Tower Group, Inc. (NASDAQ: TWGP) today reported third quarter 2012 net income attributable to common shareholders of $21.6 million, or $0.56 per diluted share. Net loss attributable to common shareholders in the third quarter of 2011 was $16.4 million, or ($0.40) per diluted share.
was $23.8 million in the third quarter of 2012, or $0.62 per diluted share, compared to an operating loss of $15.3 million in the third quarter of 2011, or ($0.38) per diluted share. The operating loss in the third quarter of 2011 included losses from Hurricane Irene which were estimated at $60.1 million ($39.1 million after-tax, or $0.96 per diluted share) in the third quarter 2011 and revised to $45.0 million ($29.2 million after tax, or $0.72 per diluted share) in the fourth quarter of 2011. The Company experienced $15.1 million of favorable development from Hurricane Irene claims in the fourth quarter of 2011.
During the quarter, Tower settled its previously disclosed litigation with Munich Reinsurance America, Inc. (“Munich”) for $2.9 million after-tax ($0.08 per share), which is included as a charge against its third quarter 2012 operating results. This settlement pertained to business that was sourced prior to 2001 from Tower’s Insurance Services segment.
(all figures compare third quarter 2012 results to the results for the same period in 2011 except as noted):
- Net premiums earned increased by 4.2% from $413.4 million to $430.7 million.
- Gross premiums written and managed decreased by 6.6% to $484.8 million primarily due to our termination of a program in the third quarter 2012 which generated $51.7 million of written premiums in the third quarter of 2011. The third quarter of 2011 also included written premiums of $23.3 million from an assumed reinsurance treaty which was commuted in the fourth quarter of 2011. Excluding these two actions, gross premiums written and managed increased by 8.2%.
- For the combined insurance segments, the net combined ratio improved to 96.0% from 109.9%. (Excluding the business that Tower manages on behalf of the reciprocal exchanges, the net combined ratio improved to 96.3% from 112.0 %.)
- The net loss ratio improved to 59.5% from 75.0%. The net loss ratio excluding the reciprocal exchanges improved to 60.8% from 77.6%.
- The net expense ratio was 36.5% compared to 34.9%.
- Net investment income was flat at $31.4 million.
- Book value per share was $27.49 at September 30, 2012 compared to $26.37 at December 31, 2011. During the quarter, Tower paid cash dividends of 18.75 cents per share, and year to date Tower has paid cash dividends of 56.25 cents per share.
- Tower Group, Inc. stockholders’ equity was $1.1 billion at September 30, 2012.
Michael H. Lee, President and Chief Executive Officer of Tower Group, Inc., said, “During the quarter, we continued to see positive trends in our business in terms of growth and underwriting profitability as well as improving market conditions. Our growth during the quarter was driven by our organic initiatives which are focused on expanding our products, improving existing business units and creating new business units and improving the various operating processes associated with generating growth. We saw continued strength in our assumed reinsurance business and are beginning to see significant demand for customized product solutions with key distribution sources. In addition to seeing robust growth opportunities, we made significant progress in non-renewing unprofitable business and continued to drive rate increases across all business units. Because of this, we are confident about the profitability of our on-going business and remain well positioned to take advantage of the improving market conditions. We are also progressing well with our proposed merger transaction with the Bermuda reinsurance business of Canopius. Our fourth quarter operating results will be adversely affected by Superstorm Sandy, which will easily cause the largest catastrophic event in our history. Our sympathies go out to those who have been severely impacted by this event, including our policyholders, agents and employees situated in the affected areas. While it is premature to estimate the full extent of our insured losses, we are confident that our capital position for the year will not be materially impaired based on the claims reporting pattern thus far, our underwriting profile and robust reinsurance program, which was substantially strengthened after Hurricane Irene last year. Despite the obvious challenges arising from this event, we are proud of the performance and the dedication of our staff, who have been working around the clock to service our customers and agents.”