Our net expense ratio was 39.1%, including 1.8 points related to reinstatement premiums from Superstorm Sandy, compared to 33.5%. (Excluding the business that we manage on behalf of the reciprocal exchanges, the net expense ratio was 38.5%, including 1.8 points related to reinstatement premiums from Superstorm Sandy, compared to 32.5%.) Excluding the impact of reinstatement premiums, the increase in the net expense ratio in the fourth quarter of 2012 is primarily due to the increase in our assumed reinsurance business which has a higher commission ratio than other lines of business and from an increase in operating expenses as a result of ongoing efforts to build-out the information technology infrastructure to support policy administration and claims processing needs. Acquisition-related transaction costs for the three months and year ended December 31, 2012 were $4.6 million and $9.2 million, respectively, primarily due to expenses associated with our proposed merger with the Bermuda reinsurance businesses of Canopius. These costs were negligible for the same periods in 2011.
Excluding the reciprocal exchanges, Tower’s effective tax rate was 40.0% in the fourth quarter of 2012 compared to 23.5% in the fourth quarter of 2011. As we recorded a net loss in 2012, tax preference items increase the effective tax rate, while in 2011 such items reduced the effective tax rate.
Tower’s Board of Directors approved a quarterly dividend on January 30, 2013, of 18.75 cents per share payable on February 28, 2013, to stockholders of record as of February 14, 2013.Shareholder Vote On February 6, 2013, Tower mailed a description of its proposed merger agreement with the Bermuda businesses of Canopius Group Ltd. Tower will have a shareholder meeting and a vote on the proposed merger agreement on March 12, 2013. Guidance Tower Group expects to report 2013 operating earnings per share in a range of $2.75 to $2.95 including the effect of the proposed merger transaction. This amount is reduced from previous guidance as Tower expects its merger transaction to close in the first quarter 2013, rather than at year end 2012, and as Tower has entered into a quota share reinsurance agreement effective in January 2013 to further protect its homeowners business from catastrophe volatility.