A.M. Best Places Ratings of CastlePoint Insurance Company and CastlePoint Holdings,...

A.M. Best Places Ratings of CastlePoint Insurance Company and CastlePoint Holdings, LTD Under Review

OLDWICK, N.J.--(Business Wire)--
A.M. Best Co. has placed the financial strength rating of A-
(Excellent) and issuer credit ratings (ICR) of "a-" of CastlePoint
Insurance Company (CPIC) (New York) and CastlePoint Reinsurance
Company, Limited (CPRe) (Bermuda) under review with negative
implications. A.M. Best also has placed the ICR of "bbb-" of
CastlePoint Holdings, LTD (CastlePoint) (NASDAQ: CPHL) (Bermuda) under
review with negative implications.

These rating actions follow CastlePoint's announcement that it has
entered into a transaction where its outstanding shares will be
acquired by Tower Group, Inc. (TWGP) (headquartered in New York, NY)
(NASDAQ: TWGP). TWGP sponsored the formation of CastlePoint as its
initial shareholder whose shares were diluted to 6.6% as of year-end
2007 after the completion of CastlePoint's private equity offering of
nearly $250 million in 2006, followed by a 2007 initial public
offering that raised nearly $115 million.

The under review status reflects A.M. Best's concerns with the
strategic change in CastlePoint's original business plan, the
potential re-allocation of capital post-transaction and execution
risks associated with the transaction. However, should the transaction
close as planned, it will greatly reduce A.M. Best's concerns
regarding CastlePoint's corporate governance and enterprise risk
management. Notably, it will eliminate the dual chief executive
officer (CEO) role of Michael Lee, who currently is the CEO of TWGP
and CastlePoint. Since inception, CastlePoint has derived over 70% of
its revenues from TWGP as its primary reinsurance client. In its first
two years of operation, CastlePoint reported combined ratios of 87.5%
and 88.1% in years 2007 and 2006, respectively.

Should the transaction close as presented to A.M. Best by
CastlePoint's management, A.M. Best expects to affirm the ratings of
CPIC and CPRe. Alternatively, if the transaction does not close and
CPIC and CPRe continue with their original business plans as presented
to A.M. Best, the ratings for both companies are expected to be
affirmed. A.M. Best will assess the effect of any change on the
business strategy and capitalization of each entity, which could
result in further rating actions.

For Best's Ratings, an overview of the rating process and rating
methodologies, please visit www.ambest.com/ratings.

Founded in 1899, A.M. Best Company is a global full-service credit
rating organization dedicated to serving the financial and health care
service industries, including insurance companies, banks, hospitals
and health care system providers. For more information, visit
www.ambest.com.

A.M. Best Co.
Analysts:
Devin Inskeep, 908-439-2200, ext. 5449
devin.inskeep@ambest.com
or
Peter Dickey, 908-439-2200, ext. 5053
peter.dickey@ambest.com
or
Public Relations:
Jim Peavy, 908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
rachelle.morrow@ambest.com

Copyright Business Wire 2008