Tower Group International (TWGP) 8-K Tower Group, Inc. Reports Fourth Quarter and Annual 2011 Results

Exhibit 99.1

Tower Group, Inc. Reports Fourth Quarter and Annual 2011 Results

NEW YORK--(BUSINESS WIRE)--February 27, 2012--Tower Group, Inc. (NASDAQ: TWGP) today reported net income available to common shareholders of $26.8 million and diluted earnings per share of $0.67 for the fourth quarter 2011, as compared to $36.6 million, or $0.88 per share in the fourth quarter of 2010. For the full year, net income available to common shareholders was $60.2 million or $1.47 per diluted share compared to $103.9 million or $2.38 per diluted share in 2010.

Operating income⁽¹⁾ and operating earnings per share⁽¹⁾ were $25.0 million and $0.63 for the fourth quarter of 2011, respectively, as compared to $33.3 million and $0.80 per share in the fourth quarter of 2010. For the full year, operating income and operating earnings per share were $56.0 million and $1.37, respectively, as compared to $97.2 million or $2.23 per share in 2010. Operating income in the full year 2011 included after-tax catastrophe storm losses of $48.3 million or $1.18 per diluted share compared to $12.0 million or $0.27 per diluted share for the full year 2010.

Key Highlights (all percentage increases compare the fourth quarter and the full year 2011 results to the corresponding periods in 2010 except as noted otherwise):

• Gross premiums written and produced⁽²⁾ were $434.3 million in the fourth quarter and $1.8 billion for the full year. This represents an increase of 21.0% for full year 2011 compared to full year 2010.
• For the combined insurance segments, the net combined ratio was 98.2% in the fourth quarter of 2011 compared to 95.1% for the same period last year. (Excluding the business that we manage on behalf of the reciprocal exchanges, the net combined ratio was 97.3% for the fourth quarter of 2011.) For the full year the net combined ratio was 100.3% compared to 96.4% in 2010. (Excluding the business that we manage on behalf of the reciprocal exchanges, the net combined ratio was 100.8% for the full year 2011.)
  • In the fourth quarter 2011, the net loss ratio was 64.9% compared to 59.9% for the same period last year. For the full year, the net loss ratio was 66.2% compared to 60.7% in 2010. In the fourth quarter 2011, the Company experienced $15 million of favorable development from Hurricane Irene claims and elected to strengthen the 2011 accident year loss reserves by $15 million. We also experienced $7 million in losses associated with the October 2011 snow storm.
  • In the fourth quarter 2011, the net expense ratio⁽³⁾ was 33.3% compared to 35.2% for the same period last year. For the full year, the net expense ratio was 34.1% compared to 35.7% in 2010.

• Net investment income increased by 8.0% to $32.1 million for the fourth quarter and by 20.3% to $127.6 million for the full year.
• The effective tax rate was 15.9% in the fourth quarter (20.4% excluding the reciprocal exchanges) and 25.9% for the year (27.1% excluding the reciprocal exchanges), a decrease of 19.3 points and 7.8 points (14.9 points and 6.7 points excluding the reciprocals), respectively. The reduced tax rate is due to a modestly higher amount of tax preferenced investment income applied against a lower earnings base.

• Book value per share⁽⁴⁾ of $26.37 at December 31, 2011 represents an increase of 4.7% since year end 2010. The company paid dividends of $0.69 per share in 2011.
• Tower Group, Inc. stockholders’ equity was $1,034.1 million as of December 31, 2011, as compared to $1,045.0 million as of December 31, 2010. During the year ended December 31, 2011, Tower Group, Inc. repurchased 2.9 million shares of its Common Stock for an aggregate purchase price of $64.6 million pursuant to its share repurchase program and paid $27.9 million in dividends on its common stock.

Michael H. Lee, President and Chief Executive Officer of Tower Group, Inc., stated “During the fourth quarter, we continued to see positive trends in our business, especially from the organic growth we generated from our newly created Assumed Reinsurance and Customized Solutions business units. We also began to see favorable pricing trends in certain lines of business, including homeowners, commercial property and workers compensation. We expect these favorable pricing trends to continue into 2012. For the full year, while we are disappointed with the negative impact on our earnings due to the losses from Hurricane Irene and other severe weather related events, we are otherwise pleased with our overall operating results and encouraged by the progress that we made with regard to some of our long term business objectives. In particular, we expanded our product offerings, improved existing business units and created new business units to generate organic growth. In addition, we are pleased with the progress that we made with some significant technology projects, including our personal lines platform redesign, which we plan to introduce during the early part of this year. As we enter 2012, we are cautiously optimistic due to the improved pricing environment and the continued benefits from our organic growth initiatives.”

Financial Summary ($ in thousands, except per share data):
			Three Months Ended						Year Ended
			December 31,						December 31,
			2011			2010			2011			2010
Gross premiums written		$	434,261		$	433,860		$	1,810,923		$	1,496,371
Net premiums written			380,873			384,667			1,638,590			1,314,064
Total commission and fee income			11,660			11,336			46,072			46,492
Net investment income			32,062			29,690			127,649			106,090
Net realized investment gains (losses)			4,121			5,860			9,394			13,483
Total revenues			454,921			419,763			1,776,965			1,458,734
Net income attributable to Tower Group, Inc.			26,831			36,633			60,198			103,890
Earnings per share—Basic		$	0.68		$	0.88		$	1.47		$	2.39
Earnings per share—Diluted		$	0.67		$	0.88		$	1.47		$	2.38
Return on average equity			10.3	%		14.1	%		5.8	%		10.0	%
Combined Commercial and Personal Segments
Net premiums earned			407,078			372,877			1,593,850			1,292,669
Net loss ratio			64.9	%		59.9	%		66.2	%		60.7	%
Net expense ratio			33.3	%		35.2	%		34.1	%		35.7	%
Commercial Insurance Segment
Net premiums earned			282,295			239,856			1,087,911			941,015
Net loss ratio			65.1	%		66.5	%		67.7	%		62.6	%
Net expense ratio			30.2	%		27.4	%		31.5	%		33.1	%
Personal Insurance Segment
Net premiums earned			124,783			133,021			505,939			351,654
Net loss ratio			64.4	%		48.1	%		63.0	%		55.4	%
Net expense ratio			40.3	%		49.2	%		39.7	%		42.5	%
Reconciliation of non-GAAP financial measures:
	Net income attributable to Tower Group, Inc.		26,831		$	36,633		$	60,198		$	103,890
	Net realized gains (losses) on investments		4,121			5,860			9,394			13,483
	Acquisition-related transaction costs		77			(971	)		(360	)		(2,369	)
	Less: net realized gains (losses) on investments related to Reciprocal Exchanges		(1,386	)		682			(2,414	)		257
	Income tax		(1,016	)		(2,219	)		(2,470	)		(4,636	)
	Operating income attributable to Tower Group, Inc.	$	25,035		$	33,281		$	56,048		$	97,155
	Operating earnings per share—Basic	$	0.63		$	0.80		$	1.37		$	2.24
	Operating earnings per share—Diluted	$	0.63		$	0.80		$	1.37		$	2.23
	Operating return on average equity		9.6	%		12.8	%		5.4	%		9.4	%

Fourth Quarter 2011 Highlights

Gross premiums written were $434.3 million in the fourth quarter of 2011, which was slightly higher than $433.9 million in the fourth quarter of 2010. Organic growth of 6% in the quarter was offset by the commutation of an assumed reinsurance agreement. For the three months ended December 31, 2011, premiums on renewed Commercial Insurance business excluding programs increased 2.2% and premiums on renewed Personal Insurance business increased 2.5%, resulting in an overall premium increase on renewal business of 2.3%. 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 91%, resulting in an overall retention rate of 88%.

Total revenues increased 8.4% to $454.9 million in the fourth quarter of 2011 as compared to $419.8 million in the prior year's fourth quarter. The growth was primarily due to increased net premiums earned and higher net investment income. Net premiums earned represented 89.5% of total revenues for the three months ended December 31, 2011 compared to 88.8% for 2010.

Net investment income increased 8.0% to $32.1 million for the three months ended December 31, 2011 compared to $29.7 million for the same period in 2010. The tax equivalent book yield on our investment portfolio was 4.8% at December 31, 2011 compared to 4.7% at December 31, 2010. Net realized investment gains were $4.1 million for the quarter ended December 31, 2011 compared to gains of $5.9 million in the same period last year. Total commission and fee income increased 2.9% to $11.7 million in the fourth quarter of 2011 compared to $11.3 million in the fourth quarter of 2010. The net loss ratio was 64.9% for the three months ended December 31, 2011 compared to 59.9% for the same period in 2010. (Excluding the business that we manage on behalf of the reciprocal exchanges, the net loss ratio was 65.0% for the fourth quarter of 2011.) In the fourth quarter 2011, we had a $15 million reduction in our estimate of Hurricane Irene claims and elected to strengthen the 2011 accident year loss reserves by $15 million. We also experienced $7 million in losses associated with the October 2011 snow storm.

Our net expense ratio was 33.3% for the three months ended December 31, 2011 compared to 35.2% for the same period in 2010. (Excluding the business that we manage on behalf of the reciprocal exchanges, the net expense ratio was 32.3% for the fourth quarter of 2011.)

Interest expense increased by $1.2 million for the three months ended December 31, 2011, compared to the same period in 2010. Interest expense increased mainly due to increased borrowings under the credit facility in 2011.

Our effective tax rate was 15.9% for the fourth quarter 2011 (20.4% excluding the reciprocal exchanges) and 25.9% for the full year 2011 (27.1% excluding the reciprocal exchanges). Our full year tax rate was lower by 7.8 points compared to 2010, as we had a modestly higher amount of tax preferenced investment income applied against a lower earnings base, and the fourth quarter tax rate, excluding the reciprocal exchanges, was 14.9 points lower than it was for the corresponding period in 2010, due largely to a true up of the effective tax rate in the fourth quarter 2011.

Additional Highlights and Disclosures:

Dividend Declaration

Tower’s Board of Directors approved a quarterly dividend on February 1, 2012 of $0.1875 per share payable on March 23, 2012 to stockholders of record as of March 12, 2012.

2012 Guidance

Tower expects to report operating earnings of between $2.60 and $2.70 per share in 2012.

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, including the reciprocal exchanges.

(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 0.6% and 1.0%, respectively, for the years ended December 31, 2011 and 2010.

(4) Book value per share is Tower Group, Inc. Stockholders’ Equity divided by outstanding shares as of the period of measurement.

Conference Call

Tower will host a conference call and webcast to discuss these results on Tuesday, February 28, 2012 at 9:00 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 administration, operational and technology services for 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, 2010 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/

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 administration, operational and technology services for other insurance companies.

Commercial Insurance & Personal Insurance Combined
($ in thousands)
(Unaudited)
			Three Months Ended December 31,								Year Ended December 31
			2011			2010		Change(%)			2011			2010		Change(%)
	Net premiums written	$	380,873		$	384,667		-1.0	%	$	1,638,590		$	1,314,064		24.7	%
Revenues
Net premiums earned			407,078			372,877		9.2	%		1,593,850			1,292,669		23.3	%
Ceding commission revenue			8,165			8,511		-4.1	%		33,968			38,068		-10.8	%
Policy billing fees			2,867			2,579		11.2	%		10,534			6,255		68.4	%
Total revenues			418,110			383,967		8.9	%		1,638,352			1,336,992		22.5	%
Expenses
Net loss and loss adjustment expenses			264,190			223,355		18.3	%		1,055,249			784,023		34.6	%
Underwriting expenses
	Direct commission expense		78,262			68,572		14.1	%		311,328			266,096		17.0	%
	Other underwriting expenses		68,211			73,797		-20.3	%		276,729			239,420		11.9	%
	Total underwriting expenses		146,473			142,369		2.9	%		588,057			505,516		16.3	%
Underwriting profit		$	7,447		$	18,243		-59.2	%	$	(4,954	)	$	47,453		-110.4	%
Underwriting Ratios
	Net loss ratio		64.9	%		59.9	%				66.2	%		60.7	%
	Net expense ratio		33.3	%		35.2	%				34.1	%		35.7	%
	Net combined ratio		98.2	%		95.1	%				100.3	%		96.4	%

Commercial Insurance Segment Information
($ in thousands)
(Unaudited)
			Three Months Ended						Year Ended
			December 31,						December 31,
			2011			2010			2011			2010
	Net premiums written	$	255,449		$	269,745		$	1,152,299		$	987,260
Revenues
Net premiums earned			282,295			239,856			1,087,911			941,015
Ceding commission revenue			4,603			4,189			14,786			31,998
Policy billing fees			1,272			732			4,345			2,742
Total revenues			288,170			244,777			1,107,042			975,755
Expenses
Net loss and loss adjustment expenses			183,847			159,427			736,474			589,322
Underwriting expenses
	Direct commission expenses		52,517			38,050			209,911			191,351
	Other underwriting expenses		38,484			32,659			151,951			155,148
	Total underwriting expenses		91,001			70,709			361,862			346,499
Underwriting profit		$	13,322		$	14,641		$	8,706		$	39,934
Underwriting Ratios
	Net loss ratio		65.1	%		66.5	%		67.7	%		62.6	%
	Net expense ratio		30.2	%		27.4	%		31.5	%		33.1	%
	Net combined ratio		95.3	%		93.9	%		99.2	%		95.7	%

Personal Insurance Segment Information
($ in thousands)
(Unaudited)
			Three Months Ended December 31,
			2011									2010
						Reciprocal								Reciprocal
			Tower			Exchanges			Total			Tower		Exchanges		Total
	Net premiums written	$	86,636		$	38,788		$	125,424		$	55,243		59,679		114,922
Revenues
Net premiums earned			80,192			44,591			124,783			85,243		47,778		133,021
Ceding commission revenue			1,693			1,869			3,562			3,297		1,025		4,322
Policy billing fees			1,455			140			1,595			1,698		149		1,847
Total revenues			83,340			46,600			129,940			90,238		48,952		139,190
Expenses
Net loss and loss adjustment expenses			51,902			28,441			80,343			36,376		27,552		63,928
Underwriting expenses
	Direct commission expense		17,431			8,314			25,745			20,472		10,050		30,522
	Other underwriting expenses		17,813			11,914			29,727			24,569		16,569		41,138
	Total underwriting expenses		35,244			20,228			55,472			45,041		26,619		71,660
Underwriting profit		$	(3,806	)	$	(2,069	)	$	(5,875	)	$	8,821		(5,219	)	3,602
Underwriting Ratios
	Net loss ratio		64.7	%		63.8	%		64.4	%		42.7	%	57.7	%	48.1	%
	Net expense ratio		40.0	%		40.9	%		40.3	%		47.0	%	53.3	%	49.2	%
	Net combined ratio		104.7	%		104.7	%		104.7	%		89.7	%	111.0	%	97.3	%

Personal Insurance Segment Information
($ in thousands)
(Unaudited)
			Year Ended December 31,
			2011									2010
						Reciprocal								Reciprocal
			Tower			Exchanges			Total			Tower		Exchanges		Total
	Net premiums written	$	316,854		$	169,437		$	486,291		$	223,630		103,174		326,804
Revenues
Net premiums earned			318,777			187,162			505,939			257,863		93,791		351,654
Ceding commission revenue			12,408			6,774			19,182			4,019		2,051		6,070
Policy billing fees			5,616			573			6,189			3,213		300		3,513
Total revenues			336,801			194,509			531,310			265,095		96,142		361,237
Expenses
Net loss and loss adjustment expenses			214,355			104,420			318,775			132,499		62,202		194,701
Underwriting expenses
	Direct commission expense		68,876			32,541			101,417			56,392		18,353		74,745
	Other underwriting expenses		73,161			51,617			124,778			59,980		24,292		84,272
	Total underwriting expenses		142,037			84,158			226,195			116,372		42,645		159,017
Underwriting profit		$	(19,591	)	$	5,931		$	(13,660	)	$	16,224		(8,705	)	7,519
Underwriting Ratios
	Net loss ratio		67.2	%		55.8	%		63.0	%		51.4	%	66.3	%	55.4	%
	Net expense ratio		38.9	%		41.0	%		39.7	%		42.3	%	43.0	%	42.5	%
	Net combined ratio		106.1	%		96.8	%		102.7	%		93.7	%	109.3	%	97.9	%

Insurance Services Segment Results of Operations
($ in thousands)
(Unaudited)
	Three Months Ended					Year Ended
	December 31,					December 31,
		2011		2010		2011		2010
Revenue
Management fee income	$	7,260	$	9,881	$	29,303	$	17,752
Other revenue		628		249		1,570		2,171
Total revenue		7,888		10,130		30,873		19,923
Expenses
Other expenses		4,327		1,123		19,331		5,760
Total expenses		4,327		1,123		19,331		5,760
Insurance services pre-tax income	$	3,561	$	9,007	$	11,542	$	14,163

Tower Group, Inc.
Consolidated Balance Sheets
	December 31,
($ in thousands, except par value and share amounts)	2011			2010
Assets
Investments - Tower
Available-for-sale investments, at fair value:
Fixed-maturity securities (amortized cost of $2,046,932 and $1,968,670)	$	2,153,620		$	2,041,557
Equity securities (cost of $91,069 and $91,218)		87,479			90,317
Short-term investments (cost of $0 and $1,560)		-			1,560
Other invested assets		44,347			-
Investments - Reciprocal Exchanges
Available-for-sale investments, at fair value:
Fixed-maturity securities (amortized cost of $288,180 and $338,494)		300,054			341,054
Equity securities (cost of $1,965 and $0)		1,866			-
Total investments		2,587,366			2,474,488
Cash and cash equivalents (includes $666 and $2,796 relating to Reciprocal Exchanges)		114,098			140,221
Investment income receivable (includes $2,978 and $3,021 relating to Reciprocal Exchanges)		26,782			23,562
Premiums receivable (includes $41,290 and $53,953 relating to Reciprocal Exchanges)		408,626			387,584
Reinsurance recoverable on paid losses (includes $5,014 and $2,167 relating to Reciprocal Exchanges)		23,903			18,214
Reinsurance recoverable on unpaid losses (includes $11,253 and $11,384 relating to Reciprocal Exchanges)		319,664			282,682
Prepaid reinsurance premiums (includes $14,685 and $17,919 relating to Reciprocal Exchanges)		54,037			77,627
Deferred acquisition costs, net (includes $11,866 and $18,206 relating to Reciprocal Exchanges)		168,858			164,123
Deferred income taxes (includes $0 and $788 relating to Reciprocal Exchanges)		-			2,245
Intangible assets (includes $4,839 and $5,504 relating to Reciprocal Exchanges)		114,920			123,820
Goodwill		250,103			250,103
Other assets (includes $2,685 and $5,808 relating to Reciprocal Exchanges)		373,838			230,405
Total assets	$	4,442,195		$	4,175,074
Liabilities
Loss and loss adjustment expenses (includes $136,275 and $171,315 relating to Reciprocal Exchanges)	$	1,632,113		$	1,610,421
Unearned premium (includes $102,991 and $123,949 relating to Reciprocal Exchanges)		893,176			872,026
Reinsurance balances payable (includes $3,466 and $3,402 relating to Reciprocal Exchanges)		20,794			35,037
Funds held under reinsurance agreements		96,726			93,153
Other liabilities (includes $7,154 and $9,384 relating to Reciprocal Exchanges)		266,155			122,333
Deferred income taxes (includes $4,511 and $0 relating to Reciprocal Exchanges)		29,337			-
Debt		426,901			374,266
Total liabilities		3,365,202			3,107,236
Stockholders' equity
Common stock ($0.01 par value; 100,000,000 shares authorized, 46,448,341 and
45,742,342 shares issued, and 39,221,102 and 41,485,678 shares outstanding)		465			457
Treasury stock (7,227,239 and 4,256,664 shares)		(158,185	)		(91,779	)
Paid-in-capital		772,938			763,064
Accumulated other comprehensive income		62,244			48,883
Retained earnings		356,680			324,376
Tower Group, Inc. stockholders' equity		1,034,142			1,045,001
Noncontrolling interests		42,851			22,837
Total stockholders' equity		1,076,993			1,067,838
Total liabilities and stockholders' equity	$	4,442,195		$	4,175,074

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)		2011			2010			2011			2010
Revenues
Net premiums earned	$	407,078		$	372,877		$	1,593,850		$	1,292,669
Ceding commission revenue		8,165			8,511			33,968			38,068
Insurance services revenue		628			247			1,570			2,169
Policy billing fees		2,867			2,578			10,534			6,255
Net investment income		32,062			29,690			127,649			106,090
Net realized investment gains (losses):
Other-than-temporary impairments		(176	)		(2,165	)		(3,509	)		(16,100	)
Portion of loss recognized in other comprehensive income		84			1,789			264			11,909
Other net realized investment gains		4,213			6,236			12,639			17,674
Total net realized investment gains (losses)		4,121			5,860			9,394			13,483
Total revenues		454,921			419,763			1,776,965			1,458,734
Expenses
Loss and loss adjustment expenses		264,190			223,355			1,055,249			784,023
Direct and ceding commission expense		78,261			69,372			311,328			267,209
Other operating expenses		68,304			66,264			278,275			230,489
Acquisition-related transaction costs		(77	)		971			360			2,369
Interest expense		9,472			8,307			34,462			24,594
Total expenses		420,150			368,269			1,679,674			1,308,684
Other income (expense)
Other		-			-			-			(466	)
Income before income taxes		34,771			51,494			97,291			149,584
Income tax expense		5,532			18,135			25,186			50,373
Net income	$	29,239		$	33,359		$	72,105		$	99,211
Less: Net income attributable to Reciprocal Exchanges		2,408			(3,274	)		11,907			(4,679	)
Net income attributable to Tower Group, Inc.	$	26,831		$	36,633		$	60,198		$	103,890
Net income	$	29,239		$	33,359		$	72,105		$	99,211
Gross unrealized investment holding gains (losses) arising during periods		29,103			(64,072	)		49,720			34,869
Gross unrealized gain on interest rate swaps		(422	)		3,223			(10,541	)		3,223
Less: Reclassification adjustment for (gains) losses included in net income		(4,121	)		(5,860	)		(9,394	)		(13,483	)
Income tax benefit (expense) related to items of other comprehensive income		(8,581	)		23,348			(10,318	)		(8,613	)
Comprehensive income	$	45,218		$	(10,002	)	$	91,572		$	115,207
Less: Comprehensive income (loss) attributable to Reciprocal Exchanges		5,117			(7,960	)		18,013			(3,014	)
Comprehensive income attributable to Tower Group, Inc.	$	40,101		$	(2,042	)	$	73,559		$	118,221
Earnings per share attributable to Tower Group, Inc. stockholders:
Basic	$	0.68		$	0.88		$	1.47		$	2.39
Diluted	$	0.67		$	0.88		$	1.47		$	2.38
Weighted average common shares outstanding:
Basic		39,733			41,538			40,833			43,462
Diluted		39,806			41,715			40,931			43,648
Dividends declared and paid per common share	$	0.188		$	0.125		$	0.690		$	0.390

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