Following the announcement from
Tower Group International, Ltd.
) last week, that it would postpone its second quarter earnings
release date, the rating agency A.M. Best Co. had taken a
negative rating action on the company.
The rating agency has put the ratings of the subsidiaries of
Tower Group under review with negative outlook, This includes the
financial strength ratings (FSR) of A- (Excellent) and issuer
credit ratings (ICR) of "a-" of the pooled and reinsured members
of the Tower US Pool (Tower); bbb-" as well as the debt rating of
"bbb-" on $142.5 million 5.00% senior convertible notes, due 2014
of the intermediate holding company, Tower Group, Inc; the FSR of
A- and ICR of "a-" of CastlePoint Reinsurance Company, Ltd.
The negative rating action also reflects the rating agency's
concern about an anticipated prior-year loss reserve charge of
approximately $60 million to $110 million pre-tax. The company's
results might suffer from reserve leverage and the increased
uncertainty with respect to future reserve charges.
However, the rating agency is confident that despite the
reserve charge, Tower's risk- adjusted capital will remain at
levels supportive of its current investment grade
Tower's ratings will remain under the agency's scanner.
Further rating action will take place after gaining enhanced
clarity about the company's reserve position.
The Zacks Consensus Estimate for second quarter is currently
pegged at 49 cents per share. In the year-ago quarter Tower Group
had reported loss of 34 cents per share.
Tower Group presently carries a Zacks Rank #3 (Hold). Property
and casualty insurers ,
HCI Group Inc.
Everest Re Ltd.
State Auto Financial Corp.
), carry favorable Zacks Rank #1 (Strong Buy) and look
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