Tower Group International Ltd. (TWGP), the insurer cutting 10 percent of its workforce as it seeks to recover from losses, tumbled in New York trading after saying it may need to add as much as $105 million to reserves.
Tower dropped 30 percent to $2.74 at 4 p.m. in New York. The stock had plunged 75 percent this year before today as Bermuda-based Tower delayed reporting financial results so it could assess reserve shortfalls.
The insurer said late yesterday that it will need to add $75 million to $105 million to reserves in the third quarter for losses tied to workers’ compensation, commercial liability and commercial auto policies. In October, Tower said it had to increase reserves by about $365 million, after a review of how much it set aside to cover losses from 2009 to 2011.
“This is a clear setback in our view,” Randy Binner, an analyst at FBR Capital Markets, said in a research note yesterday. “The resolution process for TWGP is clearly not stabilizing and we remain on the sidelines.”
Tower, which has the ticker symbol TWGP, also said yesterday that it raised $69.7 million by selling its stake in Canopius Group Ltd. to a fund overseen by Bregal Capital LLP. The proceeds were used to fully repay $70 million that was outstanding on a credit facility led by Bank of America Corp.
Tower said in October that it hired JPMorgan Chase & Co. to evaluate a “range of strategic options,” Wall Street shorthand for deals that could include a capital injection, the divestiture of assets, or the sale of an entire company. Last month, the insurer said it was cutting about 140 jobs to save $21 million a year.
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