 1. March 19, 2012 Investor Presentation NYSSA 16th Annual Insurance Conference Exhibit 99.1 |
 1 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, 2011 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. 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) Total premiums include gross premiums written through our insurance subsidiaries and produced as managing general agent on behalf of other insurance companies. |
 2 Presentation Outline I. Overview of Tower II. Strategy III. Financial Review IV. Summary |
 I. Overview of Tower 3 |
 4 Diversified Property and Casualty Insurance Company With a Niche Focus • Headquartered in New York City • Over 20 year track record of excellent operating performance • Top 50 P&C insurance company in U.S., rated “A-" by A.M. Best with positive outlook • 2011 GPW of $1.8B and over $1B in equity Broad Product Offering Expanding National Presence • 20 offices nationwide • Over 1400 employees Overview of Tower (“TWGP”) Commercial General Commercial Specialty Personal Lines Home and auto |
 5 Our 20-Year History Insurance company formation in 1990/MGA in 1996 IPO in October, 2004; CastlePoint formation in 2006 CastlePoint merger in 2009 80% of premiums transferred to reinsurers and other insurance companies Approximately 50% of premiums transferred to CastlePoint 86% of premiums retained; Deployed capital from CastlePoint to make acquisitions; Implemented organic growth initiative Commercial lines and homeowners business Commercial lines and homeowners business Commercial/Specialty/ Personal New York City Northeast with limited expansion nationally Primarily U.S. with limited international business $0 to $230 million in premiums $805 million in premiums in 2008 $1.8B in premiums in 2011 $2 million to $18 million in capital $319 million in capital $1B + in capital Summary Product / Geographical Focus GPW & Managed / Capital |
 II. Strategic Review 6 |
 7 Strategies Expand products, Geography and Distribution Focus on niche markets, specialize and customize Expand non-risk-bearing sources of revenue Generate organic growth Acquire insurance companies or make strategic investments in distribution sources Diversification and favorable ratio of premium volume opportunity to capital Significantly outperform industry results in growth and profitability Increase ROE by generating commission and fee income Achieve scale and expand into targeted products and markets Consolidate and expand into targeted products and markets Advantage Tower’s Strategic Responses to Marketplace Challenges |
 8 Diversification Strategy FY 2011 Products • Strong track record of developing and expanding product lines Geography • Leverage existing products across the country Distribution • Build different distribution sources to capitalize on market opportunities |
 9 Business Segment Strategy Commercial Customers Products Underwriting Strategy Personal General Specialty Comprehensive product offering to small business owners Narrowly focused customized specialty products Individual homeowners and drivers Apartment buildings, retail stores, restaurants and artisan contractors Garage liability, commercial construction, specialty transportation, professional employers organizations and Lloyd’s business Homeowners, auto and package Focus on personal package policies to differentiate from direct writers Use reciprocal structures to provide additional capacity and generate fee income Expand specialty classes of business Customize products for select industries and key producers Partner with specialty underwriting managers, including Lloyd’s syndicates Focus on small segment Improve scale and automation Leverage products across the country |
 10 Growth in Fee Income Higher ROE Results From Generating Commission and Fee Income • Fully leveraged capital in our own company after the CastlePoint acquisition in 2009 • Began generating fee income by transferring premiums to reinsurers and other insurance companies after the One Beacon personal lines acquisition in July 2010 » Generated $63.3 million in commission and fee income in 2011, up from $55.8 million in same period last year. |
 11 Organic Growth Initiative Expand Products • Expand our product lines platform • Develop products for target industry and customer groups • Leverage existing products across the country Develop entrepreneurs • Transform our existing business units into self-sufficient operating units • Create new business units to expand into new producers and markets • Acquire underwriting talent to support organic growth Improve business processes related to organic growth • Create a new department to research, identify and analyze growth opportunities • Improve our ability to develop products • Improve corporate marketing and communication • Redesign business development to improve our ability to understand and deliver products to meet the needs of our producers • Create a separate independent customer service department to ensure delivery of superior customer service |
 12 Improved Market Conditions and Outlook Positive market trends emerged in 2011 • Strong organic growth (10%) from two newly created business units » customized solutions and assumed reinsurance generated GPW of $158 million in 2011 • Favorable pricing trends emerged in 4Q of 2011 » 2.3% renewal rate increase for all businesses excluding program business and assumed reinsurance Outlook for 2012 • Continued implementation of organic growth initiative » New lines of business: Surety, inland marine and commercial property » Creating new business units and developing several joint ventures with managing general agencies and Lloyd’s syndicates » Developing a growing pipeline of new products and market opportunities • Continue to drive meaningful pricing increases in 2012 » Meaningful rate increases in certain areas, such as California workers’ compensation and assumed reinsurance businesses |
 An Opportunistic Acquisition Strategy Target small insurance and managing general agencies Strategic investments in distribution sources Seek acquisitions and make strategic investments to expand into new products, markets and accomplish strategic objectives Successful track record in creating value through expense reduction, re- underwriting and cross selling VALUE CREATION PROFILE OF TARGETS STRATEGY 13 |
 III. Financial Review 14 |
 15 2011 Highlights Excluding the effect of storm losses, operating earnings would have been $104.3 million in 2011 compared to $109.2 million in 2010 Excluding the effect of storm losses, operating EPS would have been $2.55 in 2011 compared to $2.50 in 2010 Excluding the effect of storm losses, operating ROE would have been 9.8% in 2011 and 10.4% in 2010. Excluding the effect of storm losses , Combined Ratio Excluding the Reciprocals would have been 95.5% in 2011 and 93.9% in 2010. |
 16 Hurricane Irene’s Impact on Tower Losses from Irene represented Tower’s single largest loss event in its history • Hurricane Irene was the first Hurricane to make landfall in the tri-state region (NY, NJ and CT) since Gloria in 1985 and the first to make landfall in NJ since 1903 • $45M pre-tax loss from Irene is higher than Tower’s total catastrophe losses throughout its history • Tower was ranked 6 with 3.9% market share for the lines of business affected by Irene in NJ, NY and CT, but its reported loss was only 1% of the total estimated industry loss ($4.5B) Tower’s property business has been historically very profitable and not prone to catastrophe losses • Tower’s homeowners and commercial multiple peril ratio has averaged 50.7% since 2005, with catastrophe losses contributing only a minimal amount to this figure • Normal winter storm activity has historically had a minimal impact on Tower’s earnings Favorable pricing trends and market opportunity • Homeowners and commercial property rates are expected to improve • Anticipate meaningful growth opportunity in 2012 th |
 17 Strong and Consistent Track Record of Profitable Growth AM Best and Company Data. Total Premium Growth Combined Ratio Gross Premiums Written and Produced |
 18 23.2 23.3 45.0 41.5 39.2 2007 2008 2009 2010 2011 Strong Track Record of Book Value Growth Book Value Per Share* *TWGP paid cash dividends of $0.15, $0.20, $0.26, $0.39 and $0.69 per share in 2007, 2008, 2009, 2010 and 2011 respectively. Shareholders’ Equity Shares Outstanding $12.74 $13.67 $22.72 $25.19 $26.37 2007 2008 2009 2010 2011 $295 $319 $1,022 $1,045 $1,034 2007 2008 2009 2010 2011 |
 19 $2.29 $2.76 $2.71 $2.23 $1.37 $0.27 $1.18 2007 2008 2009 2010 2011 Operating EPS Severe Weather Related Losses $52.9 $64.8 $107.3 $97.2 $56.0 $12.0 $48.3 2007 2008 2009 2010 2011 Operating Income Severe Weather Related Losses Strong Track Record of Operating Earnings and ROE Operating Income in millions Operating Earnings Per Share Operating ROE |
 20 Declining Expense Ratio Increase in premium volume is creating scale advantages for Tower As systems initiatives relating to personal lines are completed, we expect this scale advantage to increase Net Expense Ratio Excluding Reciprocals |
 21 Loss Ratio and Reserves 2011 net adverse development of $17.0 million at Tower stock companies was from December 2010 winter storm ($7M) and $10 M from discontinued programs that we ceased underwriting in 2010 and 2011 |
 22 Highly Rated Investments Our high-quality investment portfolio had net unrealized pre-tax gains of $115 million at December 31, 2011 attributable to Tower shareholders • Fixed income average quality of A+ • Duration of 4.8 years • Tax equivalent book yield of 4.8% Asset allocation Asset quality |
 23 Improving Investment Performance and Alternative Investments Strategy Strategy • Alternative investment commitment remains modest but should provide higher yield and diversification from interest rate risk inherent in fixed-income investments, and reduce capital markets volatility • Operating cash flows also invested in opportunistic repurchases of Tower common stock since March 2010 Examples of Alternative Investments • Private equity type investments in small real estate projects • Minority ownership in distribution partners that have a strategic fit with Tower $2,615 $2,701 12-31-2010 12-31-2011 Cash and Invested Assets ($millions) 4.7 4.6 4.8 6-30-2011 9-30-2011 12-31-2011 Tax- Equivalent Fixed Income Yield (%) $106 $128 YTD 2010 YTD 2011 Net Investment Income ($millions) |
 24 Capital Management Strong Capitalization With Limited Need for Additional Capital • Significant growth in stockholders equity (from $319 million at December 2008 to $1 billion currently) • Limited additional capital needed due to strong retained earnings and the use of hybrid business model Use of Capital Management Tool to Deliver Immediate Shareholder Value • Repurchased 6.9 million shares of common stock totaling $153 million through 12/31/11 • Quarterly dividend increased by 275%; dividend payout target at 25% • Share repurchases may slow in 2012 due to organic growth and improved market conditions |
 25 Guidance and Trends ($ in millions) 2010* 2011* 2012 Target* Trend beyond 2012 Annual GPW Growth 38.2% 21.0% 5% - 10% Organic growth of 5% to 10% excluding growth from acquisitions Loss Ratio 58.8% 62.3% 62% - 63% Loss ratio has stabilized close to 62% to 63% range Expense Ratio 35.1% 33.2% 33.5% - 34.5% Expected decrease due to improved scale, automation and lower acquisition cost Combined Ratio 93.9% 95.5% 95.5% - 97.5% Future improvement will be driven primarily by expense ratio savings from improved scale. Investment Yield 4.7% 4.8% 4.7% - 5.0% Continued growth in invested assets with yield stabilization due to alternative and strategic investments Operating ROE & 2012 Guidance 10.4% 9.8% 9% - 10% $2.60 - $2.70 Expect to see ROE’s below 10% in first half of 2012, with improvements to 10%-12% range occurring in second half of year and continuing beyond year end 2012. *Excludes reciprocals and impact of Severe Weather Related Losses; |
 IV. Summary 26 |
 27 Key Investment Considerations Superior Track Record of Operating Performance • Consistently outperformed industry in terms of growth and profitability • Created significant value for shareholders since IPO in 2004 Diversified Business Platform With a Niche Market Focus • Provides organic growth opportunities • Allows allocation of capital to profitable market segments Responsible Growth in Premiums and Fee Income • Premium growth achieved through acquisitions and new organic growth initiatives • Increasing commission and fee income Proactive Capital Management • Share repurchase plan in effect • 275% increase in dividends per share since 2008 Positive pricing trends and Outlook • Positive pricing trends and favorable outlook for organic growth • Full deployment of capital to achieve 10% - 12% ROE |
 28 Questions? |