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Financially troubled reinsurer Tower Group International Ltd. had a net loss of $507.3 million for the three months ended June 30 compared with a net loss of $16.8 million during the same period last year, the company said Friday.
Hamilton, Bermuda-based Tower said in a statement that it also had added $326.7 million to its loss reserves during the period as a result of a review completed with the help of an independent actuarial consultant.
Tower has had on ongoing financial woes and regulatory run-ins. On Aug 7, Tower notified markets and regulators that it would be late filing second-quarter results, at the time saying “management concluded that additional time is needed to review matters relating to the estimate of its loss reserves and, primarily due to the integration of the Canopius Bermuda merger, its allocation of goodwill and certain tax accounts.”
Tower also said on Aug. 19 that it was terminating its previously announced agreement to acquire American Safety Reinsurance Ltd., the Bermuda-based reinsurance subsidiary of American Safety Insurance Holdings Ltd., from Fairfax Financial Holdings Ltd.
Tower also received notices from Nasdaq on Aug. 16 and Nov. 20 that the company no longer met its listing requirements.
Second-quarter net written premiums totaled $360.1 million, down 18.3% from the year-ago period. Investment income reached $27.6 million, down 8.8% from second quarter 2012.
Revenue for the period was $419.9 million, down 10.0% from the year-ago period. The company's combined ratio for the second quarter was 183.1%, up substantially from 110.3% a year ago.
“We are deeply disappointed by our second-quarter operating results, including the significant reserve charge as well as the delay in our financial reporting,” said Michael H. Lee, Tower Group president and CEO, in the statement.
Recent downgrades by A.M. Best Co. Inc. and other ratings agencies represent a new challenge to Tower, said Mr. Lee.
Tower is taking steps to shore up its precarious position. As part of this initiative, Tower will lay off approximately 10% of its nearly 1,400 employees, the company said in the statement, mostly affecting commercial lines underwriting and operations.
“This workforce reduction is expected to result in annualized cost savings of approximately $21.0 million,” Tower said in the statement.
Tower said it estimates that it will recognize pretax charges of approximately $5.0 million in the fourth quarter of 2013 for severance and other one-time termination benefits and other associated costs.
For the six months ended June 30, Tower had a net loss of $494.4 million, compared with net income of $2.4 million in the same period last year.
First-half net premiums written totaled $776.2 million, off 6.4% from the year-ago period. Net investment income was $57.2 million, down 8.5% from the same period last year.
Six-month revenue totaled $859.3 million, down 3.6% from the year-ago period. The company's combined ratio for the six months was 140.7%, compared with 104.6% a year ago.
A.M. Best Co. Inc. has downgraded to below A-level the financial strength ratings of Tower Group International Ltd. and its affiliates, the rating agency said in a statement Tuesday.