Tower Reviewing ‘Strategic Options’ After Reserve Shortfall
Tower Group International Ltd. (TWGP) is reviewing a “range of strategic options” after the insurer determined it had to add $365 million to reserves and taking a $215 million impairment of goodwill tied to its commercial, specialty and reinsurance segments.
JPMorgan Chase & Co. (JPM) is the lead financial adviser, Bermuda-based Tower said today in a statement. The “strategic options” phrase is Wall Street shorthand for deals that could include a capital injection, the divestiture of assets or the sale of an entire company.
The insurer dropped 6.9 percent to $6.90 at 4:36 p.m. in New York. Tower had lost half its market value this year through the close of regular trading today amid a review of reserves for coverage including workers’ compensation and commercial auto policies from 2009 through 2011. Today’s results reflect a review of finances through June 30, and full second-quarter results will be disclosed when an evaluation is complete.
Tower’s “competitive position has been materially damaged, negatively impacting the company’s financial flexibility and ability to write new business,” Fitch Ratings said today in a note. Fitch cut Tower’s rating six steps, to B from BBB.
“Since 2010, Tower has been shifting its business mix, significantly de-emphasizing the lines that contributed to the reserve strengthening and modifying its book of commercial lines business,” the insurer said in its statement.
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