Insurance rating agency A.M. Best Co. has downgraded thefinancial strength rating of Tower Group following the insurer’sreserve-strengthening announcement.
|Tower Group International says it needs to strengthen loss reserves by about $365 million for accidentyears 2009-2011, resulting in an impairment charge of $215 millionfor the second quarter.
|Tower has yet to announce second-quarter results. A.M. Best saysits decision to lower Tower’s financial strength rating to "B++"from "A-" considers, in part, the “reduced flexibility given thedelay in earnings, the decline in shareholder confidence and thecorresponding decline in share price.”
|As of the morning of Oct. 9, Tower shares were selling at about$3.83, down about 12.75 percent from the previous close. On July 25shares of Tower were at about $22.
|A.M. Best says Tower will be challenged to restore shareholderconfidence.
|“Once well-regarded for its mergers and acquisitions strategy,equally important is the consequential impact this reserve chargehas on Tower’s business model, business profile and earningsprospects going forward,” A.M. Best adds in a statement.
|Reporter Leslie Scism of The Wall Street Journal,writes that Tower is now looking to be the acquired, not theacquirer.
|According to unnamed sources, several private-equity firms wereapproached by Tower, but they aren’t interested in a deal.
|Read the rest of the story HERE.
|A.M. Best says Tower will remain under review with negativeimplications pending more talks with management at theBermuda-based company.
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