(The following statement was released by the rating agency)
CHICAGO, May 13 (Fitch) Fitch Ratings has downgraded and
maintained on Rating
Watch Evolving the Insurer Financial Strength (IFS) ratings of
International, Ltd.'s (TWGP; Tower) operating subsidiaries to
'CCC' from 'B'.
Subsequent to this action, Fitch has withdrawn these ratings and
all of Tower's
ratings including the 'CC' Issuer Default Rating (IDR) of the
parent, due to
insufficient information. At the time of withdrawal all ratings
were on Rating
Watch Evolving due to the planned merger with ACP Re, Ltd. (ACP
Re). A full list
of rating actions follows at the end of this release.
KEY RATING DRIVERS
Fitch's downgrade of Tower's operating subsidiaries follows the
recent filing of
the company's 2013 GAAP financial statements. The filing
deterioration in the company's reserve position during the
fourth quarter of
2013. This reserve charge of $63 million follows previously
announced charges of
$470 million. The additional reserve strengthening was outside
for the previous rating.
In addition, the filing reported that six U.S. based operating
NAIC risk based capital (RBC) below the Company Action Level
regulators, and two Bermuda based operations capital solvency
minimum thresholds set by Bermuda regulators as of year-end
2013. A cut-through
reinsurance transaction effective Jan. 1, 2014 materially
improved the capital
position of many of these companies.
Fitch notes that Tower has a $150 million debt maturity on Sept.
15, 2014. Fitch
does not believe that Tower has the ability to meet this
obligation using its
own financial resources. The merger with ACP Re may provide
Tower the resources
to meet the maturity.
However, Fitch does not rate ACP Re, a private entity with
financial data, and thus is unable to form an opinion on its
and its abilities to provide funding to Tower to support the
Fitch does not expect to receive financial information on ACP Re
in the near to
intermediate term. Accordingly, Fitch cannot assess the probably
of default on
this debt at this time, including if the default appears
definition) as per the most recent rating; or if default is
inevitable ('C' definition), which would be the case would ACP
Re be considered
unable or unwilling to provide funding; or if some other
scenario should be
considered in setting the rating.
Fitch also would not expect to have sufficient information to
rate Tower's IDR,
debt or policyholder obligations post close if Fitch still had
no information on
ACP Re, even if ACP Re ultimately provided funding to support
the Sept. 15, 2014
Therefore, Fitch is withdrawing all ratings on Tower and its
subsidiaries due to a lack of robust data to maintain the
Fitch has maintained on Rating Watch Evolving and subsequently
Tower Group International, Ltd.
Tower Group, Inc.
--5% senior convertible debt rating 'C'.
Fitch has downgraded to 'CCC' from 'B', maintained on Rating
Watch Evolving, and
subsequently withdrawn the IFS ratings for the following
Tower Insurance Company of New York
Tower National Insurance Company
Preserver Insurance Company
CastlePoint National Insurance Company
York Insurance Company of Maine
Hermitage Insurance Company
CastlePoint Florida Insurance Company
North East Insurance Company
Massachusetts Homeland Insurance Company
CastlePoint Insurance Company
Kodiak Insurance Company
Gerald B. Glombicki, CPA
Fitch Ratings, Inc.
70 West Madison St.
Chicago, IL 60602
James B. Auden, CFA
Andrew Davidson, CFA
Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549,
Additional information is available at 'www.fitchratings.com'.
THIS ISSUER DOES NOT PARTICIPATE IN THE RATINGS PROCESS OTHER
THAN THROUGH THE
MEDIUM OF PUBLIC DISCLOSURE.
Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (Nov. 13, 2013).
Applicable Criteria and Related Research:
Insurance Rating Methodology
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