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 (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.