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A.M. Best Comments on the Ratings of AmTrust Financial Services, Inc. Following Announced Transaction with Tower Group International, Ltd.
[January 10, 2014]

A.M. Best Comments on the Ratings of AmTrust Financial Services, Inc. Following Announced Transaction with Tower Group International, Ltd.

OLDWICK, N.J. --(Business Wire)--

A.M. Best Co. has commented that the financial strength rating of A (Excellent) and issuer credit ratings (ICR) of "a" of the subsidiaries of AmTrust Financial Services, Inc. (AmTrust) (headquartered in New York, NY) (NASDAQ:AFSI) as well as its ICR of "bbb" and debt ratings are unchanged following the recent announcement of its transaction with Tower Group International, Ltd. (Tower) (Bermuda). The outlook for all ratings is stable.

Under the terms of the transaction, which involves multiple parties, ACP Re Ltd (ACP Re) (Bermuda) has agreed to acquire 100% of the outstanding stock of Tower. In addition, AmTrust will enter into a 100% quota share reinsurance agreement and provide a cut-through endorsement on a portion of Tower's commercial lines business, which will be effective January 1, 2014. AmTrust intends to reinsure not less than 60% on a prospective basis of the approximately $290 million of unearned premium relating to Tower's commercial business.

Upon completion of ACP Re's merger with Tower, AmTrust intends to acquire the commercial lines renewal rights and assets, including several of Tower's domestic insurance subsidiaries, to support the commercial lines business. Furthermore, similar to the acquisition of the cmmercial lines business, National General Holdings Corporation (National General) (Delaware) will acquire the renewal rights and assets, including several insurance subsidiaries, of Tower's personal lines insurance operations. The purchase price of the subsidiaries acquired by AmTrust and National General will be equal to the statutory tangible book value of the acquired companies. ACP Re will retain all liabilities at the time of sale of the acquired companies through a reinsurance agreement that will be fully collateralized.

AmTrust has historically maintained excellent risk-adjusted capitalization and has reported strong operating results driven by an experienced management team, emphasis on technology and focus on low hazard and predictable books of business. In addition, a significant portion of AmTrust's growth has been driven by successfully executing on renewal rights transactions, which is similar to the transaction with Tower. Based on management's expectations, the additional premium generated by this transaction is manageable considering AmTrust's current premium and surplus levels. A.M. Best expects the renewal rights acquisition to positively impact AmTrust's earnings and for the company to continue to maintain excellent risk adjusted capitalization that supports the acquisition of the additional business.

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

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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