Tower Group International Merging With ACP Re

After a fall in which it disclosed account discrepancies and delayed financial results, Tower Group International is set to merge with ACP Re.

Jan 6, 2014 at 1:09PM

Following its November announcement that it would begin "exploring the sale of some of our holding company and operating assets," Tower Group International (NASDAQ:TWGP) announced today that it had come to a merger agreement with ACP Re, in which Tower Group International would merge into ACP Re.

The merger will in turn value Tower Group International at $172.1 million, and will allow current shareholders to receive $3.00 per share. Tower Group International shares closed Friday at $2.94.

As a part of the merger agreement Tower Group International also announced it would be selling certain assets and renewal rights of its commercial insurance operations to AmTrust Financial Services (NASDAQ:AFSI) for $125 million. In addition, the renewal rights and assets of Tower's personal insurance lines will be acquired by National General Holdings Corp.

Tower Group had a tumultuous fall after it realized that it did not appropriately account for its loss reserves, which resulted in it adding $327 million to its loss reserves in the second quarter. It did not announce its second-quarter results until November 22, 2013, three months later than it originally planned. 

When the results were announced, the company reported an operating loss of $291 million. In addition, shareholder equity fell from $950 million on December 31, 2012, to $579 million at the end of the second quarter.

"We are deeply disappointed by our second quarter operating results, including the significant reserve charge as well as the delay in our financial reporting," said Tower Group President and CEO Michael Lee when the results were announced. "The reserve strengthening stemmed primarily from certain types of business that we underwrote from accident years 2008 to 2011. While we began to reunderwrite this business in 2010, the loss emergence from this business from those accident years that we noticed in the second quarter caused us to significantly increase our reserve position."

As a result of the accounting delays and the tripling of its expected loss reserves, Tower Group International shares had fallen more than 80% over the last year. The company announced that Lee, who owns 4.2% of the shares, voted in favor of the merger agreement. 

According to the company press release, ACP Re is a Bermuda-based reinsurance company. Tower Group is also headquartered in Bermuda. The controlling shareholder of ACP Re is a trust established by the founder of AmTrust Financial Services, Inc., National General Holdings Corporation, and Maiden Holdings, Ltd.

Fool contributor Patrick Morris has no position in any stocks mentioned. The Motley Fool owns shares of Amtrust Financial Services. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information