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Best lowers ratings of Tower Group units to C++

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A.M. Best Co. Inc. on Friday said it lowered the financial strength ratings of subsidiaries of troubled insurer Tower Group International Ltd. to C++, or “marginal,” from B, or “fair.”

The downgrades of the pooled and reinsured members of the Tower US Pool and CastlePoint Reinsurance Co. Ltd. (Bermuda) are based on parent company Tower Group’s most recent 10-K filing with the U.S. Securities and Exchange Commission, which disclosed “an additional $63 million of prior-year reserve development, further reductions in GAAP shareholders’ equity as well as ongoing declines in statutory policyholders’ surplus and risk-adjusted capitalization” the Oldwick, N.J.-based ratings agency said in a statement.

“These rating factors are in addition to the diminished shareholders’ equity and reserve actions already taken by Tower Group during the year,” Best said in the statement.

Tower’s finances, late reporting and pending merger with ACP Re Ltd. also figure in the downgrade, according to Best.

“In addition, these rating downgrades reflect the group’s significantly elevated financial leverage, constrained liquidity and heightened uncertainty” around Tower Group’s ability to repay its senior debt holders in the event its pending merger with ACP Re) does not occur, Best said, adding that continued delays in Tower Group’s “reporting its quarterly filings are another concern.”

All ratings are under review with developing implications, Best said.

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