A.M. Best Co. commented that the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of Tower Group Companies and its pooled members, the FSR of ‘A-‘ (Excellent) and ICR of “a-” of Bermuda-based CastlePoint Reinsurance Company, Limited – all with a stable outlook – and the FSR of ‘B++’ (Good) and ICR of “bbb+” (both with a positive outlook) of new Jersey-based Kodiak Insurance Company remain unchanged.
Best issued the comment following the announcement that Tower has entered into a definitive agreement to purchase Specialty Underwriters’ Alliance, Inc. (SUAI) in an all-stock transaction valued at approximately $107 million.
Best also commented that the ICR of “bbb-” (with a stable outlook) of the publicly traded holding company, Tower Group, Inc. is also unchanged.
In a related bulletin Best said it has placed the financial strength rating of ‘B+’ (Good) and issuer credit rating of “bbb-” of Chicago-based SUA Insurance Company “under review with positive implications,” following the merger announcement.
Best indicated that the “acquisition will allow SUA to better leverage its strong distribution network and expand its business opportunities through Tower’s higher rated paper. Management of Tower also plans on adding SUA into the existing Tower pool. The deal is expected to close by year-end 2009.”
In addition Best noted that it “believes the acquisition enhances its business profile in the specialty business segment, an area that Tower sees as a very strong opportunity for growth. Also, by leveraging the operating platform and distribution relationships that SUAI has developed, Tower is confident in its ability to further build on CastlePoint Insurance Company’s (New York NY) specialty business.
“Tower, through its subsidiaries, offers a broad range of specialized property/casualty insurance products and services to primarily small and mid-sized business and individuals in the North East, Florida, Texas and California.
“The company has expanded its operations through the acquisition of companies and existing books of business during the most recent five-year period. Although this acquisition will broaden Tower’s distribution network and geographic spread, A.M. Best believes that the performance of SUAI’s relatively new book of commercial lines business combined with Tower’s new business, particularly California workers’ compensation risks, will take time to evaluate the actual performance as loss reserves develop.”
Source: A.M. Best – www.ambest.com
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