NEW YORK, Jan. 6, 2014 (GLOBE NEWSWIRE) -- AmTrust Financial Services, Inc. (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.
The Company will acquire the Assets from ACP Re for cash in an amount equal to the statutory tangible book value of the Acquired Companies. The total purchase price for the Commercial Lines Business is expected to be approximately $125 million. The Acquired Companies will be used to support Tower's Commercial Lines Business and will contain assets and surplus equivalent to the purchase price. Through a reinsurance agreement that will be fully collateralized, ACP Re will retain all liabilities of the Acquired Companies. The acquisition is expected to close in the summer of 2014, pending regulatory approvals and the consummation of the Merger.
"We are confident the addition of Tower's small commercial insurance business will enhance the Company's value. The reinsurance agreement and cut through endorsement along with similar actions undertaken by National General are designed to stabilize and secure Tower's business and allow Tower's agents, brokers and policy holders to rely on the financial strength of AmTrust and National General to stand behind Tower's new, renewal and in-force policies," commented Barry Zyskind President and CEO. "We expect that the Tower book of business will further establish AmTrust as a market leader in the small commercial insurance business. We look forward to integrating Tower's commercial insurance operations into our organization."
About AmTrust Financial Services, Inc.
AmTrust Financial Services, Inc., headquartered in New York City, is a multinational insurance holding company, which, through its insurance carriers, offers specialty property and casualty insurance products, including workers' compensation, commercial automobile and general liability; extended service and warranty coverage. For more information about AmTrust, visit www.amtrustgroup.com, or call AmTrust toll-free at 866.203.3037.
About ACP Re, Ltd.
ACP Re, Ltd. is a Bermuda based reinsurance company. The controlling shareholder of ACP Re is a trust established by the founder of AmTrust, Maiden Holdings, Ltd. and National General who has had a long successful history in the financial services sector.
About National General Holdings Corp.
National General Holdings Corp. is an insurance holding company headquartered in New York, NY. It offers both personal lines property and casualty and accident and health insurance products, including personal and commercial automobile insurance and recreational vehicle, supplemental health insurance products and other niche insurance products.
Guggenheim Securities, LLC is acting as a financial advisor to AmTrust Financial Services, Inc.
Forward Looking Statements
This news release contains "forward-looking statements" that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on the Company's current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that actual developments will be those anticipated by the Company. Actual results may differ materially from those expressed or implied in these statements as a result of significant risks and uncertainties, including, but not limited to, non-receipt of expected payments from insureds or reinsurers, changes in interest rates, a downgrade in the financial strength ratings of our insurance subsidiaries, the effect of the performance of financial markets on our investment portfolio, our estimates of the fair value of our life settlement contracts, development of claims and the effect on loss reserves, accuracy in projecting loss reserves, the cost and availability of reinsurance coverage, the effects of emerging claim and coverage issues, changes in the demand for our products, our degree of success in integrating acquired businesses, the effect of general economic conditions, state and federal legislation, regulations and regulatory investigations into industry practices, risks associated with conducting business outside the United States, developments relating to existing agreements, disruptions to our business relationships with Maiden Holdings, Ltd., National General Holdings Corp., or third party agencies and warranty administrators, breaches in data security or other disruptions with our technology, heightened competition, changes in pricing environments, and changes in asset valuations. The forward-looking statements contained in this news release are made only as of the date of this release. The Company undertakes no obligation to publicly update any forward-looking statements except as may be required by law. Additional information about these risks and uncertainties, as well as others that may cause actual results to differ materially from those projected, is contained in the Company's filings with the Securities and Exchange Commission, including its annual report on Form 10-K and its quarterly reports on Form 10-Q.
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AmTrust Financial Services, Inc.
Elizabeth Malone CFA