Tower Group International Ltd. is cutting about 140 jobs, or 10 percent of its workforce, after posting a second-quarter loss of more than $0.5 billion.
Job cuts will be made in commercial lines underwriting and operations and save about $21 million a year, the insurer said.
Net loss attributable to common shareholders for the second quarter of 2013 was $507.3 million, or $8.88 per share, compared to a net loss of $16.8 million, or 39 cents per share, in the second quarter of 2012.
Tower shareholders’ equity was $579.2 million at June 30, 2013, compared with $950.1 million at Dec. 31, 2012.
Net written premiums in the quarter dropped 18 percent to $360.9 million, with the specialty and reinsurance segment experiencing the steepest drop of 27 percent. Commercial lines premiums fell 16 percent; personal lines premiums dropped nearly 10 percent.
The combined ratio for second-quarter 2013 was 140.7 compared to 104.8 for second-quarter 2012. Only the personal lines segment showed an underwriting profit, with the combined ratio coming in at 83.1.
Tower’s Q2 results included the impact of reserve strengthening of $326.7 million. Tower also made restatement adjustments of $37.4 million to reserves as of Dec. 31, 2012.
Tower said the reserve strengthening arose primarily from accident years 2008-2011 within workers’ compensation, commercial multi-peril liability, other liability and commercial auto liability lines.
Reserve strengthening prompted the company to perform a quantitative analysis of whether its recorded goodwill was impaired. As a result, Tower reported a non-cash goodwill impairment charge of $214 million for Q2 2013, representing all goodwill associated with its commercial insurance reporting unit at Jan. 1, 2013.
As of June 30, 2013, all of Tower’s remaining goodwill of $55.5 million is associated with the personal insurance segment.
“We are deeply disappointed by our second quarter operating results, including the significant reserve charge as well as the delay in our financial reporting,” Michael H. Lee, chairman, president and CEO, said.
While the board reviews strategic options, he said “management is continuing to address the challenges presented by the current situation. The recent downgrades in our ratings from A.M. Best and other rating agencies represent a new challenge to us. To manage this, we are continuing to underwrite our core business of homeowners and small commercial business that are less ratings-sensitive, and evaluating various options to retain certain of our ratings sensitive business by placing it with other highly rated insurance companies.”