NEW YORK, Jan. 6, 2014 (GLOBE NEWSWIRE) -- AmTrust Financial Services, Inc. (Nasdaq:AFSI) ("the Company") announced it has agreed to acquire the renewal rights and assets of the commercial lines insurance operations ("Commercial Lines Business") of Tower Group International, Ltd ("Tower") in connection with an agreement simultaneously entered into by ACP Re Ltd, ("ACP Re"), a privately held Bermuda corporation, and Tower pursuant to which a subsidiary of ACP Re has agreed to acquire 100% of the outstanding stock of Tower for $3.00 per share and merge with Tower, subject to regulatory and shareholder approval (the "Merger").
In addition, the Company has reached agreement with several Tower subsidiaries to enter into, immediately upon regulatory approval, a 100% quota share reinsurance agreement and provide a cut-through endorsement (the "Cut Through Reinsurance Agreement") on most of Tower's Commercial Lines Business in force policies and on new and renewal Commercial Lines Business. AmTrust has also obtained a 10-day option to reinsure, on a prospective basis, not less than 60% of the approximately $290 million unearned premium reserve relating to Commercial Lines Business. AmTrust expects to exercise the option and to reinsure, prospectively, most of the business included in the unearned premium reserve. The Cut Through Reinsurance Agreement, when approved, will be effective as of January 1, 2014. The Company will pay a 20% ceding commission to Tower on all Tower premium subject to the Cut Through Reinsurance Agreement.
Furthermore, concurrent with AmTrust's acquisition of the Commercial Lines Business, National General Holdings Corp. ("National General"), a specialty personal lines property/casualty insurer, agreed to acquire the renewal rights and assets of the personal lines insurance operations of Tower.Upon the completion of the Merger of Tower with an ACP Re subsidiary, the Company expects to acquire the assets necessary to support the Commercial Lines Business (the "Assets"), including several of Tower's domestic insurance companies (the "Acquired Companies"), the Commercial Lines Business renewal rights, the systems, books and records required to effectively conduct the Commercial Lines Business as well as the right to offer employment to certain Tower employees engaged in the conduct of the Commercial Lines Business.