Tower Group International (TWGP) 8-K Tower Group, Inc. Reports Fourth Quarter and Annual 2010 Results

Exhibit 99.1

Tower Group, Inc. Reports Fourth Quarter and Annual 2010 Results

NEW YORK--(BUSINESS WIRE)--February 28, 2011--Tower Group, Inc. (NASDAQ: TWGP) today reported net income available to common shareholders of $38.5 million and diluted earnings per share of $0.92 for the fourth quarter 2010, as compared to $30.7 million, or $0.72 per share in the fourth quarter of 2009. For the full year, net income available to common shareholders was $118.0 million or $2.70 per diluted share compared to $109.3 million or $2.76 per diluted share in 2009.

Operating income⁽¹⁾ and operating earnings per share⁽¹⁾ were $35.2 million and $0.84 for the fourth quarter of 2010, respectively, as compared to $31.9 million and $0.74 per share in the fourth quarter of 2009. For the full year, operating income and operating earnings per share were $111.2 million and $2.55, respectively, as compared to $119.8 million or $3.03 per share in 2009. Operating income in the fourth quarter and full year 2009 included a $13.2 million or $0.31 per diluted share bargain purchase gain from the Specialty Underwriters’ Alliance, Inc. (SUA) transaction and the year 2010 included after-tax catastrophe storm losses of $12.0 million or $0.27 per diluted share.

Key Highlights (all percentage increases compare the fourth quarter and the full year 2010 results to the corresponding periods in 2009 except as noted otherwise):

--	Gross premiums written and produced(2) increased by 32.6% to $433.9 million in the fourth quarter and by 38.2% to $1.5 billion for the full year.
--	For the combined insurance segments, the net combined ratio was 91.7% in the fourth quarter of 2010 compared to 94.7% for the same period last year. (Excluding the business that we manage on behalf of the reciprocal exchanges, the net combined ratio was 91.9% for the fourth quarter of 2010.) For the full year the net combined ratio was 93.7% compared to 88.3% in 2009. (Excluding the business that we manage on behalf of the reciprocal exchanges, the net combined ratio was 93.5% for the full year 2010.)
	-- In the fourth quarter 2010, the net loss ratio was 59.9% compared to 62.0% for the same period last year. For the full year, the net loss ratio was 60.7% compared to 55.6% in 2009.
	-- In the fourth quarter 2010, the net expense ratio(3) was 31.8% compared to 32.7% for the same period last year. For the full year, the net expense ratio was 33.0% compared to 32.7% in 2009.
--	Net investment income increased by 40.2% to $29.7 million for the fourth quarter and by 41.7% to $106.1 million for the full year.
--	Book value per share of $26.22 at December 31, 2010 represents an increase of 12.3% since year end 2009.

Michael H. Lee, President and Chief Executive Officer of Tower Group, Inc., stated, “During the fourth quarter, we achieved strong operating results driven primarily by a significant increase in premium volume resulting from the acquisition of the Personal Lines Division of OneBeacon Insurance Group (OBPL) and our continued expansion into specialty commercial business. Despite challenging market conditions, we continued to maintain underwriting and cost discipline as demonstrated by the 91.7% combined ratio for the quarter. For the full year, we were pleased with our ability to achieve strong operating results, especially in the second half of the year after experiencing catastrophe losses in the first quarter. As we move into 2011, we believe we will continue to be challenged by the competitive market conditions and lower returns on our investment portfolio. Despite the various external factors that affect our business, we believe we are well positioned to continue to profitably grow due to the strength of our business model and the strategies that we have developed to effectively navigate these market challenges.”

Financial Summary ($ in thousands, except per share data):
			Three Months Ended						Year Ended
			December 31,						December 31,
			2010			2009			2010			2009
Gross premiums written		$	433,860		$	327,232		$	1,496,371		$	1,070,716
Premiums produced by managing general agency			-			196			-			11,722
Net premiums written			384,667			205,459			1,314,064			886,189
Total commission and fee income			11,336			17,908			46,492			52,025
Net investment income			29,690			21,183			106,090			74,866
Net realized investment gains (losses)			5,860			(824	)		13,483			1,501
Total revenues			419,763			271,459			1,458,734			983,103
Gain on investment in acquired unconsolidated affiliate			-			-			-			7,388
Gain on bargain purchase			-			13,186			-			13,186
Other income (expense)			-			-			(466	)		(777	)
Net income attributable to Tower Group, Inc.			38,515			30,748			117,951			109,330
Earnings per share—Basic		$	0.93		$	0.72		$	2.71		$	2.78
Earnings per share—Diluted		$	0.92		$	0.72		$	2.70		$	2.76
Return on average equity			14.3	%		12.5	%		11.0	%		13.9	%
Combined Commercial and Personal Segments
Net premiums earned			372,877			233,191			1,292,669			854,711
Net loss ratio			59.9	%		62.0	%		60.7	%		55.6	%
Net expense ratio			31.8	%		32.7	%		33.0	%		32.7	%
Commercial Insurance Segment
Net premiums earned			239,856			196,629			941,015			738,217
Net loss ratio			66.5	%		61.3	%		62.6	%		55.1	%
Net expense ratio			28.2	%		31.0	%		31.9	%		31.5	%
Personal Insurance Segment
Net premiums earned			133,021			36,562			351,654			116,494
Net loss ratio			48.1	%		65.6	%		55.4	%		59.0	%
Net expense ratio			38.3	%		41.8	%		35.9	%		40.6	%
Reconciliation of non-GAAP financial measures:
	Net income attributable to Tower Group, Inc.	38,515			$	30,748		$	117,951		$	109,330
	Net realized gains (losses) on investments		5,860			(824	)		13,483			1,501
	Acquisition-related transaction costs (4)		(971	)		(703	)		(2,369	)		(14,038	)
	Less: net realized gains (losses) on investments related to Reciprocals		(683	)		-			(257	)		-
	Income tax		(854	)		417			(4,121	)		2,047
	Operating income attributable to Tower Group, Inc.	$	35,163		$	31,858		$	111,215		$	119,820
	Operating earnings per share—Basic	$	0.85		$	0.75		$	2.56		$	3.04
	Operating earnings per share—Diluted	$	0.84		$	0.74		$	2.55		$	3.03
	Operating return on average equity		13.1	%		12.9	%		10.3	%		15.2	%

Fourth Quarter 2010 Highlights

Gross premiums written increased to $433.9 million in the fourth quarter of 2010, which was 32.6% higher than in the fourth quarter of 2009. For the three months ended December 31, 2010, premium rates on renewed Commercial Insurance business excluding programs increased 1.0% and premium rates on renewed Personal Insurance business increased 5.2%, resulting in an overall premium rate increase on renewal business of 3.0%. During the same time period, our Commercial Insurance business renewal retention rate excluding programs was 78% and our Personal Insurance business renewal retention rate was 83%, resulting in an overall retention rate of 82%.

Total revenues increased 54.6% to $419.8 million in the fourth quarter of 2010 as compared to $271.5 million in the prior year's fourth quarter. The growth was primarily due to increased net premiums earned and net investment income resulting from the acquisitions of OBPL business in the third quarter of 2010 and of SUA in the fourth quarter of 2009. Net premiums earned represented 88.8% of total revenues for the three months ended December 31, 2010 compared to 85.9% for the same period in 2009.

Net investment income increased 40.2% to $29.7 million for the three months ended December 31, 2010 compared to $21.2 million for the same period in 2009. The tax equivalent book yield on our investment portfolio was 4.7% at December 31, 2010 compared to 5.5% at December 30, 2009. Net realized investment gains were $5.9 million for the quarter ended December 31, 2010 compared to a loss of $0.8 million in the same period last year. Credit-related other-than-temporary impairment losses for the three months ended December 31, 2010 were $0.4 million compared to $4.4 million for the same time period in 2009.

Total commission and fee income decreased 36.7% to $11.3 million in the fourth quarter of 2010 compared to $17.9 million in the fourth quarter of 2009. The decrease in the total commission and fee income was due to the run-off of a quota share treaty in 2009. Policy billing fees increased to $2.6 million in the fourth quarter of 2010 compared to $0.8 million for the same time period in 2009. The increase in policy billing fees was due to the acquisition of OBPL.

The net loss ratio was 59.9% for the three months ended December 31, 2010 compared to 62.0% for the same period in 2009. (Excluding the business that we manage on behalf of the reciprocal exchanges, the net loss ratio was 60.2% for the fourth quarter of 2010.)

Our net expense ratio was 31.8% for the three months ended December 31, 2010 compared to 32.7 % for the same period in 2009. (Excluding the business that we manage on behalf of the reciprocal exchanges, the net expense ratio was 31.7% for the fourth quarter of 2010.)

Interest expense increased by $3.7 million for the three months ended December 31, 2010, compared to the same period in 2009. Interest expense increased mainly due to the September 2010 convertible senior notes issuance, interest on withheld funds as well as interest on the bank credit facility, which was completed in May 2010.

Additional Highlights and Disclosures:

Dividend Declaration

Tower’s Board of Directors approved a quarterly dividend on February 25, 2011 of $0.125 per share payable on March 28, 2011 to stockholders of record as of March 15, 2011.

2011 Guidance

Tower expects 2011 operating earnings per share to be in a range of $2.70 to $2.90.

Notes on Non-GAAP Financial Measures

(1) Operating income excludes realized gains and losses, acquisition-related transaction costs and the results of the reciprocal business, net of tax. Operating income is a common measurement for property and casualty insurance companies. We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business. Additionally, these measures are a key internal management performance standard. Operating earnings per share is operating income divided by diluted weighted average shares outstanding. Operating return on equity is annualized operating income divided by average common stockholders' equity.

(2) Gross premiums written through our insurance subsidiaries and produced as managing general agent on behalf of other insurance companies.

(3) The gross and net underwriting expense ratios include fees paid by the Reciprocal Exchanges to Tower in excess of Tower's direct costs to service the management services agreements. These fees increased the gross and net expense ratios by 0.9% and 1.0%, respectively, for the year ended December 31, 2010.

(4) For the twelve month period ended December 31, 2010, $1.4 million of acquisition-related transaction costs were not deemed deductible for tax purposes. A tax rate of 35% was used for those acquisition-related transaction costs that were tax deductible.

Conference Call

Tower will host a conference call and webcast to discuss these results on Tuesday, March 1, 2011 at 8:30 a.m. ET. This conference call will be broadcast live over the Internet. To access a listen-only webcast over the Internet, please visit the Investor Information section of Tower Group, Inc.’s website, www.twrgrp.com, or use this link: http://investor.twrgrp.com/events.cfm

Please access the website at least 15 minutes prior to the call to register and to download any necessary audio software. If you are unable to participate during the live conference call, a webcast will be archived in the Investor Information section of Tower Group, Inc.'s website at www.twrgrp.com.

About Tower Group, Inc.

Tower Group, Inc. offers diversified property and casualty insurance products and services through its operating subsidiaries. Its insurance company subsidiaries offer insurance products to individuals and small to medium-sized businesses through its network of retail and wholesale agents and specialty business through program underwriting agents. Tower's insurance services subsidiaries provide underwriting, claims and reinsurance brokerage services to other insurance companies.

Cautionary Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This press release and any other written or oral statements made by or on behalf of Tower may include forward-looking statements that reflect Tower's current views with respect to future events and financial performance. All statements other than statements of historical fact included in this press release are forward-looking statements. Forward-looking statements can generally be identified by the use of forward-looking terminology such as "may," "will," "plan," "expect," "project," "intend," "estimate," "anticipate," "believe" and "continue" or their negative or variations or similar terminology. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause the actual results of Tower to differ materially from those indicated in these statements. Please refer to Tower’s filings with the SEC, including among others Tower’s Annual Report on Form 10-K for the year ended December 31, 2009 and subsequent filings on Form 10-Q, for a description of the important factors that could cause the actual results of Tower to differ materially from those indicated in these statements. Forward-looking statements speak only as of the date on which they are made, and Tower undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

For more information, visit Tower's website at http://www.twrgrp.com/

Tower has changed the presentation of its business results, beginning July 1, 2010, by allocating the personal insurance business previously reported in either the Brokerage Insurance or Specialty Business segments along with the newly acquired OneBeacon Personal Lines business to a new Personal Insurance segment and merged the commercial business previously reported in either the Brokerage Insurance or Specialty Business segments in a new Commercial Insurance segment.

Tower has retained its Insurance Services segment, which will include fees earned by management companies acquired as a part of the OBPL transaction. This change in presentation reflects the way management organizes the segments for making operating decisions and assessing profitability subsequent to the OBPL acquisition. This will result in the reporting of three operating segments. The prior period segment disclosures have been restated to conform to the current presentation. Following the change in presentation described above, Tower now operates three business segments:

Our Commercial Insurance Segment offers a broad range of commercial lines property and casualty insurance products to small to mid-sized businesses distributed through a network of retail and wholesale agents on both an admitted and non-admitted basis. This segment also includes reinsurance solutions provided primarily to small insurance companies;

Our Personal Insurance Segment offers a broad range of personal lines property and casualty insurance products to individuals distributed through a network of retail and wholesale agents; and

Our Insurance Services Segment provides underwriting, claims and reinsurance brokerage services to insurance companies.

Commercial Insurance & Personal Insurance Combined
($ in thousands)
(Unaudited)
			Three Months Ended December 31,								Year Ended December 31
			2010			2009		Change(%)			2010			2009		Change(%)
Revenues
Premiums earned
	Gross premiums earned	$	434,963		$	298,819		45.6	%	$	1,519,638		$	1,046,260		45.2	%
	Less: ceded premiums earned		(62,086	)		(65,628	)	-5.4	%		(226,969	)		(191,549	)	18.5	%
	Net premiums earned		372,877			233,191		59.9	%		1,292,669			854,711		51.2	%
Ceding commission revenue			8,511			16,263		-47.7	%		38,068			43,937		-13.4	%
Policy billing fees			2,579			774		233.2	%		6,255			2,944		112.5	%
Total revenues			383,967			250,228		53.4	%		1,336,992			901,592		48.3	%
Expenses
Loss and loss adjustment expenses
	Gross loss and loss adjustment expenses		231,424			175,812		31.6	%		884,420			566,762		56.0	%
	Less: ceded loss and loss adjustment expenses		(8,069	)		(31,235	)	-74.2	%		(100,397	)		(91,265	)	10.0	%
	Net loss and loss adjustment expenses		223,355			144,577		54.5	%		784,023			475,497		64.9	%
Underwriting expenses
	Direct commission expense		68,572			54,282		26.3	%		266,096			202,858		31.2	%
	Other underwriting expenses		61,157			38,906		57.2	%		204,682			123,468		65.8	%
	Total underwriting expenses		129,729			93,188		39.2	%		470,778			326,326		44.3	%
Underwriting profit		$	30,883		$	12,463		147.8	%	$	82,191		$	99,769		-17.6	%
Key Measures
Premiums written
	Gross premiums written	$	433,860		$	327,232		32.6	%	$	1,496,371		$	1,070,716		39.8	%
	Less: ceded premiums written		(49,193	)		(121,773	)	-59.6	%		(182,307	)		(184,527	)	-1.2	%
	Net premiums written	$	384,667		$	205,459		87.2	%	$	1,314,064		$	886,189		48.3	%
Calendar Year Loss Ratios
	Gross		53.2	%		58.8	%				58.2	%		54.2	%
	Net		59.9	%		62.0	%				60.7	%		55.6	%
Underwriting Expense Ratios
	Gross		29.2	%		30.9	%				30.6	%		30.9	%
	Net		31.8	%		32.7	%				33.0	%		32.7	%
Combined Ratios
	Gross		82.4	%		89.7	%				88.8	%		85.1	%
	Net		91.7	%		94.7	%				93.7	%		88.3	%

Commercial Insurance Segment Information
($ in thousands)
(Unaudited)
			Three Months Ended						Year Ended
			December 31,						December 31,
			2010			2009			2010			2009
Revenues
Premiums earned
	Gross premiums earned	$	271,610		$	249,963		$	1,096,715		$	887,420
	Less: ceded premiums earned		(31,754	)		(53,334	)		(155,700	)		(149,203	)
	Net premiums earned		239,856			196,629			941,015			738,217
Ceding commission revenue			4,189			15,535			31,998			39,355
Policy billing fees			732			580			2,742			2,215
Total revenues			244,777			212,744			975,755			779,787
Expenses
Loss and loss adjustment expenses
	Gross loss and loss adjustment expenses		164,633			148,617			675,051			486,894
	Less: ceded loss and loss adjustment expenses		(5,206	)		(28,024	)		(85,729	)		(80,166	)
	Net loss and loss adjustment expenses		159,427			120,593			589,322			406,728
Underwriting expenses
	Direct commission expenses		38,050			45,827			191,351			174,105
	Other underwriting expenses		34,532			31,147			143,504			99,641
	Total underwriting expenses		72,582			76,974			334,855			273,746
Underwriting profit		$	12,768		$	15,177		$	51,578		$	99,313
Key Measures
Premiums written
	Gross premiums written	$	277,407		$	269,722		$	1,083,832		$	884,676
	Less: ceded premiums written		(7,662	)		(110,840	)		(96,572	)		(153,814	)
	Net premiums written	$	269,745		$	158,882		$	987,260		$	730,862
Calendar Year Loss Ratios
	Gross		60.6	%		59.5	%		61.6	%		54.9	%
	Net		66.5	%		61.3	%		62.6	%		55.1	%
Underwriting Expense Ratios
	Gross		26.5	%		30.6	%		30.3	%		30.6	%
	Net		28.2	%		31.0	%		31.9	%		31.5	%
Combined Ratios
	Gross		87.1	%		90.0	%		91.9	%		85.5	%
	Net		94.7	%		92.3	%		94.5	%		86.6	%

Personal Insurance Segment Information
($ in thousands)
(Unaudited)
			Three Months Ended December 31,
			2010
						Reciprocal
			Tower			Exchanges			Total			2009
Revenues
Premiums earned
	Gross premiums earned	$	105,309		$	58,044		$	163,353		$	48,856
	Less: ceded premiums earned		(20,066	)		(10,266	)		(30,332	)		(12,294	)
	Net premiums earned		85,243			47,778			133,021			36,562
Ceding commission revenue			3,297			1,025			4,322			728
Policy billing fees			1,698			149			1,847			194
Total revenues			90,238			48,952			139,190			37,484
Expenses
Loss and loss adjustment expenses
	Gross loss and loss adjustment expenses		38,918			27,873			66,791			27,194
	Less: ceded loss and loss adjustment expenses		(2,542	)		(321	)		(2,863	)		(3,212	)
	Net loss and loss adjustment expenses		36,376			27,552			63,928			23,982
Underwriting expenses
	Direct commission expense		20,472			10,050			30,522			8,455
	Other underwriting expenses		19,797			6,828			26,625			7,759
	Total underwriting expenses		40,269			16,878			57,147			16,214
Underwriting profit		$	13,593		$	4,522		$	18,115		$	(2,712	)
Key Measures
Premiums written
	Gross premiums written	$	85,873		$	70,580		$	156,453		$	57,510
	Less: ceded premiums written		(30,630	)		(10,901	)		(41,531	)		(10,933	)
	Net premiums written	$	55,243		$	59,679		$	114,922		$	46,577
Calendar Year Loss Ratios
	Gross		37.0	%		48.0	%		40.9	%		55.7	%
	Net		42.7	%		57.7	%		48.1	%		65.6	%
Underwriting Expense Ratios
	Gross		36.6	%		28.8	%		33.9	%		32.8	%
	Net		41.4	%		32.9	%		38.3	%		41.8	%
Combined Ratios
	Gross		73.6	%		76.8	%		74.8	%		88.5	%
	Net		84.1	%		90.6	%		86.4	%		107.4	%

Personal Insurance Segment Information
($ in thousands)
(Unaudited)
			Year Ended December 31,
			2010
						Reciprocal
			Tower			Exchanges			Total			2009
Revenues
Premiums earned
	Gross premiums earned	$	308,925		$	113,998		$	422,923		$	158,840
	Less: ceded premiums earned		(51,062	)		(20,207	)		(71,269	)		(42,346	)
	Net premiums earned		257,863			93,791			351,654			116,494
Ceding commission revenue			4,019			2,051			6,070			4,582
Policy billing fees			3,213			300			3,513			729
Total revenues			265,095			96,142			361,237			121,805
Expenses
Loss and loss adjustment expenses
	Gross loss and loss adjustment expenses		140,537			68,832			209,369			79,868
	Less: ceded loss and loss adjustment expenses		(8,038	)		(6,630	)		(14,668	)		(11,099	)
	Net loss and loss adjustment expenses		132,499			62,202			194,701			68,769
Underwriting expenses
	Direct commission expense		56,392			18,353			74,745			28,753
	Other underwriting expenses		49,814			11,364			61,178			23,827
	Total underwriting expenses		106,206			29,717			135,923			52,580
Underwriting profit		$	26,390		$	4,223		$	30,613		$	456
Key Measures
Premiums written
	Gross premiums written	$	285,742		$	126,797		$	412,539		$	186,040
	Less: ceded premiums written		(62,112	)		(23,623	)		(85,735	)		(30,713	)
	Net premiums written	$	223,630		$	103,174		$	326,804		$	155,327
Calendar Year Loss Ratios
	Gross		45.5	%		60.4	%		49.5	%		50.3	%
	Net		51.4	%		66.3	%		55.4	%		59.0	%
Underwriting Expense Ratios
	Gross		33.3	%		25.8	%		31.3	%		32.6	%
	Net		38.4	%		29.2	%		35.9	%		40.6	%
Combined Ratios
	Gross		78.8	%		86.2	%		80.8	%		82.9	%
	Net		89.8	%		95.5	%		91.3	%		99.6	%

Insurance Services Segment Results of Operations
($ in thousands)
(Unaudited)
	Three Months Ended							Year Ended
	December 31,							December 31,
		2010			2009			2010			2009
Revenue
Direct commission revenue from managing general agency	$	(328	)	$	(430	)	$	(881	)	$	1,583
Management fee income		10,314			-			18,185			-
Reinsurance intermediary fees		888			770			2,269			1,488
Other revenue		(744	)		532			350			2,073
Total revenue		10,130			872			19,923			5,144
Expenses
Direct commission expenses paid to producers		16			35			327			1,707
Other insurance services expenses		1,107			498			5,433			2,576
Total expenses		1,123			533			5,760			4,283
Insurance services pre-tax income	$	9,007		$	339		$	14,163		$	861
Premiums produced by TRM on behalf of issuing companies	$	-		$	196		$	-		$	11,722

Tower Group, Inc.
Consolidated Balance Sheets
	December 31,
($ in thousands, except par value and share amounts)	2010			2009
Assets
Investments - Tower
Available-for-sale investments, at fair value:
Fixed-maturity securities (amortized cost of $1,968,670 and $1,729,117)	$	2,041,557		$	1,783,596
Equity securities (cost of $91,218 and $78,051)		90,317			76,733
Short-term investments (cost of $1,560 and $36,500)		1,560			36,500
Investments - Reciprocal Exchanges
Available-for-sale investments, at fair value:
Fixed-maturity securities (amortized cost of $338,494)		341,054			-
Total investments		2,474,488			1,896,829
Cash and cash equivalents (includes $2,796 relating to Reciprocal Exchanges in 2010)		102,877			164,882
Investment income receivable		23,562			20,240
Premiums receivable (includes $53,953 relating to Reciprocal Exchanges in 2010)		387,584			308,075
Reinsurance recoverable on paid losses (includes $2,167 relating to Reciprocal Exchanges in 2010)		18,214			14,819
Reinsurance recoverable on unpaid losses (includes $15,092 relating to Reciprocal Exchanges in 2010)		282,682			199,687
Prepaid reinsurance premiums (includes $17,919 relating to Reciprocal Exchanges in 2010)		77,627			94,818
Deferred acquisition costs, net (includes $31,312 relating to Reciprocal Exchanges in 2010)		242,824			170,652
Deferred income taxes		-			41,757
Intangible assets (includes $5,504 relating to Reciprocal Exchanges in 2010)		123,820			53,350
Goodwill		250,103			244,690
Other assets (includes $5,808 relating to Reciprocal Exchanges in 2010)		230,405			103,153
Total assets	$	4,214,186		$	3,312,952
Liabilities
Loss and loss adjustment expenses (includes $175,023 relating to Reciprocal Exchanges in 2010)	$	1,610,421		$	1,131,989
Unearned premium (includes $123,949 relating to Reciprocal Exchanges in 2010)		872,026			658,940
Reinsurance balances payable (includes $3,402 relating to Reciprocal Exchanges in 2010)		35,037			89,080
Funds held under reinsurance agreements		93,153			13,737
Other liabilities (includes $9,384 relating to Reciprocal Exchanges in 2010)		84,989			133,647
Deferred income taxes (includes $3,668 relating to Reciprocal Exchanges in 2010)		25,169			-
Debt		374,266			235,058
Total liabilities		3,095,061			2,262,451
Stockholders' equity
Common stock ($0.01 par value; 100,000,000 shares authorized, 45,742,342 and
45,092,321 shares issued, and 41,485,678 and 44,984,953 shares outstanding)		457			451
Treasury stock (4,256,664 and 107,368 shares)		(91,779	)		(1,995	)
Paid-in-capital		763,064			751,878
Accumulated other comprehensive income		48,883			34,554
Retained earnings		367,013			265,613
Tower Group, Inc. stockholders' equity		1,087,638			1,050,501
Noncontrolling interests - Reciprocal Exchanges		31,487			-
Total stockholders' equity		1,119,125			1,050,501
Total liabilities and stockholders' equity	$	4,214,186		$	3,312,952
Refer to notes accompanying consolidated financial statements, as filed with the SEC.

Tower Group, Inc.
Consolidated Statements of Income and Comprehensive Income
			Three Months Ended						Year Ended
			December 31,						December 31,
(in thousands, except per share amounts)			2010			2009			2010			2009
Revenues
Net premiums earned		$	372,877		$	233,192		$	1,292,669		$	854,711
Ceding commission revenue			8,511			16,263			38,068			43,937
Insurance services revenue			247			870			2,169			5,123
Policy billing fees			2,578			774			6,255			2,965
Net investment income			29,690			21,183			106,090			74,866
Net realized investment gains (losses):
	Other-than-temporary impairments		(2,165	)		(9,888	)		(16,100	)		(44,210	)
	Portion of loss recognized in other comprehensive income		1,789			5,444			11,909			20,722
	Other net realized investment gains		6,236			3,620			17,674			24,989
	Total net realized investment gains (losses)		5,860			(824	)		13,483			1,501
	Total revenues		419,763			271,458			1,458,734			983,103
Expenses
Loss and loss adjustment expenses			223,355			144,575			784,023			475,497
Direct and ceding commission expense			69,372			54,327			267,209			204,565
Other operating expenses			53,625			40,052			195,751			129,846
Acquisition-related transaction costs			971			703			2,369			14,038
Interest expense			8,307			4,625			24,594			18,122
	Total expenses		355,630			244,282			1,273,946			842,068
Other income (expense)
Equity in income (loss) of unconsolidated affiliate			-			-			-			(777	)
Gain on investment in acquired unconsolidated affiliate			-			-			-			7,388
Gain on bargain purchase			-			13,186			-			13,186
Other			-			-			(466	)		-
Income before income taxes			64,133			40,362			184,322			160,832
Income tax expense			22,461			9,614			62,400			51,502
Net income		$	41,672		$	30,748		$	121,922		$	109,330
Less: Net income attributable to Reciprocal Exchanges			3,157			-			3,971			-
Net income attributable to Tower Group, Inc.		$	38,515		$	30,748		$	117,951		$	109,330
Net income		$	41,672		$	30,748		$	121,922		$	109,330
Cumulative effect of adjustment resulting from adoption of
	new accounting guidance		-			-			-			(2,497	)
Gross unrealized investment holding gains (losses) arising during periods			(64,072	)		(6,791	)		34,869			108,879
Gross unrealized gain on interest rate swaps			3,223			-			3,223			-
Equity in net unrealized gains on investment in unconsolidated affiliate's
	investment portfolio		-			-			-			3,124
Less: Reclassification adjustment for (gains) losses included in net income			(5,860	)		824			(13,483	)		(1,501	)
Income tax benefit (expense) related to items of other comprehensive
	income		23,348			(195	)		(8,613	)		(37,700	)
Comprehensive income		$	(1,689	)	$	24,586		$	137,918		$	179,635
Less: Comprehensive income (loss) attributable to Reciprocal Exchanges			(4,686	)		-			1,665			-
Comprehensive income attributable to Tower Group, Inc.		$	2,997		$	24,586		$	136,253		$	179,635
Earnings per share attributable to Tower Group, Inc. stockholders:
	Basic	$	0.93		$	0.72		$	2.71		$	2.78
	Diluted	$	0.92		$	0.72		$	2.70		$	2.76
Weighted average common shares outstanding:
	Basic		41,538			42,668			43,462			39,363
	Diluted		41,715			42,901			43,648			39,581
Dividends declared and paid per common share		$	0.125		$	0.070		$	0.390		$	0.260
Refer to notes accompanying consolidated financial statements, as filed with the SEC.

CONTACT:
Tower Group, Inc.
Bill Hitselberger
Senior Vice President and Chief Financial Officer
212-655-2110
bhitselberger@twrgrp.com