group, Inc.'s website, www.twrgrp.com,
or use this link: http://investor.twrgrp.com/events.cfm
Please access the website at least 15 minutes prior to the call to
register and to download any necessary audio software. If you are unable
to participate during the live conference call, a webcast will be
archived in the Investor Information section of Tower Group, Inc.'s
website at www.twrgrp.com.
About Tower Group, Inc.
Tower Group, Inc. offers diversified property and casualty insurance
products and services through its operating subsidiaries.
Our Commercial Insurance Segment offers a broad range of commercial
lines property and casualty insurance products to small to mid-sized
businesses distributed through a network of retail, wholesale and
program underwriting agents on both an admitted and non-admitted basis.
This segment also includes reinsurance solutions provided primarily to
small insurance companies;
Our Personal Insurance Segment offers a broad range of personal lines
property and casualty insurance products to individuals distributed
through a network of retail and wholesale agents; and
Our Insurance Services Segment provides underwriting, claims and
reinsurance brokerage services to insurance companies.
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. This press release and any other
written or oral statements made by or on behalf of Tower may include
forward-looking statements that reflect Tower's current views with
respect to future events and financial performance. All statements other
than statements of historical fact included in this press release are
forward-looking statements. Forward-looking statements can generally be
identified by the use of forward-looking terminology such as "may,"
"will," "plan," "expect," "project," "intend," "estimate," "anticipate,"
"believe" and "continue" or their negative or variations or similar
terminology. All forward-looking statements address matters that involve
risks and uncertainties. Accordingly, there are or will be important
factors that could cause the actual results of Tower to differ
materially from those indicated in these statements. Please refer to
Tower's filings with the SEC, including among others Tower's Annual
Report on Form 10-K for the year ended December 31, 2011 and subsequent
filings on Form 10-Q, for a description of the important factors that
could cause the actual results of Tower to differ materially from those
indicated in these statements. Forward-looking statements speak only as
of the date on which they are made, and Tower undertakes no obligation
to update publicly or revise any forward-looking statement, whether as a
result of new information, future developments or otherwise.
For more information, visit Tower's website at http://www.twrgrp.com/
|
|
|
|
Commercial Insurance & Personal Insurance Combined
|
($ in thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
Change(%)
|
|
|
2012
|
|
|
2011
|
|
|
Change(
|
%)
|
Key Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums written
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
|
|
$
|
484,845
|
|
|
|
$
|
519,130
|
|
|
|
-6.6
|
%
|
|
|
$
|
1,489,831
|
|
|
|
$
|
1,376,662
|
|
|
|
8.2
|
%
|
Less: ceded premiums written
|
|
|
|
|
|
(60,359
|
)
|
|
|
|
(50,426
|
)
|
|
|
19.7
|
%
|
|
|
|
(153,428
|
)
|
|
|
|
(118,945
|
)
|
|
|
29.0
|
%
|
Net premiums written
|
|
|
|
|
$
|
424,486
|
|
|
|
$
|
468,704
|
|
|
|
-9.4
|
%
|
|
|
$
|
1,336,403
|
|
|
|
$
|
1,257,717
|
|
|
|
6.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
|
|
|
|
|
430,713
|
|
|
|
|
413,447
|
|
|
|
4.2
|
%
|
|
|
$
|
1,311,024
|
|
|
|
$
|
1,186,772
|
|
|
|
10.5
|
%
|
Ceding commission revenue
|
|
|
|
|
|
7,703
|
|
|
|
|
6,967
|
|
|
|
10.6
|
%
|
|
|
|
22,946
|
|
|
|
|
25,803
|
|
|
|
-11.1
|
%
|
Policy billing fees
|
|
|
|
|
|
3,133
|
|
|
|
|
2,830
|
|
|
|
10.7
|
%
|
|
|
|
9,267
|
|
|
|
|
7,667
|
|
|
|
20.9
|
%
|
Total revenues
|
|
|
|
|
|
441,549
|
|
|
|
|
423,244
|
|
|
|
4.3
|
%
|
|
|
|
1,343,237
|
|
|
|
|
1,220,242
|
|
|
|
10.1
|
%
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss and loss adjustment expenses
|
|
|
|
|
|
256,096
|
|
|
|
|
310,037
|
|
|
|
-17.4
|
%
|
|
|
|
873,364
|
|
|
|
|
791,059
|
|
|
|
10.4
|
%
|
Underwriting expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct commission expense
|
|
|
|
|
|
87,527
|
|
|
|
|
80,150
|
|
|
|
9.2
|
%
|
|
|
|
262,398
|
|
|
|
|
233,066
|
|
|
|
12.6
|
%
|
Other underwriting expenses
|
|
|
|
|
|
80,440
|
|
|
|
|
74,050
|
|
|
|
8.6
|
%
|
|
|
|
236,776
|
|
|
|
|
208,518
|
|
|
|
13.6
|
%
|
Total underwriting expenses
|
|
|
|
|
|
167,967
|
|
|
|
|
154,200
|
|
|
|
8.9
|
%
|
|
|
|
499,174
|
|
|
|
|
441,584
|
|
|
|
13.0
|
%
|
Underwriting profit (loss)
|
|
|
|
|
$
|
17,486
|
|
|
|
$
|
(40,993
|
)
|
|
|
142.7
|
%
|
|
|
$
|
(29,301
|
)
|
|
|
$
|
(12,401
|
)
|
|
|
-136.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss ratio
|
|
|
|
|
|
59.5
|
%
|
|
|
|
75.0
|
%
|
|
|
|
|
|
|
66.6
|
%
|
|
|
|
66.7
|
%
|
|
|
|
Net expense ratio
|
|
|
|
|
|
36.5
|
%
|
|
|
|
34.9
|
%
|
|
|
|
|
|
|
35.6
|
%
|
|
|
|
34.4
|
%
|
|
|
|
Net combined ratio
|
|
|
|
|
|
96.0
|
%
|
|
|
|
109.9
|
%
|
|
|
|
|
|
|
102.2
|
%
|
|
|
|
101.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Insurance Segment Information
|
($ in thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
2011
|
|
|
|
2012
|
|
|
|
2011
|
|
Key Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums written
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
|
|
$
|
311,950
|
|
|
$
|
366,740
|
|
|
$
|
1,018,738
|
|
|
$
|
945,619
|
|
Less: ceded premiums written
|
|
|
|
|
|
(25,557
|
)
|
|
|
(16,533
|
)
|
|
|
(68,392
|
)
|
|
|
(48,769
|
)
|
Net premiums written
|
|
|
|
|
$
|
286,393
|
|
|
$
|
350,207
|
|
|
$
|
950,346
|
|
|
$
|
896,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
|
|
|
|
|
296,606
|
|
|
|
290,113
|
|
|
$
|
932,091
|
|
|
$
|
805,616
|
|
Ceding commission revenue
|
|
|
|
|
|
2,446
|
|
|
|
1,455
|
|
|
|
6,350
|
|
|
|
10,183
|
|
Policy billing fees
|
|
|
|
|
|
1,358
|
|
|
|
1,195
|
|
|
|
4,261
|
|
|
|
3,073
|
|
Total revenues
|
|
|
|
|
|
300,410
|
|
|
|
292,763
|
|
|
|
942,702
|
|
|
|
818,872
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss and loss adjustment expenses
|
|
|
|
|
|
180,053
|
|
|
|
221,540
|
|
|
|
662,700
|
|
|
|
552,627
|
|
Underwriting expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct commission expenses
|
|
|
|
|
|
61,142
|
|
|
|
57,146
|
|
|
|
183,230
|
|
|
|
157,394
|
|
Other underwriting expenses
|
|
|
|
|
|
45,213
|
|
|
|
39,854
|
|
|
|
140,875
|
|
|
|
113,467
|
|
Total underwriting expenses
|
|
|
|
|
|
106,355
|
|
|
|
97,000
|
|
|
|
324,105
|
|
|
|
270,861
|
|
Underwriting profit (loss)
|
|
|
|
|
$
|
14,002
|
|
|
$
|
(25,777
|
)
|
|
$
|
(44,103
|
)
|
|
$
|
(4,616
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss ratio
|
|
|
|
|
|
60.7
|
%
|
|
|
76.4
|
%
|
|
|
71.1
|
%
|
|
|
68.6
|
%
|
Net expense ratio
|
|
|
|
|
|
34.6
|
%
|
|
|
32.5
|
%
|
|
|
33.6
|
%
|
|
|
32.0
|
%
|
Net combined ratio
|
|
|
|
|
|
95.3
|
%
|
|
|
108.9
|
%
|
|
|
104.7
|
%
|
|
|
100.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Insurance Segment Information
|
($ in thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
2012
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Reciprocal
|
|
|
|
|
|
|
|
|
Reciprocal
|
|
|
|
|
|
|
|
|
|
|
|
Tower
|
|
|
Exchanges
|
|
|
Total
|
|
|
Tower
|
|
|
Exchanges
|
|
|
Total
|
Key Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums written
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
|
|
$
|
117,220
|
|
|
$
|
55,675
|
|
|
$
|
172,895
|
|
|
$
|
97,793
|
|
|
|
54,596
|
|
|
|
152,389
|
|
Less: ceded premiums written
|
|
|
|
|
|
(20,958
|
)
|
|
|
(13,844
|
)
|
|
|
(34,802
|
)
|
|
|
(24,188
|
)
|
|
|
(9,705
|
)
|
|
|
(33,893
|
)
|
Net premiums written
|
|
|
|
|
$
|
96,262
|
|
|
$
|
41,831
|
|
|
$
|
138,093
|
|
|
$
|
73,605
|
|
|
|
44,891
|
|
|
|
118,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
|
|
|
|
|
91,484
|
|
|
|
42,623
|
|
|
|
134,107
|
|
|
|
76,761
|
|
|
|
46,573
|
|
|
|
123,334
|
|
Ceding commission revenue
|
|
|
|
|
|
2,067
|
|
|
|
3,190
|
|
|
|
5,257
|
|
|
|
3,501
|
|
|
|
2,011
|
|
|
|
5,512
|
|
Policy billing fees
|
|
|
|
|
|
1,622
|
|
|
|
153
|
|
|
|
1,775
|
|
|
|
1,493
|
|
|
|
142
|
|
|
|
1,635
|
|
Total revenues
|
|
|
|
|
|
95,173
|
|
|
|
45,966
|
|
|
|
141,139
|
|
|
|
81,755
|
|
|
|
48,726
|
|
|
|
130,481
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss and loss adjustment expenses
|
|
|
|
|
|
55,729
|
|
|
|
20,314
|
|
|
|
76,043
|
|
|
|
63,122
|
|
|
|
25,375
|
|
|
|
88,497
|
|
Underwriting expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct commission expense
|
|
|
|
|
|
18,018
|
|
|
|
8,367
|
|
|
|
26,385
|
|
|
|
15,816
|
|
|
|
7,188
|
|
|
|
23,004
|
|
Other underwriting expenses
|
|
|
|
|
|
20,714
|
|
|
|
14,513
|
|
|
|
35,227
|
|
|
|
21,166
|
|
|
|
13,030
|
|
|
|
34,196
|
|
Total underwriting expenses
|
|
|
|
|
|
38,732
|
|
|
|
22,880
|
|
|
|
61,612
|
|
|
|
36,982
|
|
|
|
20,218
|
|
|
|
57,200
|
|
Underwriting profit (loss)
|
|
|
|
|
$
|
712
|
|
|
$
|
2,772
|
|
|
$
|
3,484
|
|
|
$
|
(18,349
|
)
|
|
|
3,133
|
|
|
|
(15,216
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss ratio
|
|
|
|
|
|
60.9
|
%
|
|
|
47.7
|
%
|
|
|
56.7
|
%
|
|
|
82.2
|
%
|
|
|
54.5
|
%
|
|
|
71.8
|
%
|
Net expense ratio
|
|
|
|
|
|
38.3
|
%
|
|
|
45.8
|
%
|
|
|
40.7
|
%
|
|
|
41.7
|
%
|
|
|
38.8
|
%
|
|
|
40.6
|
%
|
Net combined ratio
|
|
|
|
|
|
99.2
|
%
|
|
|
93.5
|
%
|
|
|
97.4
|
%
|
|
|
123.9
|
%
|
|
|
93.3
|
%
|
|
|
112.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Insurance Segment Information
|
($ in thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
2012
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Reciprocal
|
|
|
|
|
|
|
|
|
Reciprocal
|
|
|
|
|
|
|
|
|
|
|
|
Tower
|
|
|
Exchanges
|
|
|
Total
|
|
|
Tower
|
|
|
Exchanges
|
|
|
Total
|
Key Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums written
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
|
|
$
|
313,604
|
|
|
$
|
157,489
|
|
|
$
|
471,093
|
|
|
$
|
273,597
|
|
|
|
157,446
|
|
|
|
431,043
|
|
Less: ceded premiums written
|
|
|
|
|
|
(52,091
|
)
|
|
|
(32,945
|
)
|
|
|
(85,036
|
)
|
|
|
(43,379
|
)
|
|
|
(26,797
|
)
|
|
|
(70,176
|
)
|
Net premiums written
|
|
|
|
|
$
|
261,513
|
|
|
$
|
124,544
|
|
|
$
|
386,057
|
|
|
$
|
230,218
|
|
|
|
130,649
|
|
|
|
360,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
|
|
|
|
$
|
252,280
|
|
|
$
|
126,653
|
|
|
$
|
378,933
|
|
|
$
|
238,585
|
|
|
$
|
142,571
|
|
|
$
|
381,156
|
|
Ceding commission revenue
|
|
|
|
|
|
7,096
|
|
|
|
9,500
|
|
|
|
16,596
|
|
|
|
10,715
|
|
|
|
4,905
|
|
|
|
15,620
|
|
Policy billing fees
|
|
|
|
|
|
4,592
|
|
|
|
414
|
|
|
|
5,006
|
|
|
|
4,161
|
|
|
|
433
|
|
|
|
4,594
|
|
Total revenues
|
|
|
|
|
|
263,968
|
|
|
|
136,567
|
|
|
|
400,535
|
|
|
|
253,461
|
|
|
|
147,909
|
|
|
|
401,370
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss and loss adjustment expenses
|
|
|
|
|
|
139,173
|
|
|
|
71,491
|
|
|
|
210,664
|
|
|
|
162,453
|
|
|
|
75,979
|
|
|
|
238,432
|
|
Underwriting expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct commission expense
|
|
|
|
|
|
54,866
|
|
|
|
24,302
|
|
|
|
79,168
|
|
|
|
51,445
|
|
|
|
24,227
|
|
|
|
75,672
|
|
Other underwriting expenses
|
|
|
|
|
|
53,844
|
|
|
|
42,057
|
|
|
|
95,901
|
|
|
|
55,348
|
|
|
|
39,703
|
|
|
|
95,051
|
|
Total underwriting expenses
|
|
|
|
|
|
108,710
|
|
|
|
66,359
|
|
|
|
175,069
|
|
|
|
106,793
|
|
|
|
63,930
|
|
|
|
170,723
|
|
Underwriting profit (loss)
|
|
|
|
|
$
|
16,085
|
|
|
$
|
(1,283
|
)
|
|
$
|
14,802
|
|
|
$
|
(15,785
|
)
|
|
|
8,000
|
|
|
|
(7,785
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss ratio
|
|
|
|
|
|
55.2
|
%
|
|
|
56.4
|
%
|
|
|
55.6
|
%
|
|
|
68.1
|
%
|
|
|
53.3
|
%
|
|
|
62.6
|
%
|
Net expense ratio
|
|
|
|
|
|
38.5
|
%
|
|
|
44.6
|
%
|
|
|
40.5
|
%
|
|
|
38.5
|
%
|
|
|
41.1
|
%
|
|
|
39.5
|
%
|
Net combined ratio
|
|
|
|
|
|
93.7
|
%
|
|
|
101.0
|
%
|
|
|
96.1
|
%
|
|
|
106.6
|
%
|
|
|
94.4
|
%
|
|
|
102.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance Services Segment Results of Operations
|
($ in thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fee income
|
|
|
|
|
$
|
7,870
|
|
|
$
|
7,644
|
|
$
|
22,697
|
|
$
|
22,043
|
Other revenue
|
|
|
|
|
|
808
|
|
|
|
413
|
|
|
2,664
|
|
|
942
|
Total revenue
|
|
|
|
|
|
8,678
|
|
|
|
8,057
|
|
|
25,361
|
|
|
22,985
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
|
|
|
9,578
|
|
|
|
4,986
|
|
|
19,120
|
|
|
15,004
|
Total expenses
|
|
|
|
|
|
9,578
|
|
|
|
4,986
|
|
|
19,120
|
|
|
15,004
|
Insurance services pre-tax income
|
|
|
|
|
$
|
(900
|
)
|
|
$
|
3,071
|
|
$
|
6,241
|
|
$
|
7,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tower Group, Inc.
|
|
|
|
|
|
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
($ in thousands, except par value and share amounts)
|
2012
|
|
|
2011
|
|
Assets
|
|
|
|
|
|
Investments - Tower
|
|
|
|
|
|
Available-for-sale investments, at fair value:
|
|
|
|
|
|
Fixed-maturity securities (amortized cost of $1,978,624 and
$2,046,932)
|
$
|
2,133,676
|
|
|
$
|
2,153,620
|
|
Equity securities (cost of $121,339 and $91,069)
|
|
123,614
|
|
|
|
87,479
|
|
Short-term investments (cost of $4,748 and $0)
|
|
4,748
|
|
|
|
-
|
|
Other invested assets
|
|
54,365
|
|
|
|
44,347
|
|
Investments - Reciprocal Exchanges
|
|
|
|
|
|
Available-for-sale investments, at fair value:
|
|
|
|
|
|
Fixed-maturity securities (amortized cost of $277,787 and $288,180)
|
|
303,172
|
|
|
|
300,054
|
|
Equity securities (cost of $5,144 and $1,965)
|
|
5,654
|
|
|
|
1,866
|
|
Total investments
|
|
2,625,229
|
|
|
|
2,587,366
|
|
Cash and cash equivalents (includes $11,383 and $666 relating to
Reciprocal Exchanges)
|
|
179,414
|
|
|
|
114,098
|
|
Investment income receivable (includes $3,443 and $2,978 relating to
Reciprocal Exchanges)
|
|
30,188
|
|
|
|
26,782
|
|
Investment in unconsolidated affiliate
|
|
71,512
|
|
|
|
-
|
|
Premiums receivable (includes $40,400 and $41,290 relating to
Reciprocal Exchanges)
|
|
367,489
|
|
|
|
408,626
|
|
Reinsurance recoverable on paid losses (includes $2,248 and $5,670
relating to Reciprocal Exchanges)
|
|
19,873
|
|
|
|
23,903
|
|
Reinsurance recoverable on unpaid losses (includes $19,138 and
$11,253 relating to Reciprocal Exchanges)
|
|
313,626
|
|
|
|
319,664
|
|
Prepaid reinsurance premiums (includes $17,944 and $14,685 relating
to Reciprocal Exchanges)
|
|
62,820
|
|
|
|
54,037
|
|
Deferred acquisition costs, net (includes $12,503 and $11,866
relating to Reciprocal Exchanges)
|
|
189,589
|
|
|
|
168,858
|
|
Intangible assets (includes $7,000 and $4,839 relating to Reciprocal
Exchanges)
|
|
108,806
|
|
|
|
114,920
|
|
Goodwill
|
|
250,103
|
|
|
|
250,103
|
|
Funds held by reinsured companies
|
|
124,353
|
|
|
|
69,755
|
|
Other assets (includes $4,086 and $2,685 relating to Reciprocal
Exchanges)
|
|
321,167
|
|
|
|
304,083
|
|
Total assets
|
$
|
4,664,169
|
|
|
$
|
4,442,195
|
|
Liabilities
|
|
|
|
|
|
Loss and loss adjustment expenses (includes $123,073 and $136,274
relating to Reciprocal Exchanges)
|
$
|
1,694,666
|
|
|
$
|
1,632,113
|
|
Unearned premium (includes $104,140 and $102,991 relating to
Reciprocal Exchanges)
|
|
927,295
|
|
|
|
893,176
|
|
Reinsurance balances payable (includes $3,685 and $3,466 relating to
Reciprocal Exchanges)
|
|
20,850
|
|
|
|
20,794
|
|
Funds held under reinsurance agreements
|
|
88,810
|
|
|
|
96,726
|
|
Other liabilities (includes $46,889 and $7,154 relating to
Reciprocal Exchanges)
|
|
316,073
|
|
|
|
266,155
|
|
Deferred income taxes (includes $7,445 and $4,511 relating to
Reciprocal Exchanges)
|
|
48,896
|
|
|
|
29,337
|
|
Debt
|
|
449,005
|
|
|
|
426,901
|
|
Total liabilities
|
|
3,545,595
|
|
|
|
3,365,202
|
|
Stockholders' equity
|
|
|
|
|
|
Common stock ($0.01 par value; 100,000,000 shares authorized,
46,781,251 and
|
|
|
|
|
|
46,448,341 shares issued, and 38,376,845 and 39,221,102 shares
outstanding)
|
|
468
|
|
|
|
465
|
|
Treasury stock (8,404,406 and 7,227,239 shares)
|
|
(181,432
|
)
|
|
|
(158,185
|
)
|
Paid-in-capital
|
|
777,864
|
|
|
|
772,938
|
|
Accumulated other comprehensive income
|
|
96,125
|
|
|
|
62,244
|
|
Retained earnings
|
|
361,956
|
|
|
|
356,680
|
|
Tower Group, Inc. stockholders' equity
|
|
1,054,981
|
|
|
|
1,034,142
|
|
Noncontrolling interests
|
|
63,593
|
|
|
|
42,851
|
|
Total stockholders' equity
|
|
1,118,574
|
|
|
|
1,076,993
|
|
Total liabilities and stockholders' equity
|
$
|
4,664,169
|
|
|
$
|
4,442,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tower Group, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
(in thousands, except per share amounts)
|
|
|
|
|
2012
|
|
|
|
2011
|
|
|
|
2012
|
|
|
|
2011
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
|
|
|
$
|
430,713
|
|
|
$
|
413,447
|
|
|
$
|
1,311,024
|
|
|
$
|
1,186,772
|
|
Ceding commission revenue
|
|
|
|
|
7,703
|
|
|
|
6,967
|
|
|
|
22,946
|
|
|
|
25,803
|
|
Insurance services revenue
|
|
|
|
|
808
|
|
|
|
413
|
|
|
|
2,664
|
|
|
|
942
|
|
Policy billing fees
|
|
|
|
|
3,133
|
|
|
|
2,830
|
|
|
|
9,267
|
|
|
|
7,667
|
|
Net investment income
|
|
|
|
|
31,389
|
|
|
|
31,411
|
|
|
|
97,113
|
|
|
|
95,587
|
|
Net realized investment gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other-than-temporary impairments
|
|
|
|
|
(1,727
|
)
|
|
|
(2,955
|
)
|
|
|
(6,973
|
)
|
|
|
(3,333
|
)
|
Portion of loss recognized in other comprehensive income
|
|
|
|
|
-
|
|
|
|
156
|
|
|
|
286
|
|
|
|
180
|
|
Other net realized investment gains
|
|
|
|
|
2,872
|
|
|
|
3,026
|
|
|
|
11,179
|
|
|
|
8,426
|
|
Total net realized investment gains (losses)
|
|
|
|
|
1,145
|
|
|
|
227
|
|
|
|
4,492
|
|
|
|
5,273
|
|
Total revenues
|
|
|
|
|
474,891
|
|
|
|
455,295
|
|
|
|
1,447,506
|
|
|
|
1,322,044
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expenses
|
|
|
|
|
256,096
|
|
|
|
310,037
|
|
|
|
873,364
|
|
|
|
791,059
|
|
Direct and ceding commission expense
|
|
|
|
|
87,527
|
|
|
|
80,254
|
|
|
|
262,398
|
|
|
|
233,067
|
|
Other operating expenses
|
|
|
|
|
85,404
|
|
|
|
73,883
|
|
|
|
242,475
|
|
|
|
209,971
|
|
Acquisition-related transaction costs
|
|
|
|
|
2,679
|
|
|
|
425
|
|
|
|
4,661
|
|
|
|
437
|
|
Interest expense
|
|
|
|
|
8,224
|
|
|
|
8,633
|
|
|
|
23,702
|
|
|
|
24,990
|
|
Total expenses
|
|
|
|
|
439,930
|
|
|
|
473,232
|
|
|
|
1,406,600
|
|
|
|
1,259,524
|
|
Income before income taxes
|
|
|
|
|
34,961
|
|
|
|
(17,937
|
)
|
|
|
40,906
|
|
|
|
62,520
|
|
Income tax expense
|
|
|
|
|
9,500
|
|
|
|
(5,981
|
)
|
|
|
4,111
|
|
|
|
19,654
|
|
Net income
|
|
|
|
$
|
25,461
|
|
|
$
|
(11,956
|
)
|
|
$
|
36,795
|
|
|
$
|
42,866
|
|
Less: Net income attributable to Noncontrolling interests
|
|
|
|
|
3,832
|
|
|
|
4,483
|
|
|
|
9,645
|
|
|
|
9,499
|
|
Net income attributable to Tower Group, Inc.
|
|
|
|
$
|
21,629
|
|
|
$
|
(16,439
|
)
|
|
$
|
27,150
|
|
|
$
|
33,367
|
|
Earnings per share attributable to Tower Group, Inc. stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
$
|
0.56
|
|
|
$
|
(0.40
|
)
|
|
$
|
0.70
|
|
|
$
|
0.82
|
|
Diluted
|
|
|
|
$
|
0.56
|
|
|
$
|
(0.40
|
)
|
|
$
|
0.70
|
|
|
$
|
0.81
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
38,371
|
|
|
|
40,814
|
|
|
|
38,929
|
|
|
|
41,207
|
|
Diluted
|
|
|
|
|
38,395
|
|
|
|
40,814
|
|
|
|
38,979
|
|
|
|
41,312
|
|
Dividends declared and paid per common share
|
|
|
|
$
|
0.19
|
|
|
$
|
0.19
|
|
|
$
|
0.56
|
|
|
$
|
0.50
|
|
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|