Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Jun. 30, 2013 | Nov. 21, 2013 | |
Document Information [Line Items] | ' | ' |
Document Type | '10-Q | ' |
Amendment Flag | 'false | ' |
Document Period End Date | 30-Jun-13 | ' |
Document Fiscal Year Focus | '2013 | ' |
Document Fiscal Period Focus | 'Q2 | ' |
Trading Symbol | 'TWGP | ' |
Entity Registrant Name | 'Tower Group International, Ltd. | ' |
Entity Central Index Key | '0001289592 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Filer Category | 'Large Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 57,429,099 |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Jun. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Available-for-sale investments, at fair value: | ' | ' |
Fixed-maturity securities | $2,289,545 | $2,344,711 |
Total investments | 2,517,362 | 2,553,505 |
Cash and cash equivalents | 108,535 | 102,269 |
Investment income receivable | 26,182 | 25,332 |
Investment in unconsolidated affiliate | 76,196 | 71,894 |
Premiums receivable | 392,433 | 412,045 |
Reinsurance recoverable on paid losses | 27,333 | 17,609 |
Reinsurance recoverable on unpaid losses | 690,069 | 459,457 |
Prepaid reinsurance premiums | 126,159 | 63,923 |
Deferred acquisition costs, net | 192,887 | 181,198 |
Intangible assets | 99,507 | 106,768 |
Goodwill | 55,540 | 241,458 |
Funds held by reinsured companies | 890,186 | 137,545 |
Other assets | 465,548 | 338,769 |
Total assets | 5,667,937 | 4,711,772 |
Liabilities | ' | ' |
Loss and loss adjustment expenses | 2,552,351 | 1,895,679 |
Unearned premium | 998,624 | 921,271 |
Reinsurance balances payable | 46,442 | 40,569 |
Funds held under reinsurance agreements | 657,275 | 98,581 |
Other liabilities | 350,838 | 296,960 |
Deferred income taxes | 20,282 | 24,763 |
Debt | 451,224 | 449,731 |
Total liabilities | 5,077,036 | 3,727,554 |
Contingencies (Note 18) | ' | ' |
Shareholders' equity | ' | ' |
Common stock ($0.01 par value; 100,000,000 shares authorized, 57,437,157 and 53,048,011 shares issued, and 57,429,099 and 43,513,678 shares outstanding) | 574 | 530 |
Treasury stock (8,058 and 9,534,333 shares) | -17 | -181,435 |
Paid-in-capital | 812,547 | 780,036 |
Accumulated other comprehensive income | 9,060 | 82,756 |
Retained earnings (accumulated deficit) | -242,930 | 268,171 |
Tower Group International, Ltd. shareholders' equity | 579,234 | 950,058 |
Noncontrolling interests | 11,667 | 34,160 |
Total shareholders' equity | 590,901 | 984,218 |
Total liabilities and shareholders' equity | 5,667,937 | 4,711,772 |
Tower | ' | ' |
Available-for-sale investments, at fair value: | ' | ' |
Fixed-maturity securities | 2,035,770 | 2,064,148 |
Equity securities | 134,650 | 140,695 |
Short-term investments | 13,379 | 4,750 |
Other invested assets | 77,038 | 57,786 |
Liabilities | ' | ' |
Loss and loss adjustment expenses | 2,433,087 | 1,759,888 |
Reciprocal Exchanges | ' | ' |
Available-for-sale investments, at fair value: | ' | ' |
Fixed-maturity securities | 253,775 | 280,563 |
Equity securities | 2,750 | 5,563 |
Cash and cash equivalents | 12,744 | 9,782 |
Investment income receivable | 2,609 | 2,610 |
Premiums receivable | 45,385 | 44,285 |
Reinsurance recoverable on paid losses | 6,556 | 682 |
Reinsurance recoverable on unpaid losses | 24,897 | 52,389 |
Prepaid reinsurance premiums | 19,988 | 17,803 |
Deferred acquisition costs, net | 9,912 | 11,364 |
Intangible assets | 6,596 | 6,854 |
Other assets | 1,687 | 1,559 |
Liabilities | ' | ' |
Loss and loss adjustment expenses | 119,264 | 135,791 |
Unearned premium | 102,492 | 103,216 |
Reinsurance balances payable | 7,266 | 6,979 |
Funds held under reinsurance agreements | 0 | 500 |
Other liabilities | 10,851 | 21,321 |
Deferred income taxes | $19,818 | $19,719 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Jun. 30, 2013 | Dec. 31, 2012 |
In Thousands, except Share data, unless otherwise specified | ||
Fixed-maturity securities, amortized cost | $2,229,407 | $2,190,186 |
Cash and cash equivalents | 108,535 | 102,269 |
Investment income receivable | 26,182 | 25,332 |
Premiums receivable | 392,433 | 412,045 |
Reinsurance recoverable on paid losses | 27,333 | 17,609 |
Reinsurance recoverable on unpaid losses | 690,069 | 459,457 |
Prepaid reinsurance premiums | 126,159 | 63,923 |
Deferred acquisition costs, net | 192,887 | 181,198 |
Intangible assets | 99,507 | 106,768 |
Other assets | 465,548 | 338,769 |
Loss and loss adjustment expenses | 2,552,351 | 1,895,679 |
Unearned premium | 998,624 | 921,271 |
Reinsurance balances payable | 46,442 | 40,569 |
Funds held under reinsurance agreements | 657,275 | 98,581 |
Other liabilities | 350,838 | 296,960 |
Deferred income taxes | 20,282 | 24,763 |
Common stock, par value | $0.01 | $0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 57,437,157 | 53,048,011 |
Common stock, shares outstanding | 57,429,099 | 43,513,678 |
Treasury stock, shares | 8,058 | 9,534,333 |
Tower | ' | ' |
Fixed-maturity securities, amortized cost | 1,980,652 | 1,926,236 |
Equity securities, cost | 127,598 | 144,204 |
Short-term investments, cost | 13,415 | 4,749 |
Loss and loss adjustment expenses | 2,433,087 | 1,759,888 |
Reciprocal Exchanges | ' | ' |
Fixed-maturity securities, amortized cost | 248,755 | 263,950 |
Equity securities, cost | 2,751 | 5,144 |
Cash and cash equivalents | 12,744 | 9,782 |
Investment income receivable | 2,609 | 2,610 |
Premiums receivable | 45,385 | 44,285 |
Reinsurance recoverable on paid losses | 6,556 | 682 |
Reinsurance recoverable on unpaid losses | 24,897 | 52,389 |
Prepaid reinsurance premiums | 19,988 | 17,803 |
Deferred acquisition costs, net | 9,912 | 11,364 |
Intangible assets | 6,596 | 6,854 |
Other assets | 1,687 | 1,559 |
Loss and loss adjustment expenses | 119,264 | 135,791 |
Unearned premium | 102,492 | 103,216 |
Reinsurance balances payable | 7,266 | 6,979 |
Funds held under reinsurance agreements | 0 | 500 |
Other liabilities | 10,851 | 21,321 |
Deferred income taxes | $19,818 | $19,719 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 |
Revenues | ' | ' | ' | ' |
Net premiums earned | $418,364 | $460,153 | $840,250 | $880,311 |
Ceding commission revenue | 11,933 | 10,080 | 26,084 | 15,243 |
Insurance services revenue | 532 | 1,359 | 660 | 1,856 |
Policy billing fees | 3,321 | 3,000 | 6,471 | 6,134 |
Net investment income | 28,402 | 31,781 | 58,719 | 65,724 |
Net realized investment gains (losses): | ' | ' | ' | ' |
Other-than-temporary impairments | -4,456 | -2,270 | -5,145 | -5,246 |
Portion of loss recognized in other comprehensive income | ' | 286 | ' | 286 |
Other net realized investment gains | 2,422 | 2,003 | 9,962 | 8,307 |
Total net realized investment gains (losses) | -2,034 | 19 | 4,817 | 3,347 |
Total revenues | 460,518 | 506,392 | 937,001 | 972,615 |
Expenses | ' | ' | ' | ' |
Loss and loss adjustment expenses | 559,892 | 349,775 | 835,624 | 617,268 |
Commission expense | 106,278 | 95,186 | 195,854 | 175,571 |
Other operating expenses | 88,308 | 78,100 | 172,701 | 155,171 |
Acquisition-related transaction costs | 665 | 720 | 19,721 | 1,982 |
Interest expense | 7,635 | 7,902 | 15,443 | 16,513 |
Total expenses | 762,778 | 531,683 | 1,239,343 | 966,505 |
Other income (expense) | ' | ' | ' | ' |
Equity income in unconsolidated affiliate | 7,838 | ' | 7,966 | ' |
Goodwill impairment | -214,049 | ' | -214,049 | ' |
Income (loss) before income taxes | -508,471 | -25,291 | -508,425 | 6,110 |
Income tax expense (benefit) | -1,930 | -8,919 | -3,520 | 306 |
Net income (loss) | -506,541 | -16,372 | -504,905 | 5,804 |
Less: Net income (loss) attributable to Noncontrolling interests | 801 | 437 | -10,480 | 3,448 |
Net income (loss) attributable to Tower Group International, Ltd. | ($507,342) | ($16,809) | ($494,425) | $2,356 |
Earnings (loss) per share attributable to Tower Group International, Ltd. shareholders: | ' | ' | ' | ' |
Basic | ($8.88) | ($0.39) | ($9.61) | $0.05 |
Diluted | ($8.88) | ($0.39) | ($9.61) | $0.05 |
Weighted average common shares outstanding: | ' | ' | ' | ' |
Basic | 57,135 | 43,289 | 51,487 | 43,340 |
Diluted | 57,135 | 43,289 | 51,487 | 43,410 |
Dividends declared and paid per common share | $0.17 | $0.17 | $0.34 | $0.34 |
Consolidated_Statements_of_Com
Consolidated Statements of Comprehensive Income (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 |
Net income (loss) | ($506,541) | ($16,372) | ($504,905) | $5,804 |
Other comprehensive income (loss) before tax | ' | ' | ' | ' |
Gross unrealized investment holding gains (losses) arising during periods | -80,963 | 8,613 | -81,334 | 33,585 |
Less: Reclassification adjustment for investment (gains) losses included in net income | 1,938 | -19 | -4,529 | -3,347 |
Portion of other-than-temporary impairment losses recognized in other comprehensive income | ' | -286 | ' | -286 |
Cumulative translation adjustment | -53 | ' | -3,664 | ' |
Deferred gain (loss) on cash flow hedge | 2,220 | -1,160 | 3,818 | -1,391 |
Other comprehensive income (loss) before tax | -76,858 | 7,148 | -85,709 | 28,561 |
Income tax benefit (expense) related to items of other comprehensive income (loss) | -2,721 | -2,272 | ' | -9,010 |
Other comprehensive income (loss), net of income tax | -79,579 | 4,876 | -85,709 | 19,551 |
Comprehensive income (loss) | -586,120 | -11,496 | -590,614 | 25,355 |
Less: Comprehensive income (loss) attributable to Noncontrolling interests | -9,526 | 2,992 | -22,492 | 9,377 |
Comprehensive income (loss) attributable to Tower Group International, Ltd. | ($576,594) | ($14,488) | ($568,122) | $15,978 |
Consolidated_Statements_of_Cha
Consolidated Statements of Changes in Shareholders' Equity (USD $) | Total | Common Stock | Treasury Stock | Paid-in Capital | Accumulated Other Comprehensive Income (loss) | Retained Earnings (Accumulated Deficit) | Noncontrolling Interests |
In Thousands | |||||||
Balance at Dec. 31, 2011 | $1,037,131 | $526 | ($158,185) | $772,877 | $63,053 | $331,480 | $27,380 |
Balance (in shares) at Dec. 31, 2011 | ' | 52,626 | ' | ' | ' | ' | ' |
Dividends declared | -14,680 | ' | ' | ' | ' | -14,680 | ' |
Stock based compensation (in shares) | ' | 364 | ' | ' | ' | ' | ' |
Stock based compensation | 2,233 | 4 | -2,152 | 4,381 | ' | ' | ' |
Repurchase of common stock | -20,987 | ' | -20,987 | ' | ' | ' | ' |
Net income (loss) | 5,804 | ' | ' | ' | ' | 2,356 | 3,448 |
Transfer of assets to Reciprocal Exchange | ' | ' | ' | -1,778 | ' | ' | 1,778 |
Other comprehensive income (loss) | 19,551 | ' | ' | ' | 13,622 | ' | 5,929 |
Balance at Jun. 30, 2012 | 1,029,052 | 530 | -181,324 | 775,480 | 76,675 | 319,156 | 38,535 |
Balance (in shares) at Jun. 30, 2012 | ' | 52,990 | ' | ' | ' | ' | ' |
Balance at Dec. 31, 2012 | 984,218 | 530 | -181,435 | 780,036 | 82,756 | 268,171 | 34,160 |
Balance (in shares) at Dec. 31, 2012 | ' | 53,048 | ' | ' | ' | ' | ' |
Dividends declared | -16,676 | ' | ' | ' | ' | -16,676 | ' |
Stock based compensation (in shares) | ' | 245 | ' | ' | ' | ' | ' |
Stock based compensation | 6,085 | 3 | -5,870 | 11,952 | ' | ' | ' |
Merger Transaction with Canopius Bermuda (in shares) | ' | 14,026 | ' | ' | ' | ' | ' |
Merger Transaction with Canopius Bermuda | 207,347 | 140 | ' | 207,207 | ' | ' | ' |
Extinguishment of treasury stock in connection with Merger Transaction (in shares) | ' | -9,882 | ' | ' | ' | ' | ' |
Extinguishment of treasury stock in connection with Merger Transaction | ' | -99 | 187,288 | -187,189 | ' | ' | ' |
Termination of convertible senior notes hedge and warrants | 541 | ' | ' | 541 | ' | ' | ' |
Net income (loss) | -504,905 | ' | ' | ' | ' | -494,425 | -10,480 |
Other comprehensive income (loss) | -85,709 | ' | ' | ' | -73,696 | ' | -12,013 |
Balance at Jun. 30, 2013 | $590,901 | $574 | ($17) | $812,547 | $9,060 | ($242,930) | $11,667 |
Balance (in shares) at Jun. 30, 2013 | ' | 57,437 | ' | ' | ' | ' | ' |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 |
Cash flows provided by (used in) operating activities: | ' | ' |
Net income (loss) | ($504,905) | $5,804 |
Adjustments to reconcile net income to net cash provided by (used in) operations: | ' | ' |
Gain on investment in acquired unconsolidated affiliate | -7,966 | ' |
Net realized investment (gains) losses | -4,817 | -3,347 |
Depreciation and amortization | 22,080 | 15,985 |
Goodwill impairment | 214,049 | ' |
Amortization of bond premium or discount | 6,124 | 5,377 |
Amortization of restricted stock | 12,622 | 4,382 |
Deferred income taxes | 44,743 | -1,786 |
Excess tax benefits from share-based payment arrangements | -1,108 | ' |
Changes in operating assets and liabilities: | ' | ' |
Investment income receivable | -850 | -451 |
Premiums receivable | 19,612 | 26,643 |
Reinsurance recoverable | 228,391 | 22,871 |
Prepaid reinsurance premiums | 90,195 | -1,654 |
Deferred acquisition costs, net | -5,871 | -16,649 |
Funds held by reinsured companies | -53,822 | -64,213 |
Other assets | 35,105 | -4,511 |
Loss and loss adjustment expenses | 26,059 | 69,720 |
Unearned premium | -92,610 | 33,280 |
Reinsurance balances payable | 5,873 | -6,376 |
Funds held under reinsurance agreements | -2,020 | -5,584 |
Other liabilities | -52,376 | -7,054 |
Net cash flows provided by (used in) operations | -21,492 | 72,437 |
Cash flows provided by (used in) investing activities: | ' | ' |
Cash acquired in Merger Transaction | 134,741 | ' |
Purchase of fixed assets | -15,661 | -19,426 |
Purchase - fixed-maturity securities | -815,579 | -997,657 |
Purchase - equity securities | -796,800 | -802,154 |
Short-term investments, net | 18,309 | ' |
Purchase of other invested assets | -19,252 | -7,986 |
Sale of fixed-maturity securities | 664,401 | 911,796 |
Maturity of fixed-maturity securities | 79,230 | 199,867 |
Sale - equity securities | 802,297 | 745,618 |
Change in restricted cash | -3,870 | ' |
Net cash flows provided by (used in) investing activities | 47,816 | 30,058 |
Cash flows provided by (used in) financing activities: | ' | ' |
Proceeds from credit facility borrowings | ' | 20,000 |
Proceeds from convertible senior notes hedge termination | 2,380 | ' |
Payment for warrants termination | -1,000 | ' |
Issuance of common stock under stock-based compensation programs | 2 | 3 |
Excess tax benefits from share-based payment arrangements | 1,106 | 228 |
Treasury stock acquired-net employee share-based compensation | -5,870 | -2,152 |
Repurchase of Common Stock | ' | -20,987 |
Dividends paid | -16,676 | -14,680 |
Net cash flows provided by (used in) financing activities | -20,058 | -17,588 |
Increase (decrease) in cash and cash equivalents | 6,266 | 84,907 |
Cash and cash equivalents, beginning of period | 102,269 | 114,098 |
Cash and cash equivalents, end of period | $108,535 | $199,005 |
Nature_of_Business
Nature of Business | 6 Months Ended | |||
Jun. 30, 2013 | ||||
Nature of Business | ' | |||
Note 1—Nature of Business | ||||
Tower Group International, Ltd. (the “Company” or “Tower”) offers a broad range of commercial, specialty and personal property and casualty insurance products and services through its subsidiaries to businesses and to individuals. On March 13, 2013, the Company and Tower Group, Inc. (“TGI”) completed a merger transaction under which the Company, formerly known as Canopius Holdings Bermuda Limited (“Canopius Bermuda”), was re-named Tower Group International, Ltd. and became the ultimate parent company (the “Merger Transaction”). The Company’s common shares are publicly traded on the NASDAQ Global Select Market under the symbol “TWGP”, which was also the symbol of TGI common shares on that exchange prior to the Merger Transaction. See “Note 4 – Merger Transaction” for further discussion of the Merger Transaction and the Company’s succession to TGI as registrant. | ||||
Significant Business Developments and Risks and Uncertainties | ||||
Loss reserves recognized in the June 30, 2013 statement of operations reflect an increase in its loss and loss adjustment expense reserves of $326.7 million excluding the Reciprocal Exchanges relating to reserve strengthening associated with losses from prior accident years. This unfavorable loss development arose primarily from accident years 2008-2011 within the workers’ compensation, commercial multi-peril liability (“CMP”), other liability and commercial auto liability lines of business offset to some degree by favorable development from more recent years within the short tail property lines of business. In the second quarter of 2013, the Company performed a comprehensive update to its internal reserve study in response to continued observance in the second quarter of 2013 of higher than expected reported loss development. In conjunction with its comprehensive internal review, the Company also retained its consulting actuary to perform an independent reserve study covering lines of business comprising over 90% of the Company’s loss reserves. Since 2010, the Company has changed the mix of business by reducing the amount of program and middle market workers’ compensation and liability business that it underwrites. For additional detail of this reserve charge by accident year, business segment and line of business please see “Note 9 - Loss and Loss Adjustment Expense”. | ||||
The reserve strengthening was viewed by the Company as an event or circumstance that required the Company to perform a detailed quantitative analysis of whether its recorded goodwill was impaired. After performing the quantitative analysis, it was determined that $214.0 million of goodwill, which represents all of the goodwill allocated to the Commercial Insurance reporting unit, was impaired. Accordingly, the consolidated statement of operations in the second quarter of 2013 includes a non-cash charge of $214.0 million associated with the write-down of goodwill. See “Note 5 – Goodwill and Intangible Assets” for additional detail on the Goodwill impairment. | ||||
As a result of the reserve strengthening, the Company is expecting its U.S. based operations to have a pre-tax loss for 2013, which would result in a three-year cumulative tax loss position on its U.S. subsidiaries. After considering this negative evidence and uncertainty regarding the Company’s ability to generate sufficient future taxable income in the United States, the Company concluded that it should not recognize any net deferred tax assets (comprised principally of net operating loss carryforwards). The Company, therefore provided a full valuation allowance against its deferred tax asset at June 30, 2013. | ||||
Reinsurance Agreements | ||||
On October 1, 2013, Tower announced that it entered into agreements with three reinsurers, Arch Reinsurance Ltd. (“Arch”), Hannover Re (Ireland) Plc. (“Hannover”) and Southport Re (Cayman), Ltd. (“Southport Re”).These agreements provided for surplus enhancement and improved certain financial leverage ratios, while increasing the Company’s financial flexibility. The agreements with Arch and Hannover each consist of one reinsurance agreement while the arrangement with Southport Re consists of several reinsurance agreements. Each of these is described below. | ||||
The first agreement was between Tower Insurance Company of New York (“TICNY”), on its behalf and on behalf of each of its pool participants, and Arch. Under this multi-line quota share agreement, TICNY will cede 17.5% on a quota share of certain commercial automobile liability, commercial multi-peril property, commercial multi-peril liability and brokerage other liability (mono line liability) businesses. The agreement covers losses occurring on or after July 1, 2013 for policies in-force as at June 30, 2013 and policies written or renewed from July 1, 2013 to December 31, 2013. The agreement has a special termination clause whereby either party may terminate the agreement upon the occurrence of certain circumstances, including an A.M. Best financial strength rating downgrade to below A-. As noted below, A.M. Best downgraded Tower’s financial strength rating to B++. Neither party has provided notice to terminate the agreement. | ||||
The second agreement was between TICNY, on its behalf and on behalf of each of its pool participants, and Hannover. Under this multi-line quota share agreement, TICNY will cede 14% on a quota share of certain brokerage commercial automobile liability, brokerage commercial multi-peril property, brokerage commercial multi-peril liability, brokerage other liability (mono line liability) and brokerage workers’ compensation businesses. The agreement covers losses occurring on or after July 1, 2013 for policies in-force as at June 30, 2013 and policies written or renewed from July 1, 2013 to December 31, 2013. The agreement has a special termination clause whereby either party may terminate the agreement upon the occurrence of certain circumstances, including an A.M. Best financial strength rating downgrade to below A-. As noted below, A.M. Best downgraded Tower’s financial strength rating to B++. Neither party has provided notice to terminate the agreement. | ||||
The third reinsurance arrangement with Southport Re consisted of two separate reinsurance agreements with TICNY, on its behalf and on behalf of each of its pool participants, and a third reinsurance agreement with Tower Reinsurance, Ltd. (“TRL”). Under the first of the agreements with TICNY, TICNY ceded to Southport Re a 30% quota share of its workers’ compensation and employer’s liability business. The agreement covers losses occurring on or after July 1, 2013 for policies in force at June 30, 2013 and policies written or renewed during the term of the agreement. Under the second of these agreements with TICNY, an aggregate excess of loss agreement, Southport Re assumed a portion of the losses incurred by TICNY on its workers’ compensation and employer’s liability business between January 1, 2011 and June 30, 2013, but paid by TICNY on or after June 1, 2013. Finally, TRL, a wholly-owned Bermuda-domiciled reinsurance subsidiary of Tower, also entered into an aggregate excess of loss agreement with Southport Re, in which Southport Re assumed a portion of the losses incurred by TRL on its assumed workers’ compensation and employer’s liability business between January 1, 2011 and June 30, 2013, but paid by TRL on or after June 1, 2013. The agreement has a special termination clause whereby either party may terminate the agreement upon the occurrence of certain circumstances, including an A.M. Best financial strength rating downgrade to below A-. As noted below, A.M. Best downgraded Tower’s financial strength rating to B++. Neither party has provided notice to terminate the agreement. | ||||
A.M. Best, Fitch and Demotech Downgrade the Company’s Financial Strength and Issuer Credit Ratings | ||||
On October 7, 2013, Fitch Ratings (“Fitch”), downgraded Tower’s Issuer Default Rating from “BBB” to “B” and Tower’s insurance subsidiaries’ Insurer Financial Strength ratings from “A-” to “BB”. The ratings will continue to remain on negative watch until, at the earliest, the completion of Tower’s exploration of strategic alternatives. | ||||
On October 8, 2013, A.M. Best Company (“A.M. Best”), lowered Tower’s issuer credit, as well as its financial strength ratings, from “A-” (Excellent) to “B++” (Good). The ratings remain under review with negative implications pending further discussions between A.M. Best and Tower’s management. | ||||
On October 7, 2013, Demotech, Inc. (“Demotech”) lowered its rating on TICNY and three other U.S. based insurance subsidiaries (Kodiak Insurance Company, Massachusetts Homeland Insurance Company and York Insurance Company of Maine) from A’ (A prime) to A (A exceptional). In addition, Demotech removed its previous A’ (A prime) rating on six other U.S. based insurance subsidiaries (CastlePoint Florida Insurance Company, CastlePoint Insurance Company, CastlePoint National Insurance Company, Hermitage Insurance Company, North East Insurance Company and Preserver Insurance Company). Demotech also affirmed its A ratings on Adirondack Insurance Exchange, New Jersey Skylands Insurance Association, New Jersey Skylands Insurance Company and Mountain Valley Indemnity Company. | ||||
Management expects these rating actions, in combination with other items that have impacted the Company in the second quarter of 2013, to result in a decrease in the amount of premiums the insurance subsidiaries are able to write. The net written premiums in the Commercial Insurance segment were $169.1 million and $343.6 million for the three and six months ended June 30, 2013, respectively. The net written premiums in the Specialty Insurance and Reinsurance segment were $103.7 million and $306.6 million for the three and six months ended June 30, 2013, respectively. Business written through certain program underwriting agents requires an A.M. Best rating of A- or greater. | ||||
In addition, one of Tower’s ceding companies requested as a result of contractual provisions that $26.3 million of additional collateral be provided to support the recoverability of their reinsurance receivable from Tower. The $26.3 million was funded in October 2013. Tower’s U.S. based insurance subsidiaries are also required to post collateral for various statutory purposes, and such requests are received from time to time from various regulatory authorities. | ||||
Statutory Capital | ||||
The Company is required to maintain minimum capital and surplus for each of its insurance subsidiaries. | ||||
U.S. based insurance companies are required to maintain capital and surplus above Company Action Level, which is a calculated capital and surplus number using a risk-based formula adopted by the state insurance regulators. The basis for this formula is the National Association of Insurance Commissioners’ (“NAIC’s”) risk-based capital (“RBC”) system and is designed to measure the adequacy of a U.S. regulated insurer’s statutory capital and surplus compared to risks inherent in its business. If an insurance entity falls into Company Action Level, its management is required to submit a comprehensive financial plan that identifies the conditions that contributed to the financial condition. This plan must contain proposals to correct the financial problems and provide projections of the financial condition, both with and without the proposed corrections. The plan must also outline the key assumptions underlying the projections and identify the quality of, and problems associated with, the underlying business. Depending on the level of actual capital and surplus in comparison to the Company Action Level, the state insurance regulators could increase their regulatory oversight, restrict the placement of new business, or place the company under regulatory control. Bermuda based insurance entities minimum capital and surplus requirements are calculated from a solvency formula prescribed by the Bermuda Monetary Authority (the “BMA”). | ||||
As of June 30, 2013, Tower Reinsurance, Ltd. (“TRL”), one the Company’s two Bermuda-based reinsurers had capital and surplus that did not meet the minimum capital and surplus requirements of the BMA. | ||||
The Company has discussed with the BMA its intention to combine a substantial portion of the business and the capital of CastlePoint Reinsurance Company (“CastlePoint Re”), the Company’s other Bermuda based reinsurer, with TRL. Through this combination, management believes that the combined entity’s capital would meet the minimum capital and surplus thresholds determined by the BMA. The Company is currently developing this plan and expects to deliver this plan to its Bermuda regulators in the next several weeks. The Company cannot provide assurance that it will be successful in pursuing this alternative. Should the business combination not be approved, TRL would be operating at a capital level that is below the regulatory minimums as designated by the BMA. As such, TRL may be subject to significant additional regulatory oversight or, in the event that such oversight did not satisfy the BMA, placed into liquidation. | ||||
Tower has in place several intercompany reinsurance transactions between its U.S. based insurance subsidiaries and its Bermuda based insurance subsidiaries. The U.S. based insurance subsidiaries have historically reinsured on a quota share basis obligations to CastlePoint Re. The 2013 obligations that CastlePoint Re assumes from the U.S. based insurance subsidiaries are then retroceded to TRL. In addition, CastlePoint Re also entered into a loss portfolio transaction with TRL where its reserves associated with the U.S. insurance subsidiary business for underwriting years prior to 2013 were all transferred to TRL. Therefore, TRL recorded $175 million of reserve strengthening on its balance sheet as of June 30, 2013 and, consequently, the financial result of such development was a reduction in the capital of TRL to $8.3 million at June 30, 2013. In addition TRL is required to collateralize the additional $175 million of assumed reserves in a trust for the benefit of TICNY, the lead pool company of the U.S. insurance companies. TRL had unencumbered liquid assets of $96 million at June 30, 2013, and during October of 2013, TRL commuted two reinsurance treaties which provided an additional $79 million in unencumbered assets. | ||||
The funding of the trust to support TICNY’s reinsurance recoverable has not yet occurred and requires approval by the BMA. The Company can provide no assurance that it will be successful in finalizing the business combination or in funding the trust. If the trust funding is not approved, 1) the statutory capital of TICNY would be at a level that could result in the New York Department of Financial Services placing TICNY under regulatory control; and 2) Tower Group, Inc. could violate the revised debt covenants of the bank credit facility at December 31, 2013, which violation, if not waived, would result in a cross default of our convertible notes. Statutory capital and surplus would be further reduced by whatever amounts are due from CastlePoint Re or from TRL that are not supported by assets held in trust. At June 30, 2013, all other U.S. based insurance subsidiaries maintained capital and surplus above company action level. | ||||
Two insurance subsidiaries that do not constitute “significant subsidiaries” of the Company under Regulation S-X are in discussions with the insurance regulatory authority in their state of domicile with respect to the imposition of restrictions on the operation of their businesses. These discussions may result in such subsidiaries’ agreeing to provide the regulatory authority with increased information with respect to their business, operations and financial condition, as well as limitations on payments and transactions outside the ordinary course of business and material changes in their management and related matters. | ||||
Liquidity | ||||
TGI is the obligor under the bank credit facility agreement dated as of February 15, 2012, as amended, with Bank of America, N.A. and other lenders named therein ($70 million is outstanding as of June 30,2013) and the Convertible Senior Notes (“Notes”) due September 2014 ($150 million par outstanding as of June 30,2013). The indebtedness of TGI is guaranteed by Tower Group International, Ltd. (“TGIL”), as well as several of TGIL’s non-insurance subsidiaries. | ||||
TGI amended its credit facility on October 11, 2013, and agreed to several restrictions under the credit facility, including: | ||||
• | To not enter into any new borrowings under the credit facility; | |||
• | To pledge to the lending banks any proceeds of new capital raises by TGI or TGIL until such time as the credit facility is paid in full; | |||
• | To pledge to the lending banks proceeds from any sales of assets occurring at TGI; and | |||
• | To submit to regulatory authorities, as appropriate, a request for approval to pledge the capital stock of the U.S. based and Bermuda based insurance subsidiaries. | |||
In addition, the following financial covenants are included in the credit facility: | ||||
• | Minimum Consolidated Net Worth is the greater of $553,400,000 or 90 % of Consolidated Net Worth as of June 30, 2013; this covenant increases by 90% of any new capital plus 50% of Net Income above $20,000,000; | |||
• | Debt to capitalization ratio limit of 46%; | |||
• | Minimum risk based capital ratio of 175% at December 31, 2013 for Tower Insurance Company of New York and any other insurance subsidiary that exceeds 10% of the consolidated statutory surplus of all insurances subsidiaries; | |||
• | Bermuda enhanced minimum capital requirement of 150% for CastlePoint Re at December 31, 2013 and 110% for TRL; | |||
• | Minimum statutory surplus for all insurance companies of the greater of $419,000,000 or 85% of Combined Surplus at June 30, 2013. The Company was in compliance with this covenant as of June 30, 2013; and | |||
• | Independent accountant’s annual report shall not be subject to any “going concern” or like qualification or exception. This financial covenant will remain in effect for the year ending December 31, 2013. Although the independent accountant’s report on the consolidated financial statements for the years ended December 31, 2010, 2011 and 2012 contains a “going concern” explanatory paragraph, on November 14, 2013, the Company received a waiver from the lenders under the credit facility in respect of such “going concern” paragraph. | |||
Tower currently is in compliance with all covenants contained in the credit facility. | ||||
The credit facility matures on May 30, 2014, at which point any unpaid balance becomes due. | ||||
The Company is evaluating potential opportunities to raise additional capital in private sales transactions as well as through other strategic alternatives currently being considered by TGIL’s Board of Directors, and intends to liquidate certain investments at TGI to repay the credit facility. Should the Company default on the credit facility and should such default not be waived by the credit banks, it would cause an acceleration of the maturity of the Notes, and such notes would become due concurrently with the unpaid balance on the credit facility. | ||||
The Company’s plan to repay the Notes includes a combination of using proceeds from the sale of assets held at TGI as well as using proceeds generated by future strategic alternatives being evaluated by TGIL’s Board of Directors, and to the extent necessary, issuing debt and/or equity securities to pay down the principal of the Notes. To the extent that such asset sales and debt securities issuances are not executed or are not successful, the Company may seek to sell certain of its operating assets to satisfy this obligation. The Company can provide no assurance that it will be successful in finalizing the liquidation of the assets held at TGI, issuing new debt and/or equity securities or selling certain of its operating assets. | ||||
As of June 30, 2013, there are $235 million of subordinated debentures outstanding. The subordinated debentures do not have financial covenants that would cause an acceleration of their stated maturities. The earliest stated maturity date is on a $10 million debenture, with a stated maturity in May 2033. The Company has the ability to defer interest payments on its subordinated debentures for up to twenty quarters. | ||||
There are currently no commitments or assurances to raise additional capital, execute on any strategic alternatives or to liquidate certain investments at prices sufficient to liquidate the credit facility. In addition, there can be no guarantees that the Company will be able to remedy current statutory capital deficiencies in certain insurance subsidiaries or maintain adequate levels of statutory capital in the future. Consequently, there is substantial doubt about the Company’s ability to continue as a going concern. Should the Company no longer continue to support its capital or liquidity needs, or should the Company be unable to successfully execute the above mentioned initiatives, the above items would have a material adverse effect on its business, results of operations and financial position. | ||||
The Company and certain of its senior officers have been named as defendants in several class action lawsuits instituted against them by certain shareholders. See “Note 18 – Contingences” for additional detail on such litigation. | ||||
Reorganization | ||||
In the second quarter of 2013, the Company changed the presentation of its business results by allocating its specialty business and assumed reinsurance previously reported in the Commercial Insurance segment to a new Specialty Insurance and Reinsurance segment. In addition, the Company redefined the Personal Insurance segment to include its management companies, which provide certain services to the Reciprocal Exchanges for a management fee. The Reciprocal Exchanges continue to be included in the Personal Insurance segment and transactions between the management companies and the Reciprocal Exchanges have been eliminated. The management companies were previously reported in the Insurance Services segment. The Company will no longer present an Insurance Services segment. These changes in presentation reflect the way management organizes the Company for operating decisions and assessing profitability subsequent to the Merger Transaction. The prior period segment disclosures have been restated to conform to the current presentation. | ||||
Following the change in presentation described above, the Company now operates in three business segments: Commercial Insurance, Specialty Insurance and Reinsurance and Personal Insurance: | ||||
• | Commercial Insurance (“Commercial”) segment offers a broad range of standard commercial lines property and casualty insurance products to businesses distributed through a network of retail and wholesale agents on both an admitted and non-admitted basis; | |||
• | Specialty Insurance and Reinsurance (“Specialty and Reinsurance”) segment offers (i) specialty commercial lines property casualty insurance products distributed through program underwriting agents and (ii) assumed reinsurance; and | |||
• | Personal Insurance (“Personal”) segment offers a broad range of personal lines property and casualty insurance products to individuals distributed through a network of retail and wholesale agents. Also included in the Personal Insurance segment are the results of the Reciprocal Exchanges. | |||
See “Note 17 – Segment Information” for further information on the composition of the Company’s operating and reportable segments. |
Restatement_of_Previously_Issu
Restatement of Previously Issued Financial Statements | 6 Months Ended | ||||||||||||
Jun. 30, 2013 | |||||||||||||
Restatement of Previously Issued Financial Statements | ' | ||||||||||||
Note 2—Restatement of previously issued financial statements | |||||||||||||
On November 14, 2013, Tower Group International, Ltd. (“Tower” or the “Company”) issued a Current Report on Form 8-K stating that it had reached a determination to restate Tower’s audited annual consolidated financial statements as of and for the years ended December 31, 2011 and 2012 contained in Amendment No. 1 to Tower’s Annual Report on Form 10-K for the year ended December 31, 2012, which was filed with the SEC on March 13, 2013 (the “2012 Form 10-K/A”), and that such financial statements should no longer be relied upon. In addition, Tower will revise its (i) audited annual consolidated financial statements for the year ended December 31, 2010 contained in the 2012 Form 10-K/A and (ii) unaudited interim consolidated financial statements as of and for the three months ended March 31, 2013 and 2012 contained in its Quarterly Report on Form 10-Q for the Quarter ended March 31, 2013, which was filed with the SEC on May 10, 2013. Following management review of the matter with the Audit Committee of Tower’s Board of Directors (the “Audit Committee”), and upon management’s recommendation, the Audit Committee reached a conclusion on November 7, 2013 that previously issued financial statements of the Company covering one or more periods for which the Company is required to provide financial statements need to be revised or restated and may no longer be relied upon because of the inadvertent mistakes described below. At such meeting, the Audit Committee authorized the Company’s Chief Financial Officer and Chief Accounting Officer to determine, in consultation with the Company’s independent registered public accounting firm, the specific financial statements that should be revised or restated and should no longer be relied upon. Acting upon such authority, on November 12, 2013, these officers reached a conclusion, and advised Tower’s Board of Directors, as to the specific financial statements that need to be so revised or restated and should no longer be relied upon, as described above. The Company had previously determined and announced on October 7, 2013 that its June 30, 2013 loss reserves were strengthened by approximately $365 million. The Company then undertook to review its reserve analyses for prior years. During this evaluation, the Company considered its historical loss reserve analyses and the analyses of its independent actuaries and reviewed and discussed its conclusions with its independent registered public accounting firm. Upon completion of this evaluation, the Company determined that inadvertent mistakes in classification of insurance premiums by line of business used in the loss reserving process resulted in (1) an increase in the loss and loss adjustment expenses of $9.6 million, $21.7 million and $5.7 million, for the years ended December 31, 2012, 2011 and 2010, respectively, and (2) a decrease in the reinsurance recoverables on unpaid losses asset balance by $37.0 million, $27.4 million and $5.7 million as of December 31, 2012, 2011 and 2010, respectively. | |||||||||||||
In addition, subsequent to the announcement on October 7, 2013, the Company identified errors in its historical premiums receivable balances due to inadvertent mistakes in its premiums receivable reconciliation process. This resulted in (1) a decrease of premiums receivable asset balance of $11.0 million, $10.0 million, $5.6 million and $7.2 million as of the years ended December 31, 2012, 2011, 2010 and 2009, respectively, and (2) an increase (decrease) of other operating expenses of $1.0 million, $4.4 million, ($1.6) million and $7.2 million for the years ended December 31, 2012, 2011, 2010 and 2009, respectively. The Company has also corrected other immaterial adjustments that were initially recorded in the period they were identified. | |||||||||||||
The effect of the restatement on the consolidated balance sheets are presented in the table below: | |||||||||||||
December 31, 2012 | |||||||||||||
($ in thousands, except par value and share amounts) | As | Restated | Effect of | ||||||||||
Previously | Adjustments | ||||||||||||
Reported | |||||||||||||
Assets | |||||||||||||
Total investments | 2,554,505 | 2,553,505 | (1,000 | ) | |||||||||
Cash and cash equivalents | 100,293 | 102,269 | 1,976 | ||||||||||
Investment income receivable | 25,332 | 25,332 | — | ||||||||||
Investment in unconsolidated affiliate | 70,830 | 71,894 | 1,064 | ||||||||||
Premiums receivable | 422,112 | 412,045 | (10,067 | ) | |||||||||
Reinsurance recoverable on paid losses | 17,609 | 17,609 | — | ||||||||||
Reinsurance recoverable on unpaid losses | 496,192 | 459,457 | (36,735 | ) | |||||||||
Prepaid reinsurance premiums | 63,923 | 63,923 | — | ||||||||||
Deferred acquisition costs, net | 180,941 | 181,198 | 257 | ||||||||||
Intangible assets | 106,768 | 106,768 | — | ||||||||||
Goodwill | 241,458 | 241,458 | — | ||||||||||
Funds held by reinsured companies | 137,545 | 137,545 | — | ||||||||||
Other assets | 331,506 | 338,769 | 7,263 | ||||||||||
Total Assets | 4,749,014 | $ | 4,711,772 | $ | (37,242 | ) | |||||||
Liabilities | |||||||||||||
Loss and loss adjustment expenses | 1,895,073 | $ | 1,895,679 | $ | 606 | ||||||||
Unearned premium | 920,859 | 921,271 | 412 | ||||||||||
Reinsurance balances payable | 40,569 | 40,569 | — | ||||||||||
Funds held under reinsurance agreements | 98,581 | 98,581 | — | ||||||||||
Other liabilities | 292,239 | 296,960 | 4,721 | ||||||||||
Deferred income taxes | 36,464 | 24,763 | (11,701 | ) | |||||||||
Debt | 449,731 | 449,731 | — | ||||||||||
Total liabilities | 3,733,516 | 3,727,554 | (5,962 | ) | |||||||||
Contingencies | — | — | — | ||||||||||
Stockholders’ equity | |||||||||||||
Common stock | 530 | 530 | — | ||||||||||
Treasury stock | (181,435 | ) | (181,435 | ) | — | ||||||||
Paid-in-capital | 780,036 | 780,036 | — | ||||||||||
Accumulated other comprehensive income | 83,406 | 82,756 | (650 | ) | |||||||||
Retained earnings | 298,299 | 268,171 | (30,128 | ) | |||||||||
Tower Group, Inc. stockholders’ equity | 980,836 | 950,058 | (30,778 | ) | |||||||||
Noncontrolling interests | 34,662 | 34,160 | (502 | ) | |||||||||
Total stockholders’ equity | 1,015,498 | 984,218 | (31,280 | ) | |||||||||
Total liabilities and stockholders’ equity | 4,749,014 | $ | 4,711,772 | $ | (37,242 | ) |
Accounting_Policies_and_Basis_
Accounting Policies and Basis of Presentation | 6 Months Ended | ||||||||
Jun. 30, 2013 | |||||||||
Accounting Policies and Basis of Presentation | ' | ||||||||
Note 3—Accounting Policies and Basis of Presentation | |||||||||
Basis of Presentation | |||||||||
The Merger Transaction was accounted for as a reverse acquisition, under which TGI was identified and treated as the accounting acquirer. As such, the Company’s unaudited consolidated financial statements include the accounts and operations of TGI and its insurance subsidiaries, managing general agencies and management companies as its historical financial statements, with the results of Tower Group International, Ltd., as accounting acquiree, being included from March 13, 2013, the effective date of the Merger Transaction. The unaudited consolidated financial statements also include the accounts of Adirondack Insurance Exchange, a New York reciprocal insurer, and New Jersey Skylands Insurance Association, a New Jersey reciprocal insurer (together, the “Reciprocal Exchanges”). The Company does not own the Reciprocal Exchanges but manages their business operations through its wholly-owned management companies. | |||||||||
The accompanying unaudited consolidated financial statements included in this report have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q and Article 10 of SEC Regulation S-X. The principles for condensed interim financial information do not require the inclusion of all the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with TGI’s consolidated financial statements as of and for the year ended December 31, 2012 and notes thereto included in TGI’s Amendment No. 2 to the Annual Report on Form 10-K for the year ended December 31, 2012. The accompanying consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with standards of the Public Company Accounting Oversight Board (United States) but, in the opinion of management, such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Company’s financial position, results of operations and cash flows. All intercompany transactions have been eliminated in consolidation. | |||||||||
Use of Estimates | |||||||||
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |||||||||
Moreover, the results of operations for the six months ended June 30, 2013 may not be indicative of the results that may be expected for the year ending December 31, 2013. | |||||||||
Intercompany transactions | |||||||||
In the first quarter of 2012, the Company transferred a licensed insurance subsidiary shell to the Reciprocal Exchanges and received cash for its statutory book value. At the date of the transfer, the Company’s GAAP carrying basis in this subsidiary exceeded the statutory book value and the transfer resulted in a loss to the Company of $1.8 million. Since this was a non-recurring transaction between entities under common control, assets were transferred at historical book value. The difference in the consideration paid and the book value of the assets transferred was treated as an adjustment to equity. This transaction had no effect on consolidated shareholders’ equity. | |||||||||
Reclassifications and Adjustments | |||||||||
Since the Company accounted for the Merger Transaction as a reverse acquisition and recapitalization, it has retroactively restated Common Stock, Treasury Stock and Paid-in-Capital accounts and earnings per share for periods prior to the Merger Transaction to reflect the historical capitalization of TGI, adjusted for the 1.1330 conversion ratio as discussed in “Note 4 – Merger Transaction”. Certain other reclassifications have also been made to prior years’ financial information to conform to the current year presentation, including the changes in segment presentation discussed in “Note 1 – Nature of Business.” | |||||||||
The table below reflects the previously reported and revised shareholders’ equity accounts resulting from the Merger Transaction: | |||||||||
As previously | Revised | ||||||||
($ in thousands, except per share amounts) | Reported | Amount | |||||||
As of December 31, 2012 | |||||||||
Common stock | $ | 469 | $ | 530 | |||||
Treasury stock | (181,435 | ) | (181,435 | ) | |||||
Paid-in-capital | 780,097 | 780,036 | |||||||
For the three-months ended June 30, 2012 | |||||||||
Earnings (Loss) per Share: | |||||||||
Basic | $ | (0.43 | ) | $ | (0.39 | ) | |||
Diluted | (0.43 | ) | (0.39 | ) | |||||
Weighted average common shares outstanding | |||||||||
Basic | 39,117 | 43,289 | |||||||
Diluted | 39,117 | 43,289 | |||||||
For the six-months ended June 30, 2012 | |||||||||
Earnings (Loss) per Share: | |||||||||
Basic | $ | 0.06 | $ | 0.05 | |||||
Diluted | 0.06 | 0.05 | |||||||
Weighted average common shares outstanding | |||||||||
Basic | 39,206 | 43,340 | |||||||
Diluted | 39,268 | 43,410 | |||||||
See “Note 15 – Earnings (loss) per Share” for the computation of the earnings per share. | |||||||||
Accounting Pronouncements | |||||||||
Accounting guidance adopted in 2012 and 2013 | |||||||||
In July 2012, the Financial Accounting Standards Board (“FASB”) issued amended guidance on testing indefinite-lived intangible assets for impairment. This guidance is intended to reduce the cost and complexity of the annual impairment test by allowing an entity to utilize more qualitative factors and is effective for annual and interim tests performed for fiscal years beginning after September 15, 2012. The Company will consider this guidance in connection with the annual impairment testing of its indefinite-lived intangible assets, which is performed annually in the fourth quarter based on data as of September 30. This guidance does not affect existing guidance on recognition or measurement of impairment losses on indefinite-lived intangible assets, and as such it will not affect the Company’s financial position, results of operations or cash flows. | |||||||||
In February 2013, the FASB issued amended guidance on the presentation of amounts reclassified out of accumulated other comprehensive income in one place, either on the face of the income statement or in the footnotes to the financial statements. The Company adopted this guidance effective January 1, 2013 on a prospective basis as prescribed by the amended guidance. As all of the information that this guidance requires to be disclosed is already presented elsewhere in the Company’s financial statements under existing GAAP, and it does not affect the classification, recognition or measurement of items within other comprehensive income, the adoption will not affect the Company’s financial position, results of operations or cash flows. | |||||||||
Accounting guidance not yet effective | |||||||||
In July 2013, the FASB issued new guidance that permits the use of a new benchmark for hedges. This guidance is effective prospectively for new or re-designated hedges as of July 17, 2013. The Company will consider this guidance if and when it enters into any new hedging relationships. |
Merger_Transaction
Merger Transaction | 6 Months Ended | ||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||
Merger Transaction | ' | ||||||||||||||||
Note 4 – Merger Transaction | |||||||||||||||||
On August 20, 2012, TGI closed on its previously announced $74.9 million acquisition of a 10.7% stake in Canopius Group Limited (“Canopius Group”), a privately owned Lloyd’s insurance holding company domiciled in Guernsey, Channel Islands. In connection with this acquisition, TGI also entered into an agreement dated April 25, 2012 (the “Master Transaction Agreement”) under which Canopius Group committed to assist TGI with the establishment of a presence at Lloyd’s of London through a special purpose syndicate (“SPS Transaction Right and Acquisition Right”) (subject to required approvals) and granted TGI an option (the “Merger Option”) to combine with Canopius Bermuda. On July 30, 2012, TGI announced that it had exercised the Merger Option and executed an Agreement and Plan of Merger (the “Original Merger Agreement”) with Canopius Bermuda pursuant to which a wholly-owned subsidiary of Canopius Bermuda would acquire all of TGI’s common stock. TGI paid Canopius Group a fee of $1,000,000 to exercise the Merger Option. On November 8, 2012, the Original Merger Agreement was amended by Amendment No. 1 to the Agreement and Plan of Merger to reflect changes to the merger consideration to be received by TGI shareholders (the Original Merger Agreement as so amended, the “Merger Agreement”). | |||||||||||||||||
Prior to the Merger Transaction date, Canopius Group priced on March 6, 2013, a private sale of 100% of the shares of Canopius Bermuda to third party investors for net consideration for $205,862,755. This investment resulted in 14,025,737 shares being issued in the private placement immediately preceding the merger. | |||||||||||||||||
On March 13, 2013, Canopius Bermuda and TGI consummated the Merger Transaction contemplated by the Merger Agreement. Canopius Bermuda was re-named Tower Group International, Ltd. and became the ultimate parent company of TGI, with TGI becoming its indirect wholly-owned subsidiary. Pursuant to the terms of the Merger Agreement, among other things, (i) 100% of the issued and outstanding shares of TGI common stock was cancelled and automatically converted into the right to receive 1.1330 common shares of the Company, par value $0.01 per share (the “ Common Shares”), (ii) each outstanding option to acquire TGI common stock, whether vested or unvested and whether granted under TGI’s 2008 Long-Term Equity Compensation Plan or otherwise, automatically vested, free of any forfeiture conditions, and constituted a fully vested option to acquire that number of Common Shares (rounded down to the nearest whole number) equal to the number of shares of TGI common stock subject to such option multiplied by 1.1330, on the same terms and conditions (other than vesting and performance conditions) as were applicable to such TGI stock option immediately prior to the Merger Transaction, with the exercise price of such option adjusted to be the original exercise price divided by 1.1330, and (iii) substantially all issued and outstanding shares of TGI restricted stock, whether granted under TGI’s 2008 Long-Term Equity Compensation Plan or otherwise, automatically vested, free of any forfeiture conditions, and was converted into the right to receive, as soon as reasonably practicable after the effective time, 1.1330 Common Shares. | |||||||||||||||||
Immediately after giving effect to the issuance of Common Shares to the former TGI shareholders in the Merger Transaction, approximately 57,432,150 Common Shares were outstanding, of which 76% were held by the former TGI shareholders. The remaining 24% of Common Shares outstanding immediately after giving effect to the Merger Transaction were held by third party investors. As the Company is the successor issuer to TGI, succeeding to the attributes of TGI as registrant, including TGI’s SEC filer code, its Common Shares trade on the same exchange, the NASDAQ Global Select Market, and under the same trading symbol, “TWGP,” that the shares of TGI common stock traded on and under prior to the Merger Transaction. | |||||||||||||||||
The Merger Transaction is expected to advance the Company’s strategy and create a more efficient global, diversified specialty insurance company consisting of commercial, specialty and personal lines, reinsurance and international specialty products. In addition, the establishment of a Bermuda domicile provides the Company with an international platform through which it accesses the U.S., Bermuda and the Lloyd’s of London (“Lloyd’s”) markets. | |||||||||||||||||
Accounting for the Merger Transaction | |||||||||||||||||
The Company has accounted for the Merger Transaction as a reverse acquisition in which TGI, the legal acquiree, was identified and treated as the accounting acquirer and Tower Group International, Ltd., the legal acquirer, was identified and treated as the accounting acquiree. The identification of the accounting acquirer and acquiree in the Merger Transaction was primarily based on the fact that immediately following the close of the Merger Transaction there was a change in control of the Company with TGI designees to the Company’s Board of Directors comprising all of its directors and TGI’s former senior management comprising the Company’s entire senior management team. In accordance with accounting guidance for reverse acquisitions, the unaudited consolidated financial statements of the Company following the Merger Transaction have been issued under the name of the Company, as the legal parent, but reflect a continuation of the financial statements of TGI, as the accounting acquirer, with one exception, which was the retroactive adjustment of TGI’s historical legal capital to reflect the transaction as a recapitalization of TGI’s historical capital accounts. On the effective date of the Merger Transaction, the assets and liabilities of Tower Group International, Ltd. were accounted for under the acquisition method, under which they have been reflected at their respective acquisition date fair values. | |||||||||||||||||
Prior to the Merger Transaction, Canopius Bermuda restructured its insurance operations as contemplated in the Master Transaction Agreement. This restructuring occurred primarily through the execution of retrocession agreements with Canopius Reinsurance Limited (“CRL”), an indirectly wholly-owned subsidiary of Canopius Group, to retrocede a percentage of Lloyd’s of London Syndicate 4444 (“Syndicate 4444”) business for the Year of Account (“YOA”) 2012, YOA 2011 and prior years, which Canopius Bermuda assumed from Canopius Group. Syndicate 4444 is an insurance syndicate managed by Canopius Group. The Company accounts for these retrocession agreements in accordance with prospective accounting treatment, and reports the assumed and ceded assets and liabilities on a gross basis on the consolidated balance sheet. On September 30, 2013, Tower commuted the Syndicate 4444 YOA 2012 and YOA 2011 and prior years retrocession agreements with CRL and novated the assumed reinsurance with Canopius Group on these same contracts. | |||||||||||||||||
In addition, effective January 1, 2013, pursuant to the terms of the Master Transaction Agreement, prior to the Merger Transaction, TGI entered into a commutation agreement whereby the TGI commuted Syndicate 4444 YOA 2012 and YOA 2011 business TGI previously reinsured from Canopius Group in prior years. There was no gain or loss recognized on this commutation. | |||||||||||||||||
The following provides details of the purchase consideration, the fair values of the respective assets acquired and liabilities assumed and the resulting amount of goodwill recorded in connection with the Merger Transaction. | |||||||||||||||||
The purchase consideration was determined based on the total consideration received by Canopius Group for its sale of 100% of its equity ownership of Canopius Bermuda, and the proceeds received for the issuance and exercise of the Merger Option from TGI. | |||||||||||||||||
(in thousands) | |||||||||||||||||
Consideration received by Canopius Group from the third party sale | $ | 205,863 | |||||||||||||||
Fair value of Merger Option received in connection with TGI’s investment in Canopius Group | 484 | ||||||||||||||||
Exercise price of Merger Right received from TGI upon exercise | 1,000 | ||||||||||||||||
Total preliminary purchase consideration | $ | 207,347 | |||||||||||||||
($ in thousands) | |||||||||||||||||
Assets | |||||||||||||||||
Cash and cash equivalents | $ | 134,741 | |||||||||||||||
Investments | 26,485 | ||||||||||||||||
Reinsurance recoverables | 468,727 | ||||||||||||||||
Prepaid reinsurance | 152,431 | ||||||||||||||||
Funds held by reinsured companies | 698,819 | ||||||||||||||||
Other assets | 75,219 | ||||||||||||||||
Liabilities | |||||||||||||||||
Loss and loss adjustment expenses | 630,613 | ||||||||||||||||
Unearned premiums | 169,963 | ||||||||||||||||
Funds held under reinsurance agreements | 560,714 | ||||||||||||||||
Other liabilities | 15,916 | ||||||||||||||||
Net assets acquired | $ | 179,216 | |||||||||||||||
Purchase Consideration | 207,347 | ||||||||||||||||
Goodwill | $ | 28,131 | |||||||||||||||
Direct costs of the acquisition were expensed as incurred. During the three and six months ended June 30, 2013, the Company recognized approximately $0.7 million and $19.7 million, respectively, of such costs, all of which have been classified within “acquisition-related transaction costs” on the consolidated statement of operations. Such costs for the six months ended June 30, 2013 included $11.6 million in compensation expense (of which accelerated vesting of restricted stock was $10.3 million) and $8.1 million in legal and accounting fees. | |||||||||||||||||
The resulting goodwill recognized in connection with the Merger Transaction is mainly derived from the synergies and economies of scale expected to result from the combined operations of the Company. See “Note 5 – Goodwill and Intangible Assets” for the allocation of the Merger Transaction goodwill by segment. | |||||||||||||||||
The fair value of loss and loss adjustment expenses includes $19.1 million of reserves for risk premiums (“risk premiums”). The risk premium was determined using a cash flow model. This model used an estimate of net nominal future cash flows related to liabilities for losses and loss adjustment expenses that a market participant would expect as of the date of the transaction. These future cash flows were adjusted for the time value of money at a risk free rate and a risk margin to compensate an acquirer for bearing the risk associated with the liabilities. | |||||||||||||||||
Since the effective date of the Merger Transaction on March 13, 2013 through June 30, 2013, the operations of the acquired business accounted for approximately $40.8 million and $(22.0) million of the Company’s consolidated revenues and net income (loss), respectively. | |||||||||||||||||
The following unaudited pro forma financial information presents the consolidated revenues and net income (loss) of the Company for the three and six months ended June 30, 2013 and 2012, as if the Merger Transaction had been completed as of January 1, 2012. | |||||||||||||||||
These pro forma amounts exclude any pro forma impacts to the Company’s effective federal income tax rates. | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
($ in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Revenues | $ | 460,518 | $ | 509,666 | $ | 940,145 | $ | 979,033 | |||||||||
Net Income (Loss) | (505,876 | ) | (16,887 | ) | (485,248 | ) | 10,074 |
Goodwill_and_Intangible_Assets
Goodwill and Intangible Assets | 6 Months Ended | ||||||||||||
Jun. 30, 2013 | |||||||||||||
Goodwill and Intangible Assets | ' | ||||||||||||
Note 5–Goodwill and Intangible Assets | |||||||||||||
Goodwill is calculated as the excess of purchase price over the net fair value of assets acquired. Under GAAP, the Company is required to allocate goodwill to each of its reporting units. On March 13, 2013, the Company recorded $28.1 million of goodwill in connection with the Merger Transaction (See “Note 4– Merger Transaction”), which was mainly derived from synergies and economies of scale expected to result from the combined operations of the Company. Management allocated the goodwill recognized in the Merger Transaction to the Commercial Insurance reporting unit. | |||||||||||||
2013 Reorganization | |||||||||||||
In the second quarter of 2013, the Company changed the way it presents its results by segment, as described in “Note 1 – Nature of Business”. Following the reorganization, based on information regularly reviewed by the Company’s chief operating decision maker, the Company concluded it had three reporting units corresponding to it each of the business segments: (i) Commercial Insurance, (ii) Specialty Insurance and Reinsurance and (iii) Personal Insurance. | |||||||||||||
In accordance with GAAP, when an entity reorganizes its reporting structure in a manner that changes the composition of one or more of its reporting units, the entity reassigns goodwill to the affected reporting units by using a relative fair value allocation approach. | |||||||||||||
Goodwill Impairment Testing and Charge | |||||||||||||
The Company tests goodwill balances for impairment annually in the fourth quarter of each year using a September 30 measurement date, or more frequently if circumstances indicate that the value of goodwill may be impaired. Goodwill impairment is performed at the reporting unit level and the test requires a two-step process. In performing Step 1of the impairment test, management compared the estimated fair values of the applicable reporting units to their aggregate carrying values, including goodwill. If the carrying amount of a reporting unit including goodwill were to exceed the fair value of the reporting unit, Step 2 of the goodwill impairment would be performed. Step 2 of the goodwill impairment test requires comparing the implied fair value of the affected reporting unit’s goodwill against the carrying value of that goodwill. | |||||||||||||
In its 2012 annual impairment test, management determined that a greater risk of future impairment existed for the Commercial Insurance reporting unit. During the second quarter of 2013, management concluded an impairment test was required as a result of the significant prior years’ loss reserves incurred (see “Note 9 – Loss and Loss Adjustment Expense”) and the 2013 reorganization. | |||||||||||||
In conducting the goodwill impairment analysis as of June 30, 2013, the Company tested the reporting units prior to the reorganization as required by GAAP. The Company estimated each of the reporting units’ fair values using a market multiple approach based on tangible book values. Historically, the Company also utilized market multiple approaches based on (i) book value, (ii) estimates of projected results for future periods, and (iii) a valuation technique using discounted cash flows. However, based upon the significance of the loss reserve charge recorded in the second quarter of 2013, the reduction to Tower’s insurance subsidiaries’ capital and surplus levels (see “Note 16 – Statutory Financial Information”), management in its judgment concluded a multiple of tangible book value was most indicative of a price a market participant would pay for the reporting units. In addition, the Commercial Insurance reporting unit’s estimated fair value was adjusted for the expected capital infusion a market participant would be expected to fund into the insurance businesses to maintain historical rating agency ratings. | |||||||||||||
Step 1 of the impairment test indicated the Commercial Insurance unit’s carrying value exceeded its fair value and the Personal Insurance unit’s fair value exceeded its carrying value. | |||||||||||||
Accordingly, the Company performed a Step 2 impairment test on the Commercial Insurance reporting unit. Based on the results, the Company recorded a non-cash goodwill impairment charge of $214.0 million to write-down all of the goodwill in the Commercial Insurance reporting unit as of June 30, 2013. | |||||||||||||
The following table reflects the changes to goodwill during 2013 and is presented using the reporting units prior to the reorganization. | |||||||||||||
($ in thousands) | Commercial | Personal | Total | ||||||||||
Insurance | Insurance | ||||||||||||
Balance, January 1, 2013 | $ | 185,918 | $ | 55,540 | $ | 241,458 | |||||||
Goodwill from Merger Transaction | 28,131 | - | 28,131 | ||||||||||
Goodwill impairment | (214,049 | ) | - | (214,049 | ) | ||||||||
Total, June 30, 2013 | $ | - | $ | 55,540 | $ | 55,540 | |||||||
As of June 30, 2013, all remaining goodwill is in the Personal Insurance reporting unit. Subsequent goodwill assessments could result in personal lines goodwill impairment due to the impact of a volatile financial impact on earnings, changes in liquidity and market capitalizations, or other unfavorable events resulting rating agency downgrades. | |||||||||||||
Intangible Assets | |||||||||||||
The intangible assets consist of finite life and indefinite life assets. Finite life intangible assets include customer relationships and trademarks. Insurance company licenses and management contracts are considered indefinite life intangible assets subject to annual impairment testing. Management assessed the carrying value of its intangible assets as of June 30, 2013, and concluded an impairment charge of $3.8 million was required to reduce its customer relationship intangible assets. This charge is reported in Other Operating Expenses in the consolidated statements of operations. |
Variable_Interest_Entities_VIE
Variable Interest Entities ("VIEs") | 6 Months Ended |
Jun. 30, 2013 | |
Variable Interest Entities ("VIEs") | ' |
Note 6–Variable Interest Entities (“VIEs”) | |
Through its management companies, Tower is the attorney-in-fact for the Reciprocal Exchanges and has the ability to direct their activities. The Reciprocal Exchanges are policyholder-owned insurance carriers organized as unincorporated associations. Each policyholder insured by the Reciprocal Exchanges shares risk with the other policyholders. | |
In the event of dissolution, policyholders would share any residual unassigned surplus in the same proportion as the amount of insurance purchased but are not subject to assessment for any deficit in unassigned surplus of the Reciprocal Exchanges. Tower receives management fee income for the services provided to the Reciprocal Exchanges. The assets of the Reciprocal Exchanges can be used only to settle the obligations of the Reciprocal Exchanges and general creditors to their liabilities have no recourse to Tower as the primary beneficiary. | |
In addition, Tower holds the surplus notes issued by the Reciprocal Exchanges when they were originally capitalized. The obligation to repay principal and interest on the surplus notes is subordinated to the Reciprocal Exchanges’ other liabilities including obligations to policyholders and claimants for benefits under insurance policies. Principal and interest on the surplus notes are payable only with regulatory approval. The Company has no ownership interest in the Reciprocal Exchanges. | |
The Company determined that each of the Reciprocal Exchanges qualifies as a VIE and that the Company is the primary beneficiary as it has both the power to direct the activities of the Reciprocal Exchanges that most significantly impact their economic performance and the risk of economic loss through its ownership of the surplus notes. Accordingly, the Company consolidates these Reciprocal Exchanges and eliminates all intercompany balances and transactions with Tower. | |
For the three months ended June 30, 2013, the Reciprocal Exchanges recognized total revenues, total expenses and net income (loss) of $49.1 million, $48.3 million and $0.8 million, respectively. For the three months ended June 30, 2012, the Reciprocal Exchanges recognized total revenues, total expenses and net income of $49.2 million, $48.8 million and $0.4 million, respectively. | |
For the six months ended June 30, 2013, the Reciprocal Exchanges recognized total revenues, total expenses and net income (loss) of $96.4 million, $106.9 million and $(10.5) million, respectively. For the six months ended June 30, 2012, the Reciprocal Exchanges recognized total revenues, total expenses and net income of $99.4 million, $96.0 million and $3.4 million, respectively. |
Investments
Investments | 6 Months Ended | ||||||||||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||||||||||
Investments | ' | ||||||||||||||||||||||||
Note 7—Investments | |||||||||||||||||||||||||
The cost or amortized cost and fair value of the Company’s investments in fixed maturity and equity securities, gross unrealized gains and losses, and other-than-temporary impairment losses (“OTTI”) as of June 30, 2013 and December 31, 2012 are summarized as follows: | |||||||||||||||||||||||||
($ in thousands) | Cost or | Gross | Gross | Fair Value | Unrealized | ||||||||||||||||||||
Amortized | Unrealized | Unrealized | OTTI | ||||||||||||||||||||||
Cost | Gains | Losses | Losses (1) | ||||||||||||||||||||||
June 30, 2013 | |||||||||||||||||||||||||
U.S. Treasury securities | $ | 390,003 | $ | 1,024 | $ | (5,780 | ) | $ | 385,247 | $ | - | ||||||||||||||
U.S. Agency securities | 104,099 | 2,189 | (965 | ) | 105,323 | - | |||||||||||||||||||
Municipal bonds | 568,991 | 24,132 | (5,732 | ) | 587,391 | (71 | ) | ||||||||||||||||||
Corporate and other bonds | |||||||||||||||||||||||||
Finance | 246,779 | 14,594 | (4,240 | ) | 257,133 | - | |||||||||||||||||||
Industrial | 406,976 | 13,171 | (5,675 | ) | 414,472 | - | |||||||||||||||||||
Utilities | 58,368 | 2,078 | (2,152 | ) | 58,294 | (203 | ) | ||||||||||||||||||
Commercial mortgage-backed securities | 217,531 | 21,439 | (2,351 | ) | 236,619 | (604 | ) | ||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency backed securities | 161,783 | 4,891 | (1,614 | ) | 165,060 | - | |||||||||||||||||||
Non-agency backed securities | 35,583 | 4,059 | (30 | ) | 39,612 | (6 | ) | ||||||||||||||||||
Asset-backed securities | 39,294 | 1,102 | (2 | ) | 40,394 | - | |||||||||||||||||||
Total fixed-maturity securities | 2,229,407 | 88,679 | (28,541 | ) | 2,289,545 | (884 | ) | ||||||||||||||||||
Preferred stocks, principally financial sector | 21,584 | 188 | (1,137 | ) | 20,635 | - | |||||||||||||||||||
Common stocks, principally financial and industrial sectors | 108,765 | 8,463 | (463 | ) | 116,765 | - | |||||||||||||||||||
Short-term investments | 13,415 | - | (36 | ) | 13,379 | - | |||||||||||||||||||
Total, June 30, 2013 | $ | 2,373,171 | $ | 97,330 | $ | (30,177 | ) | $ | 2,440,324 | $ | (884 | ) | |||||||||||||
Tower | $ | 2,121,665 | $ | 87,920 | $ | (25,786 | ) | $ | 2,183,799 | $ | (884 | ) | |||||||||||||
Reciprocal Exchanges | 251,506 | 9,410 | (4,391 | ) | 256,525 | - | |||||||||||||||||||
Total, June 30, 2013 | $ | 2,373,171 | $ | 97,330 | $ | (30,177 | ) | $ | 2,440,324 | $ | (884 | ) | |||||||||||||
December 31, 2012, as restated | |||||||||||||||||||||||||
U.S. Treasury securities | $ | 183,462 | $ | 1,500 | $ | (13 | ) | $ | 184,949 | $ | - | ||||||||||||||
U.S. Agency securities | 98,502 | 4,351 | (76 | ) | 102,777 | - | |||||||||||||||||||
Municipal bonds | 633,373 | 52,914 | (244 | ) | 686,043 | - | |||||||||||||||||||
Corporate and other bonds | |||||||||||||||||||||||||
Finance | 233,849 | 21,293 | (1,095 | ) | 254,047 | - | |||||||||||||||||||
Industrial | 412,465 | 26,556 | (868 | ) | 438,153 | - | |||||||||||||||||||
Utilities | 51,698 | 2,958 | (191 | ) | 54,465 | - | |||||||||||||||||||
Commercial mortgage-backed securities | 211,819 | 30,375 | (141 | ) | 242,053 | - | |||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency backed securities | 283,652 | 12,326 | (262 | ) | 295,716 | - | |||||||||||||||||||
Non-agency backed securities | 38,615 | 3,575 | (34 | ) | 42,156 | (6 | ) | ||||||||||||||||||
Asset-backed securities | 42,751 | 1,615 | (14 | ) | 44,352 | - | |||||||||||||||||||
Total fixed-maturity securities | 2,190,186 | 157,463 | (2,938 | ) | 2,344,711 | (6 | ) | ||||||||||||||||||
Preferred stocks, principally financial sector | 31,272 | 730 | (481 | ) | 31,521 | - | |||||||||||||||||||
Common stocks, principally industrial and financial sectors | 118,076 | 953 | (4,292 | ) | 114,737 | - | |||||||||||||||||||
Short-term investments | 4,749 | 1 | - | 4,750 | - | ||||||||||||||||||||
Total, December 31, 2012, as restated | $ | 2,344,283 | $ | 159,147 | $ | (7,711 | ) | $ | 2,495,719 | $ | (6 | ) | |||||||||||||
Tower | $ | 2,075,189 | $ | 141,614 | $ | (7,210 | ) | $ | 2,209,593 | $ | (6 | ) | |||||||||||||
Reciprocal Exchanges | 269,094 | 17,533 | (501 | ) | 286,126 | - | |||||||||||||||||||
Total, December 31, 2012, as restated | $ | 2,344,283 | $ | 159,147 | $ | (7,711 | ) | $ | 2,495,719 | $ | (6 | ) | |||||||||||||
(1) Represents the gross unrealized loss on other-than-temporarily impaired securities recognized in accumulated other comprehensive income (loss). | |||||||||||||||||||||||||
In accordance with Lloyd’s operating guidelines, the Company deposits funds at Lloyd’s to support underwriting operations. These funds are available only to fund claims obligations. These restricted assets consisted of approximately $32 million of cash and cash equivalents as of June 30, 2013. In addition, the Company had $457.3 million and $481.5 million of cash and cash equivalents and investments as of June 30, 2013 and December 31, 2012, respectively, held by counterparties as collateral or in trusts to support letters of credit issued on the Company’s behalf, reinsurance liabilities on certain assumed reinsurance treaties, collateral posted for certain leases and other purposes. | |||||||||||||||||||||||||
The Company also deposits funds with various state and governmental authorities in the U.S. For a discussion of the Company’s deposits with state and governmental authorities, see “Note 7– Investments” of the Notes to Consolidated Financial Statements in TGI’s Amendment No. 2 to its Annual Report on Form 10-K for the year ended December 31, 2012. | |||||||||||||||||||||||||
Major categories of net investment income are summarized as follows: | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||
Income | |||||||||||||||||||||||||
Fixed-maturity securities | $ | 20,562 | $ | 24,511 | $ | 41,535 | $ | 49,924 | |||||||||||||||||
Equity securities | 6,808 | 6,603 | 13,292 | 14,239 | |||||||||||||||||||||
Cash and cash equivalents | 19 | 505 | 70 | 798 | |||||||||||||||||||||
Other invested assets | 2,158 | 1,313 | 6,414 | 3,146 | |||||||||||||||||||||
Other | 287 | 203 | 615 | 349 | |||||||||||||||||||||
Total | 29,834 | 33,135 | 61,926 | 68,456 | |||||||||||||||||||||
Expenses | |||||||||||||||||||||||||
Investment expenses | (1,432 | ) | (1,354 | ) | (3,207 | ) | (2,732 | ) | |||||||||||||||||
Net investment income | $ | 28,402 | $ | 31,781 | $ | 58,719 | $ | 65,724 | |||||||||||||||||
Tower | 27,612 | 30,267 | 57,195 | 62,525 | |||||||||||||||||||||
Reciprocal Exchanges | 2,458 | 3,177 | 4,839 | 6,526 | |||||||||||||||||||||
Elimination of interest on Reciprocal Exchange surplus notes | (1,668 | ) | (1,663 | ) | (3,315 | ) | (3,327 | ) | |||||||||||||||||
Net investment income | $ | 28,402 | $ | 31,781 | $ | 58,719 | $ | 65,724 | |||||||||||||||||
Proceeds from the sale of fixed-maturity securities were $759.0 million and $980.0 million for the six months ended June 30, 2013 and 2012, respectively. Proceeds from the sale of equity securities were $796.8 million and $745.6 million for the six months ended June 30, 2013 and 2012, respectively. | |||||||||||||||||||||||||
Gross realized gains, losses and impairment write-downs on investments are summarized as follows: | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||
Fixed-maturity securities | |||||||||||||||||||||||||
Gross realized gains | $ | 10,479 | $ | 12,354 | $ | 17,843 | $ | 25,162 | |||||||||||||||||
Gross realized losses | (1,672 | ) | (609 | ) | (1,862 | ) | (2,551 | ) | |||||||||||||||||
8,807 | 11,745 | 15,981 | 22,611 | ||||||||||||||||||||||
Equity securities | |||||||||||||||||||||||||
Gross realized gains | 5,323 | 2,685 | 9,559 | 4,179 | |||||||||||||||||||||
Gross realized losses | (12,717 | ) | (9,808 | ) | (17,530 | ) | (16,160 | ) | |||||||||||||||||
(7,394 | ) | (7,123 | ) | (7,971 | ) | (11,981 | ) | ||||||||||||||||||
Other | |||||||||||||||||||||||||
Gross realized gains | 2,100 | 555 | 3,855 | 1,790 | |||||||||||||||||||||
Gross realized losses | (1,091 | ) | (3,174 | ) | (1,903 | ) | (4,113 | ) | |||||||||||||||||
1,009 | (2,619 | ) | 1,952 | (2,323 | ) | ||||||||||||||||||||
Net realized gains (losses) on investments | 2,422 | 2,003 | 9,962 | 8,307 | |||||||||||||||||||||
Other-than-temporary impairment losses: | |||||||||||||||||||||||||
Fixed-maturity securities | (23 | ) | (765 | ) | (187 | ) | (882 | ) | |||||||||||||||||
Equity securities | (4,433 | ) | (1,219 | ) | (4,958 | ) | (4,078 | ) | |||||||||||||||||
Total other-than-temporary impairment losses recognized in earnings | (4,456 | ) | (1,984 | ) | (5,145 | ) | (4,960 | ) | |||||||||||||||||
Total net realized investment gains (losses) | $ | (2,034 | ) | $ | 19 | $ | 4,817 | $ | 3,347 | ||||||||||||||||
Tower | $ | (2,243 | ) | $ | (110 | ) | $ | 3,990 | $ | 1,028 | |||||||||||||||
Reciprocal Exchanges | 209 | 129 | 827 | 2,319 | |||||||||||||||||||||
Total net realized investment gains (losses) | $ | (2,034 | ) | $ | 19 | $ | 4,817 | $ | 3,347 | ||||||||||||||||
Management may dispose of a particular security due to changes in facts and circumstances related to the invested asset that have arisen since the last analysis supporting management’s determination whether or not it intended to sell the security, and if not, whether it is more likely than not that the Company would be required to sell the security before recovery of its amortized cost basis. | |||||||||||||||||||||||||
Impairment Review | |||||||||||||||||||||||||
Management regularly reviews the Company’s fixed-maturity and equity security portfolios in accordance with its impairment policy to evaluate the necessity of recording impairment losses for OTTI. The determination of OTTI is a subjective process and different judgments and assumptions could affect the timing of loss realization. | |||||||||||||||||||||||||
Management, in conjunction with its outside portfolio managers, analyzes its non-agency residential mortgage-backed securities (“RMBS”) using default loss models based on the performance of the underlying loans. Performance metrics include delinquencies, defaults, foreclosures, anticipated cash flow prepayments and cumulative losses incurred. The expected losses for a mortgage pool are compared to the break-even loss, which represents the point at which the Company’s tranche begins to experience losses. | |||||||||||||||||||||||||
The commercial mortgage-backed securities (“CMBS”) holdings are evaluated using analytical techniques and various metrics including the level of subordination, debt-service-coverage ratios, loan-to-value ratios, delinquencies, defaults and foreclosures. | |||||||||||||||||||||||||
For the non-structured fixed-maturity securities (U.S. Treasury and Agency securities, municipal bonds, and corporate debt), unrealized losses are reviewed to determine whether full recovery of principal and interest will be received. The estimate of expected cash flows is determined by projecting a recovery value and a recovery time frame and assessing whether further principal and interest will be received. The determination of recovery value incorporates an issuer valuation assumption utilizing one or a combination of valuation methods as deemed appropriate by management. The present value of the cash flows is determined by applying the effective yield of the security at the date of acquisition (or the most recent implied rate used to accrete the security if the implied rate has changed as a result of a previous impairment) and an estimated recovery time frame. For securities for which the issuer is financially troubled but not in bankruptcy, that time frame is generally longer. Included in the present value calculation are expected principal and interest payments; however, for securities for which the issuer is classified as bankrupt or in default, the present value calculation assumes no interest payments and a single recovery amount. In situations for which a present value of cash flows cannot be estimated, a write-down to fair value is recorded. | |||||||||||||||||||||||||
In estimating the recovery value, significant judgment is involved in the development of assumptions relating to a number of factors related to the issuer including, but not limited to, revenue, margin and earnings projections, the likely market or liquidation values of assets, potential additional debt to be incurred pre- or post- bankruptcy/restructuring, the ability to shift existing or new debt to different priority layers, the amount of restructuring/bankruptcy expenses, the size and priority of unfunded pension obligations, litigation or other contingent claims, the treatment of intercompany claims and the likely outcome with respect to inter-creditor conflicts. | |||||||||||||||||||||||||
The evaluation of equity securities includes management’s intent and ability to hold the security to recovery. Management will record OTTI in those situations where it does not intend to hold the security to recovery or if the security is not expected to recover in value in the near term. | |||||||||||||||||||||||||
The following table shows the fixed-maturity and equity securities OTTI amounts for the three and six months ended June 30, 2013 and 2012: | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||
Corporate and other bonds | $ | - | $ | (648 | ) | $ | - | $ | (737 | ) | |||||||||||||||
Commercial mortgage-backed securities | (23 | ) | (403 | ) | (47 | ) | (403 | ) | |||||||||||||||||
Residential mortgage-backed securities | (140 | ) | - | (140 | ) | (28 | ) | ||||||||||||||||||
Equities | (4,293 | ) | (1,219 | ) | (4,958 | ) | (4,078 | ) | |||||||||||||||||
Other-than-temporary-impairments | (4,456 | ) | (2,270 | ) | (5,145 | ) | (5,246 | ) | |||||||||||||||||
Portion of loss recognized in accumulated other comprehensive income (loss) | - | 286 | - | 286 | |||||||||||||||||||||
Impairment losses recognized in earnings | $ | (4,456 | ) | $ | (1,984 | ) | $ | (5,145 | ) | $ | (4,960 | ) | |||||||||||||
Tower | $ | (4,456 | ) | $ | (1,984 | ) | $ | (5,145 | ) | $ | (4,960 | ) | |||||||||||||
Reciprocal Exchanges | - | - | - | - | |||||||||||||||||||||
Impairment losses recognized in earnings | $ | (4,456 | ) | $ | (1,984 | ) | $ | (5,145 | ) | $ | (4,960 | ) | |||||||||||||
The following table provides a rollforward of the cumulative amounts of credit OTTI for securities still held showing the amounts that have been included in earnings on a pretax basis for the three months ended June 30, 2013 and 2012: | |||||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||||
June 30, | |||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||||||||||
Balance, April 1, | $ | 4,516 | $ | 6,084 | |||||||||||||||||||||
Additional credit losses recognized during the period, related to securities for which: | |||||||||||||||||||||||||
No OTTI has been previously recognized | 23 | 765 | |||||||||||||||||||||||
OTTI has been previously recognized | - | - | |||||||||||||||||||||||
Reductions due to: | |||||||||||||||||||||||||
Securities sold during the period (realized) | - | (730 | ) | ||||||||||||||||||||||
Balance, June 30, | $ | 4,539 | $ | 6,119 | |||||||||||||||||||||
The following table provides a rollforward of the cumulative amounts of credit OTTI for securities still held showing the amounts that have been included in earnings on a pretax basis for the six months ended June 30, 2013 and 2012: | |||||||||||||||||||||||||
Six Months Ended | |||||||||||||||||||||||||
June 30, | |||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||||||||||
Balance, January 1, | $ | 4,492 | $ | 12,666 | |||||||||||||||||||||
Additional credit losses recognized during the period, related to securities for which: | |||||||||||||||||||||||||
No OTTI has been previously recognized | 47 | 854 | |||||||||||||||||||||||
OTTI has been previously recognized | - | 28 | |||||||||||||||||||||||
Reductions due to: | |||||||||||||||||||||||||
Securities sold during the period (realized) | - | (7,429 | ) | ||||||||||||||||||||||
Balance, June 30, | $ | 4,539 | $ | 6,119 | |||||||||||||||||||||
Unrealized Losses | |||||||||||||||||||||||||
There are 668 securities at June 30, 2013, including fixed maturities and equity securities, which account for the gross unrealized loss, none of which is deemed by management to be OTTI. Temporary losses on corporate and other bonds result from purchases made in a lower yield spread environment. In addition, there have been some ratings downgrades on certain of these securities. After analyzing the credit quality, balance sheet strength and company outlook, management believes these securities will recover in value. To the extent projected cash flows on structured securities change adversely, they would be considered OTTI, and an impairment loss would be recognized in the current period. Management considered all relevant factors, including expected recoverability of cash flows, in assessing whether a loss was other-than-temporary. The Company does not intend to sell these fixed maturity securities, and it is not more likely than not that these securities will be sold before recovering their cost basis. | |||||||||||||||||||||||||
For all fixed-maturity securities in an unrealized loss position at June 30, 2013, the Company has received all contractual interest payments (and principal if applicable). Based on the continuing receipt of cash flow and the foregoing analyses, management expects continued timely payments of principal and interest and considers the losses to be temporary. | |||||||||||||||||||||||||
The unrealized loss position associated with the fixed-maturity portfolio was $28.5 million as of June 30, 2013, consisting primarily of corporate bonds and mortgage-backed securities of $16.1 million. The total fixed-maturity portfolio of gross unrealized losses included 644 securities which were, in aggregate, approximately 3.0% below amortized cost. Of the 644 fixed maturity investments identified, 27 have been in an unrealized loss position for more than 12 months. The total unrealized loss on these investments at June 30, 2013 was $0.10 million. Management does not consider these investments to be other-than-temporarily impaired. | |||||||||||||||||||||||||
For common stocks, there were 17 securities in a loss position at June 30, 2013 totaling $0.5 million. Management evaluated the financial condition of the common stock issuers, the severity and duration of the impairment, and the Company’s ability and intent to hold to recovery. The evaluation consisted of a detailed review, including but not limited to some or all of the following factors for each security: the current S&P rating, analysts’ reports, past earnings trends and analysts’ earnings expectations for the next 12 months, liquidity, near-term financing risk, and whether the company was currently paying dividends on its equity securities. Management does not consider these investments to be other-than-temporarily impaired. | |||||||||||||||||||||||||
The following table presents information regarding invested assets that were in an unrealized loss position at June 30, 2013 and December 31, 2012 by amount of time in a continuous unrealized loss position: | |||||||||||||||||||||||||
Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Aggregate | Unrealized | ||||||||||||||||||||
($ in thousands) | Value | Losses | Value | Losses | Fair Value | Losses | |||||||||||||||||||
June 30, 2013 | |||||||||||||||||||||||||
U.S. Treasury securities | $ | 318,415 | $ | (5,780 | ) | $ | - | $ | - | $ | 318,415 | $ | (5,780 | ) | |||||||||||
U.S. Agency securities | 32,802 | (965 | ) | - | - | 32,802 | (965 | ) | |||||||||||||||||
Municipal bonds | 151,394 | (5,688 | ) | 218 | (44 | ) | 151,612 | (5,732 | ) | ||||||||||||||||
Corporate and other bonds | |||||||||||||||||||||||||
Finance | 76,192 | (4,240 | ) | - | - | 76,192 | (4,240 | ) | |||||||||||||||||
Industrial | 188,193 | (5,635 | ) | 1,184 | (40 | ) | 189,377 | (5,675 | ) | ||||||||||||||||
Utilities | 42,328 | (2,152 | ) | - | - | 42,328 | (2,152 | ) | |||||||||||||||||
Commercial mortgage-backed securities | 50,984 | (2,351 | ) | - | - | 50,984 | (2,351 | ) | |||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency backed | 54,462 | (1,613 | ) | 229 | (1 | ) | 54,691 | (1,614 | ) | ||||||||||||||||
Non-agency backed | 639 | (16 | ) | 199 | (14 | ) | 838 | (30 | ) | ||||||||||||||||
Asset-backed securities | 2,507 | (2 | ) | - | - | 2,507 | (2 | ) | |||||||||||||||||
Total fixed-maturity securities | 917,916 | (28,442 | ) | 1,830 | (99 | ) | 919,746 | (28,541 | ) | ||||||||||||||||
Preferred stocks | 9,802 | (821 | ) | 6,089 | (316 | ) | 15,891 | (1,137 | ) | ||||||||||||||||
Common stocks | 44,338 | (463 | ) | - | - | 44,338 | (463 | ) | |||||||||||||||||
Short-term investments | 11,379 | (36 | ) | - | - | 11,379 | (36 | ) | |||||||||||||||||
Total, June 30, 2013 | $ | 983,435 | $ | (29,762 | ) | $ | 7,919 | $ | (415 | ) | $ | 991,354 | $ | (30,177 | ) | ||||||||||
Tower | $ | 875,960 | $ | (25,386 | ) | $ | 7,553 | $ | (400 | ) | $ | 883,513 | $ | (25,786 | ) | ||||||||||
Reciprocal Exchanges | 107,475 | (4,376 | ) | 366 | (15 | ) | 107,841 | (4,391 | ) | ||||||||||||||||
Total, June 30, 2013 | $ | 983,435 | $ | (29,762 | ) | $ | 7,919 | $ | (415 | ) | $ | 991,354 | $ | (30,177 | ) | ||||||||||
December 31, 2012, as restated | |||||||||||||||||||||||||
U.S. Treasury securities | $ | 44,347 | $ | (13 | ) | $ | - | $ | - | $ | 44,347 | $ | (13 | ) | |||||||||||
U.S. Agency securities | 22,345 | (76 | ) | - | - | 22,345 | (76 | ) | |||||||||||||||||
Municipal bonds | 21,532 | (235 | ) | 251 | (9 | ) | 21,783 | (244 | ) | ||||||||||||||||
Corporate and other bonds | |||||||||||||||||||||||||
Finance | 16,853 | (1,095 | ) | - | - | 16,853 | (1,095 | ) | |||||||||||||||||
Industrial | 53,576 | (666 | ) | 4,188 | (202 | ) | 57,764 | (868 | ) | ||||||||||||||||
Utilities | 20,143 | (191 | ) | 7 | - | 20,150 | (191 | ) | |||||||||||||||||
Commercial mortgage-backed securities | 23,223 | (141 | ) | 95 | - | 23,318 | (141 | ) | |||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency backed | 59,009 | (261 | ) | 25 | (1 | ) | 59,034 | (262 | ) | ||||||||||||||||
Non-agency backed | 815 | (6 | ) | 588 | (28 | ) | 1,403 | (34 | ) | ||||||||||||||||
Asset-backed securities | 1,499 | (3 | ) | 4,232 | (11 | ) | 5,731 | (14 | ) | ||||||||||||||||
Total fixed-maturity securities | 263,342 | (2,687 | ) | 9,386 | (251 | ) | 272,728 | (2,938 | ) | ||||||||||||||||
Preferred stocks | 9,716 | (155 | ) | 5,724 | (326 | ) | 15,440 | (481 | ) | ||||||||||||||||
Common stocks | 55,560 | (4,292 | ) | - | - | 55,560 | (4,292 | ) | |||||||||||||||||
Total, December 31, 2012, as restated | $ | 328,618 | $ | (7,134 | ) | $ | 15,110 | $ | (577 | ) | $ | 343,728 | $ | (7,711 | ) | ||||||||||
Tower | $ | 270,609 | $ | (6,732 | ) | $ | 13,338 | $ | (478 | ) | $ | 283,947 | $ | (7,210 | ) | ||||||||||
Reciprocal Exchanges | 58,009 | (402 | ) | 1,772 | (99 | ) | 59,781 | (501 | ) | ||||||||||||||||
Total, December 31, 2012, as restated | $ | 328,618 | $ | (7,134 | ) | $ | 15,110 | $ | (577 | ) | $ | 343,728 | $ | (7,711 | ) | ||||||||||
Management evaluated the severity of the impairment in relation to the carrying values for the securities referred to above and considered all relevant factors in assessing whether the loss was other-than-temporary. Management does not intend to sell its fixed-maturity securities, and it is not more likely than not that fixed maturity and equity securities will be sold until there is a recovery of fair value to the original cost basis; which may be at maturity for the fixed income securities. | |||||||||||||||||||||||||
Fixed-Maturity Investment—Time to Maturity | |||||||||||||||||||||||||
The following table shows the amortized cost and fair value of the fixed-maturity portfolio by contractual time to maturity at June 30, 2013 and December 31, 2012: | |||||||||||||||||||||||||
Tower | Reciprocal Exchanges | Total | |||||||||||||||||||||||
($ in thousands) | Amortized | Fair Value | Amortized | Fair | Amortized | Fair Value | |||||||||||||||||||
Cost | Cost | Value | Cost | ||||||||||||||||||||||
June 30, 2013 | |||||||||||||||||||||||||
Remaining Time to Maturity | |||||||||||||||||||||||||
Less than one year | $ | 38,967 | $ | 39,597 | $ | 3,996 | $ | 4,148 | $ | 42,963 | $ | 43,745 | |||||||||||||
One to five years | 614,572 | 626,489 | 41,860 | 43,790 | 656,432 | 670,279 | |||||||||||||||||||
Five to ten years | 646,016 | 654,732 | 66,201 | 65,527 | 712,217 | 720,259 | |||||||||||||||||||
More than 10 years | 301,473 | 310,890 | 62,131 | 62,685 | 363,604 | 373,575 | |||||||||||||||||||
Mortgage and asset-backed securities | 379,624 | 404,062 | 74,567 | 77,625 | 454,191 | 481,687 | |||||||||||||||||||
Total, June 30, 2013 | $ | 1,980,652 | $ | 2,035,770 | $ | 248,755 | $ | 253,775 | $ | 2,229,407 | $ | 2,289,545 | |||||||||||||
December 31, 2012, as restated | |||||||||||||||||||||||||
Remaining Time to Maturity | |||||||||||||||||||||||||
Less than one year | $ | 30,082 | $ | 30,614 | $ | 2,678 | $ | 2,715 | $ | 32,760 | $ | 33,329 | |||||||||||||
One to five years | 489,939 | 510,523 | 45,576 | 47,275 | 535,515 | 557,798 | |||||||||||||||||||
Five to ten years | 564,556 | 607,711 | 76,480 | 80,009 | 641,036 | 687,720 | |||||||||||||||||||
More than 10 years | 346,410 | 379,045 | 57,628 | 62,542 | 404,038 | 441,587 | |||||||||||||||||||
Mortgage and asset-backed securities | 495,249 | 536,255 | 81,588 | 88,022 | 576,837 | 624,277 | |||||||||||||||||||
Total, December 31, 2012, as restated | $ | 1,926,236 | $ | 2,064,148 | $ | 263,950 | $ | 280,563 | $ | 2,190,186 | $ | 2,344,711 | |||||||||||||
Other Invested Assets | |||||||||||||||||||||||||
The following table shows the composition of the other invested assets as of June 30, 2013 and December 31, 2012: | |||||||||||||||||||||||||
June 30, | December 31, | ||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||||||||||
Limited partnerships, equity method | $ | 34,843 | $ | 23,864 | |||||||||||||||||||||
Real estate, amortized cost | 7,645 | 7,422 | |||||||||||||||||||||||
Securities reported under the fair value option | 30,250 | 25,000 | |||||||||||||||||||||||
Other | 4,300 | 1,500 | |||||||||||||||||||||||
Total | $ | 77,038 | $ | 57,786 | |||||||||||||||||||||
Securities reported under the fair value option include five securities for which the Company has elected the fair value option. This election was made to simplify the accounting for these instruments which contain embedded derivatives and other features. | |||||||||||||||||||||||||
The fair value of the limited partnerships in the table above approximates their carrying value under the equity method of accounting. The significant inputs used to determine fair value of these limited partnerships are considered Level 3 pursuant to the fair value hierarchy. See “Note 8 – Fair Value Measurements” below. As of June 30, 2013, the Company had future funding commitments of $47.0 million to these limited partnerships. |
Fair_Value_Measurements
Fair Value Measurements | 6 Months Ended | ||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||
Fair Value Measurements | ' | ||||||||||||||||
Note 8—Fair Value Measurements | |||||||||||||||||
GAAP establishes a three-level hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets or liabilities fall within different levels of the hierarchy, the classification is based on the lowest level input that is significant to the fair value measurement of the asset or liability. Classification of assets and liabilities within the hierarchy considers the markets in which the assets and liabilities are traded, including during periods of market disruption, and the reliability and transparency of the assumptions used to determine fair value. The hierarchy requires the use of observable market data when available. The levels of the hierarchy are as follows: | |||||||||||||||||
Level 1 — Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active markets. Included are those equity securities that are traded on active exchanges, such as the NASDAQ Global Select Market. | |||||||||||||||||
Level 2 — Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs. Included are investments in U.S. Treasury and Agency securities and, together with municipal bonds, corporate debt securities, commercial mortgages, residential mortgage-backed securities and asset-backed securities. Additionally, interest-rate swap contracts utilize Level 2 inputs in deriving fair values. | |||||||||||||||||
Level 3 — Inputs to the valuation methodology are unobservable in the market for the asset or liability and are significant to the fair value measurement. Material assumptions and factors considered in pricing investment securities may include projected cash flows, collateral performance including delinquencies, defaults and recoveries, and any market clearing activity or liquidity circumstances in the security or similar securities that may have occurred since the prior pricing period. | |||||||||||||||||
The availability of observable inputs varies and is affected by a wide variety of factors. When the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment. The degree of judgment exercised by management in determining fair value is greatest for investments categorized as Level 3. For investments in this category, management considers prices and inputs that are current as of the measurement date. In periods of market dislocation, as characterized by current market conditions, the ability to observe stable prices and inputs may be reduced for many instruments. This condition could cause a security to be reclassified between levels. | |||||||||||||||||
As at June 30, 2013 and December 31, 2012, the Company’s financial instruments carried at fair value are allocated among levels as follows: | |||||||||||||||||
($ in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
June 30, 2013 | |||||||||||||||||
Fixed-maturity securities | |||||||||||||||||
U.S. Treasury securities | $ | - | $ | 385,247 | $ | - | $ | 385,247 | |||||||||
U.S. Agency securities | - | 105,323 | - | 105,323 | |||||||||||||
Municipal bonds | - | 587,391 | - | 587,391 | |||||||||||||
Corporate and other bonds | - | 729,899 | - | 729,899 | |||||||||||||
Commercial mortgage-backed securities | - | 236,619 | - | 236,619 | |||||||||||||
Residential mortgage-backed securities | |||||||||||||||||
Agency | - | 165,060 | - | 165,060 | |||||||||||||
Non-agency | - | 39,612 | - | 39,612 | |||||||||||||
Asset-backed securities | - | 40,394 | - | 40,394 | |||||||||||||
Total fixed-maturities | - | 2,289,545 | - | 2,289,545 | |||||||||||||
Equity securities | 137,400 | - | - | 137,400 | |||||||||||||
Short-term investments | - | 13,379 | - | 13,379 | |||||||||||||
Total investments at fair value | 137,400 | 2,302,924 | - | 2,440,324 | |||||||||||||
Other invested assets (1) | - | - | 30,250 | 30,250 | |||||||||||||
Other liabilities | - | ||||||||||||||||
Interest rate swap contracts | - | (6,830 | ) | - | (6,830 | ) | |||||||||||
Debt and equity securities sold, not yet purchased | - | (25,570 | ) | - | (25,570 | ) | |||||||||||
Total, June 30, 2013 | $ | 137,400 | $ | 2,270,524 | $ | 30,250 | $ | 2,438,174 | |||||||||
Tower | $ | 134,650 | $ | 2,016,748 | $ | 30,250 | $ | 2,181,648 | |||||||||
Reciprocal Exchanges | 2,750 | 253,776 | - | 256,526 | |||||||||||||
Total, June 30, 2013 | $ | 137,400 | $ | 2,270,524 | $ | 30,250 | $ | 2,438,174 | |||||||||
December 31, 2012, as restated | |||||||||||||||||
Fixed-maturity securities | |||||||||||||||||
U.S. Treasury securities | $ | - | $ | 184,949 | $ | - | $ | 184,949 | |||||||||
U.S. Agency securities | - | 102,777 | - | 102,777 | |||||||||||||
Municipal bonds | - | 686,043 | - | 686,043 | |||||||||||||
Corporate and other bonds | - | 746,665 | - | 746,665 | |||||||||||||
Commercial mortgage-backed securities | - | 242,053 | - | 242,053 | |||||||||||||
Residential mortgage-backed securities | |||||||||||||||||
Agency | - | 295,716 | - | 295,716 | |||||||||||||
Non-agency | - | 42,156 | - | 42,156 | |||||||||||||
Asset-backed securities | - | 44,352 | - | 44,352 | |||||||||||||
Total fixed-maturities | - | 2,344,711 | - | 2,344,711 | |||||||||||||
Equity securities | 146,258 | - | - | 146,258 | |||||||||||||
Short-term investments | - | 4,750 | - | 4,750 | |||||||||||||
Total investments at fair value | 146,258 | 2,349,461 | - | 2,495,719 | |||||||||||||
Other invested assets (2) | - | - | 25,000 | 25,000 | |||||||||||||
Other liabilities | |||||||||||||||||
Interest rate swap contracts | - | (9,016 | ) | - | (9,016 | ) | |||||||||||
Debt and equity securities sold, not yet purchased | - | (17,101 | ) | - | (17,101 | ) | |||||||||||
Total, December 31, 2012, as restated | $ | 146,258 | $ | 2,323,344 | $ | 25,000 | $ | 2,494,602 | |||||||||
Tower | $ | 140,695 | $ | 2,042,780 | $ | 25,000 | $ | 2,208,475 | |||||||||
Reciprocal Exchanges | 5,563 | 280,564 | - | 286,127 | |||||||||||||
Total, December 31, 2012, as restated | $ | 146,258 | $ | 2,323,344 | $ | 25,000 | $ | 2,494,602 | |||||||||
(1) $30.3 million of the $77.0 million Other invested assets reported on the consolidated balance sheet at June 30, 2013 is reported at fair value. The remaining $46.7 million of Other invested assets is reported under the equity method of accounting or at amortized cost. | |||||||||||||||||
(2) $25.0 million of the $57.8 million Other invested assets reported on the consolidated balance sheet at December 31, 2012 is reported at fair value. The remaining $32.8 million of Other invested assets is reported under the equity method of accounting or at amortized cost. | |||||||||||||||||
As of June 30, 2013, substantially all of the investment portfolio recorded at fair value was priced based upon quoted market prices or other observable inputs. For investments in active markets, the Company used the quoted market prices provided by the outside pricing services to determine fair value. In circumstances where quoted market prices were unavailable, the Company used fair value estimates based upon other observable inputs including matrix pricing, benchmark interest rates, market comparables and other relevant inputs. When observable inputs were adjusted to reflect management’s best estimate of fair value, such fair value measurements are considered a lower level measurement in the GAAP fair value hierarchy. | |||||||||||||||||
The Company’s process to validate the market prices obtained from the outside pricing sources includes, but is not limited to, periodic evaluation of model pricing methodologies and analytical reviews of certain prices. The Company also periodically performs testing of the market to determine trading activity, or lack of trading activity, as well as market prices. Several securities sold during the quarter were “back-tested” (i.e., the sales price is compared to the previous month end reported market price to determine reasonableness of the reported market price). If management believes that the price provided from the pricing source is distressed, management will use a valuation method that reflects an orderly transaction between market participants, generally a discounted cash flow method that incorporates relevant interest rate, risk and liquidity factors. | |||||||||||||||||
The ability to observe stable prices and inputs may be reduced for highly-customized and illiquid instruments which had been the case for certain non-agency residential and commercial mortgage-backed securities and asset-backed securities in previous periods. | |||||||||||||||||
Substantially all of the portfolio valuations at June 30, 2013, classified as Level 1 or Level 2 in the above table are priced by utilizing the services of several independent pricing services that provide the Company with a price quote for each security. There were no adjustments made to the prices obtained from the independent pricing sources and dealers on securities classified as Level 1 or Level 2. | |||||||||||||||||
In 2013 and 2012, there were no transfers of investments between Level 1 and Level 2 or between Level 2 and Level 3. | |||||||||||||||||
The fair values of the interest rate swaps were derived using an industry standard swap valuation model with market based inputs for swaps having similar characteristics. | |||||||||||||||||
The fair values of the debt and equity securities sold, not yet purchased were derived using quoted prices for similar securities in active markets. These instruments resulted in net realized gains of $0.7 million and $0.8 million for the three and six months ended June 30, 2013, respectively. | |||||||||||||||||
The Company holds five securities which are reported in other invested assets and have been classified as Level 3 of the fair value hierarchy. Management utilizes a discounted cash flow analysis to derive the fair values. For one security, which matures in 2015 and whose cash flows are supported by underlying short-term loans, the significant unobservable inputs include the underlying short-term loans’ probability of default and loss severity, and a discount for the security’s lack of marketability. Increases in the probability of default and loss severity assumptions (which generally move directionally with each other) would have the effect of decreasing the fair value of this security. The Company obtains credit ratings on the underlying short-term loans quarterly and considers these ratings when updating its assumptions. A second security is an equity instrument which entitles the Company to residual interests of a finite life special purpose vehicle. The significant unobservable inputs include the estimated losses to be incurred by the vehicle and the equity instrument’s lack of marketability. The Company obtains quarterly financial data from the vehicle and evaluates the estimated incurred loss figure. An increase in the vehicle’s estimated incurred losses would have the effect of decreasing the instrument’s fair value. The remaining three securities are preferred equity interests in limited partnerships that invest in leisure hotels. The preferred interests pay a stated quarterly dividend with residual equity incentives payable after the General Partner’s minimum return thresholds are met. The significant unobservable inputs include the market discount rate and the instruments’ lack of marketability. The three preferred equity interest investments closed in the latter part of June 2013, and were therefore carried at their original cost as of June 30, 2013. | |||||||||||||||||
Management is responsible for the determination of the value of the investments carried at fair value and the supporting methodologies and assumptions. Management has reviewed the pricing techniques and methodologies of the independent pricing sources and believes that their policies adequately consider market activity, either based on specific transactions for the issue valued or based on modeling of securities with similar credit quality, duration, yield and structure that were recently traded. Management monitors security-specific valuation trends and discusses material changes or the absence of expected changes with the portfolio managers to understand the underlying factors and inputs and to validate the reasonableness of pricing. Management also back-tests the prices on numerous sales of securities during the year to validate the previous pricing provided as well as utilizes other pricing sources to validate the pricing provided by the Company’s primary provider of the majority of the non-U.S. Treasury securities and non-agency securities included in Level 2. | |||||||||||||||||
The following table summarizes the changes in Level 3 assets measured at fair value for the three months ended June 30, 2013 and 2012 for Tower (the Reciprocal Exchanges have no Level 3 assets): | |||||||||||||||||
Three Months Ended | |||||||||||||||||
June 30, | |||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||
Beginning balance, April 1, | $ | 25,000 | $ | 24,914 | |||||||||||||
Total gains (losses)-realized / unrealized | |||||||||||||||||
Included in net income | - | 86 | |||||||||||||||
Included in other comprehensive income (loss) | - | - | |||||||||||||||
Purchases, issuances and settlements | 5,250 | - | |||||||||||||||
Net transfers into (out of) Level 3 | - | - | |||||||||||||||
Ending balance, June 30, | $ | 30,250 | $ | 25,000 | |||||||||||||
The following table summarizes the changes in Level 3 assets measured at fair value for the six months ended June 30, 2013 and 2012 for Tower (the Reciprocal Exchanges have no Level 3 assets): | |||||||||||||||||
Six Months Ended | |||||||||||||||||
June 30, | |||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||
Beginning balance, January 1 | $ | 25,000 | $ | 25,000 | |||||||||||||
Total gains (losses)-realized / unrealized - included in net income | - | - | |||||||||||||||
Included in other comprehensive income (loss) | - | - | |||||||||||||||
Purchases, issuances and settlements | 5,250 | - | |||||||||||||||
Net transfers into (out of) Level 3 | - | - | |||||||||||||||
Ending balance, June 30, | $ | 30,250 | $ | 25,000 |
Loss_and_Loss_Adjustment_Expen
Loss and Loss Adjustment Expense | 6 Months Ended | ||||||||||||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||||||||||||
Loss and Loss Adjustment Expense | ' | ||||||||||||||||||||||||||
Note 9 – Loss and Loss Adjustment Expense | |||||||||||||||||||||||||||
The following table provides a reconciliation of the beginning and ending consolidated balances for unpaid losses and loss adjustment expense (“LAE”) for the six months ended June 30, 2013 and 2012: | |||||||||||||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | Tower | Reciprocal | Total | |||||||||||||||||||||
Exchanges | Exchanges | ||||||||||||||||||||||||||
Balance at January 1, as restated | $ | 1,759,888 | $ | 135,791 | $ | 1,895,679 | $ | 1,495,839 | $ | 136,274 | $ | 1,632,113 | |||||||||||||||
Less reinsurance recoverables on unpaid losses | (407,068 | ) | (52,389 | ) | (459,457 | ) | (280,968 | ) | (11,253 | ) | (292,221 | ) | |||||||||||||||
1,352,820 | 83,402 | 1,436,222 | 1,214,871 | 125,021 | 1,339,892 | ||||||||||||||||||||||
Net reserves, at fair value, of acquired entities | 161,886 | - | 161,886 | - | - | - | |||||||||||||||||||||
Incurred related to: | |||||||||||||||||||||||||||
Current year | 451,020 | 57,688 | 508,708 | 487,837 | 57,430 | 545,267 | |||||||||||||||||||||
Prior years unfavorable/(favorable) development | 326,749 | 167 | 326,916 | 78,254 | (6,253 | ) | 72,001 | ||||||||||||||||||||
Total incurred | 777,769 | 57,855 | 835,624 | 566,091 | 51,177 | 617,268 | |||||||||||||||||||||
Paid related to: | |||||||||||||||||||||||||||
Current year | 164,774 | 36,669 | 201,443 | 153,792 | 31,369 | 185,161 | |||||||||||||||||||||
Prior years | 359,786 | 10,221 | 370,007 | 313,400 | 30,943 | 344,343 | |||||||||||||||||||||
Total paid | 524,560 | 46,890 | 571,450 | 467,192 | 62,312 | 529,504 | |||||||||||||||||||||
Net balance at end of period | 1,767,915 | 94,367 | 1,862,282 | 1,313,770 | 113,886 | 1,427,656 | |||||||||||||||||||||
Add reinsurance recoverables on unpaid losses | 665,172 | 24,897 | 690,069 | 254,516 | 19,661 | 274,177 | |||||||||||||||||||||
Balance at June 30, | $ | 2,433,087 | $ | 119,264 | $ | 2,552,351 | $ | 1,568,286 | $ | 133,547 | $ | 1,701,833 | |||||||||||||||
The consolidated net loss ratio, which includes the Reciprocal Exchanges, was 133.8% and 76.0% for the three months ended June 30, 2013 and 2012, respectively. Excluding the Reciprocal Exchanges, the net loss ratio was 142.7% and 77.3% for the three months ended June 30, 2013 and 2012, respectively. | |||||||||||||||||||||||||||
The consolidated net loss ratio, which includes the Reciprocal Exchanges, was 99.4% and 70.1% for the six months ended June 30, 2013 and 2012, respectively. Excluding the Reciprocal Exchanges, the net loss ratio was 102.7% and 71.1% for the six months ended June 30, 2013 and 2012, respectively. | |||||||||||||||||||||||||||
Incurred losses and LAE for the six months ended June 30, 2013 attributable to events of prior years were $326.9 million including the Reciprocal Exchanges and $326.7 million excluding the Reciprocal Exchanges. Excluding the Reciprocal Exchanges, $171.9 million of the prior year reported loss was associated with development in Specialty Insurance and Reinsurance and $163.6 million was associated with Commercial, partially offset by $8.8 million of favorable development in Personal. Reserve strengthening arose primarily from accident years 2008-2011 within the workers’ compensation, CMP liability, other liability and commercial auto liability lines of business offset by small amount of favorable loss development from more recent years within the short tail property lines of business. The Company recognized in the second quarter of 2013 that the higher than expected reported loss development it had been experiencing had become a trend. In response to this recognition, the Company performed a comprehensive update to the internal reserve study to respond to higher than expected reported losses and to update the actuarial assumptions within the study. In conjunction with its comprehensive internal review, the Company also retained its consulting actuary to perform an independent reserve study covering lines of business comprising over 90% of the Company’s loss reserves. | |||||||||||||||||||||||||||
For these four casualty lines of business, the total amount of actual versus expected loss development observed during the first six months of 2013 was $127.1 million on a net basis. The Company updated the reported loss development triangles and other data used in the underlying reserve analysis to reflect this development and noted that more recent data diagonals indicated a need to increase loss development factors and other actuarial assumptions (for example initial expected loss ratios and net to gross ratios) used to estimate ultimates for the casualty lines of business. As a result of changes in the underlying actuarial assumptions, ultimates for casualty lines of business increased by an additional $201.1 million on a net basis. The increase in ultimates for the casualty lines of business was offset by $0.9 million decrease in ultimates within the short-tail property lines of business. | |||||||||||||||||||||||||||
For the six months ended June 30, 2013, by line of business, ultimate loss estimates for prior accident years have primarily increased by $122.1 million for workers’ compensation, $89.2 million for commercial package liability, $74.4 million for commercial auto liability and $42.6 million for Other Liability. | |||||||||||||||||||||||||||
Incurred losses and LAE for the six month ended June 30, 2012 attributable to events of prior years were $72.0 million. Excluding the Reciprocal Exchanges, the incurred losses and LAE from prior accident years were $78.3 million. During the second quarter of 2012, the Company performed a comprehensive reserve study to respond to higher than expected reported losses observed in the first and second quarters of 2012, resulting in increases in ultimate loss estimates of $35.6 million within Commercial and $38.4 million in Specialty and Reinsurance Insurance. $4.3 million of the increase pertained to Personal Insurance. The reserve strengthening was comprised of approximately $39 million in workers’ compensation, $22 million in commercial automobile liability, and smaller changes in other lines. Approximately $51 million of the reserve strengthening pertained to various programs, many of which have been terminated. | |||||||||||||||||||||||||||
Prior year development is based upon numerous estimates by line of business and accident year. The Company’s management continually monitors claims activity to assess the appropriateness of carried case and incurred but not reported (“IBNR”) reserves, giving consideration to Company and industry trends. | |||||||||||||||||||||||||||
Included in the reserves for the loss and LAE reserves at June 30, 2013 and December 31, 2012 are $9.8 million and $8.4 million, respectively, of tabular and non-tabular reserve discount for workers’ compensation and excess workers’ compensation claims. | |||||||||||||||||||||||||||
As of June 30, 2013 the Company had $17.0 million of unamortized reserve for risk premium related to the Merger Transaction. The reserve for risk premium is included in unpaid losses and LAE. The Company recorded $2.2 million of amortization related to the reserve for risk premium for the six months ended June 30, 2013. There was no unamortized reserve for risk premium recorded as of December 31, 2012. | |||||||||||||||||||||||||||
As disclosed in “Note 1 – Nature of Business”, the Company performed a comprehensive update of its liability for unpaid claims and claims adjustment expenses at June 30, 2013, and was assisted in this review by an independent actuarial consulting firm. In response to its material weakness in internal controls over financial reporting related to loss reserves, the Company will continue to utilize the services of the independent actuarial firm in the Company’s ongoing analyses. Additional reviews of the Company’s loss reserves as of September 30, 2013 are underway, and are expected to be completed in the next several weeks. Substantial additional analysis of the preliminary information is required before a determination can be made as to the impacts, if any, on the Company’s loss reserves. | |||||||||||||||||||||||||||
Shareholders_Equity
Shareholders' Equity | 6 Months Ended |
Jun. 30, 2013 | |
Shareholders' Equity | ' |
Note 10—Shareholders’ Equity | |
Shares of Common Stock Issued | |
As previously discussed in “Note 4 – Merger Transaction”, the Merger Transaction was accounted for as a reverse acquisition with TGI treated as the accounting acquirer. Accordingly, TGI’s historical common stock balance immediately prior to the Merger is the historical common stock of TGI adjusted for the number of shares issued in the Merger Transaction by the Company to TGI shareholders (i.e., TGI’s outstanding shares immediately prior to the Merger Transaction multiplied by the conversion ratio of 1.1330). | |
Canopius Bermuda had 14,025,737 outstanding common shares outstanding on March 13, 2013 which were sold by Canopius Group to third-party investors in connection with the Merger Transaction. | |
For both the three and six months ended June 30, 2013, 2,674 new common shares were issued as the result of employee stock option exercises. For the three and six months ended June 30, 2013, 2,333 and 242,626 new common shares, respectively, were issued after the Merger Transaction as the result of the Company’s restricted stock grants. For the three and six months ended June 30, 2012, no new common shares were issued as the result of employee stock option exercises. For the three and six months ended June 30, 2012, zero and 363,894 new common shares, respectively, (adjusted for the 1.1330 conversion ratio), were issued as the result of restricted stock grants. | |
For the three and six months ended June 30, 2013, 891 and 341,598 shares, respectively, of common stock were purchased from employees in connection with the vesting of restricted stock issued under the 2008 Long Term Equity Compensation Plan (the “Plan”). For the three and six months ended June 30, 2012, 561 and 110,304 shares, respectively, (adjusted for the 1.1330 conversion ratio), of common stock were purchased from employees in connection with the vesting of restricted stock issued under the Plan. The shares were withheld at the direction of employees as permitted under the Plan in order to pay the expected amount of tax liability owed by the employees from the vesting of those shares. In addition, for the three and six months ended June 30, 2013, 7,167 and 14,015 shares, respectively, of common stock were surrendered as a result of restricted stock forfeitures. For the three and six months ended June 30, 2012, 5,022 and 9,874 shares, respectively, (adjusted for the 1.1330 conversion ratio) of common stock were surrendered as a result of restricted stock forfeitures. | |
In connection with the Merger Transaction, all Treasury shares held by TGI as of the effective date of the Merger Transaction were cancelled. There were 8,058 Treasury shares of the Company held at June 30, 2013. | |
Share Repurchase Program | |
As part of Tower’s capital management strategy, Tower’s Board of Directors approved a $50 million share repurchase program on May 7, 2013. Purchases under this program can be made from time to time in the open market or in privately negotiated transactions in accordance with applicable laws and regulations. In the six months ended June 30, 2013, no shares of common stock were purchased under this program. TGI’s previously approved share repurchase program expired in March 2013. | |
Dividends Declared | |
Dividends on common stock and participating unvested restricted stock of $9.5 million and $7.3 million for the three months ended June 30, 2013 and 2012, respectively, were declared and paid. Dividends on common stock and participating unvested restricted stock of $16.7 million and $14.7 million for the six months ended June 30, 2013 and 2012, respectively, were declared and paid. | |
On August 6, 2013, the Board of Directors approved a quarterly dividend of $0.165 per share which was paid on September 20, 2013 to shareholders of record as of September 9, 2013. | |
The quarterly dividend of $0.165 per share is equivalent to TGI’s historical quarterly dividend of $0.1875 per share adjusted for the conversion ratio of 1.1330 resulting from the Merger Transaction. | |
Accumulated_Other_Comprehensiv
Accumulated Other Comprehensive Income | 6 Months Ended | ||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||
Accumulated Other Comprehensive Income | ' | ||||||||||||||||
Note 11—Accumulated Other Comprehensive Income | |||||||||||||||||
The following table provides a summary of changes in accumulated other comprehensive income, by component, for the six months ended June 30, 2013, with all amounts reflected net of income taxes and noncontrolling interest: | |||||||||||||||||
($ in thousands) | Unrealized | Gains | Cumulative | Total | |||||||||||||
gains (losses) | (losses) on | translation | |||||||||||||||
on available for | cash flow | adjustments | |||||||||||||||
sale securities | hedges | ||||||||||||||||
Balance at December 31, 2012, as restated | $ | 87,412 | $ | -5,860 | $ | 1,204 | $ | 82,756 | |||||||||
Other comprehensive income before reclassifications, net of tax | (71,210 | ) | 1,406 | (2,382 | ) | (72,186 | ) | ||||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax | (2,594 | ) | 1,084 | - | (1,510 | ) | |||||||||||
Net current period other comprehensive income | (73,804 | ) | 2,490 | (2,382 | ) | (73,696 | ) | ||||||||||
Balance at June 30, 2013 | $ | 13,608 | $ | -3,370 | $ | (1,178 | ) | $ | 9,060 | ||||||||
The following provides a summary of the items that have been reclassified from accumulated other comprehensive income to net income in their entirety during the six months ended June 30, 2013, including the line item on the consolidated statement of operations on which the impact is reflected. Unrealized gains (losses) on available for sale securities are reclassified from accumulated other comprehensive income when a security is sold or when a non-credit impairment is recorded. Gains (losses) on cash flow hedges are reclassified from accumulated other comprehensive income when the related hedged item (subordinated debentures floating rate interest payments) are recorded in the statement of operations. | |||||||||||||||||
($ in thousands) | |||||||||||||||||
Accumulated other comprehensive income components | Amounts reclassified | Affected line item in the consolidated statement of operations | |||||||||||||||
from accumulated other | |||||||||||||||||
comprehensive income | |||||||||||||||||
Unrealized gains (losses) on available for sale securities | $ | -2,594 | Other net realized investment gains | ||||||||||||||
- | Income tax expense | ||||||||||||||||
$ | -2,594 | Total net of income taxes | |||||||||||||||
Gains (losses) on cash flow hedges interest rate swaps | $ | 1,084 | Interest expense | ||||||||||||||
- | Income tax expense | ||||||||||||||||
$ | 1,084 | Total net of income taxes | |||||||||||||||
Debt
Debt | 6 Months Ended | ||||||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||||||
Debt | ' | ||||||||||||||||||||
Note 12—Debt | |||||||||||||||||||||
The Company’s borrowings consisted of the following at June 30, 2013 and December 31, 2012: | |||||||||||||||||||||
June 30, 2013 | December 31, 2012 | ||||||||||||||||||||
($ in thousands) | Carrying | Fair | Carrying | Fair | |||||||||||||||||
Value | Value | Value | Value | ||||||||||||||||||
Credit facility | $ | 70,000 | $ | 70,000 | $ | 70,000 | $ | 70,000 | |||||||||||||
Convertible senior notes | 146,166 | 158,243 | 144,673 | 152,063 | |||||||||||||||||
Subordinated debentures | 235,058 | 240,010 | 235,058 | 232,678 | |||||||||||||||||
Total | $ | 451,224 | $ | 468,253 | $ | 449,731 | $ | 454,741 | |||||||||||||
The fair value of the convertible senior notes is determined utilizing recent transaction prices for these securities between third-party market participants. The fair value of the subordinated debentures is based on discounted cash flow analysis. The significant inputs used for fair value are considered Level 2 in the fair value hierarchy. | |||||||||||||||||||||
Total interest expense incurred, including interest expense on the funds held liabilities, was $7.6 million and $7.9 million for the three months ended June 30, 2013 and 2012, respectively. Total interest expense incurred, including interest expense on the funds held liabilities, was $15.4 million and $16.5 million for the six months ended June 30, 2013 and 2012, respectively. | |||||||||||||||||||||
Subordinated Debentures | |||||||||||||||||||||
The Company and its wholly-owned subsidiaries have issued trust preferred securities through wholly-owned Delaware statutory business trusts. The trusts use the proceeds of the sale of the trust preferred securities and common securities that the Company acquired from the trusts to purchase junior subordinated debentures from the Company with terms that match the terms of the trust preferred securities. Interest on the junior subordinated debentures and the trust preferred securities is payable quarterly. In some cases, the interest rate is fixed for an initial period of five years after issuance and then floats with changes in the London Interbank Offered Rate (“LIBOR”) and in other cases the interest rate floats with LIBOR without any initial fixed-rate period. As of June 30, 2013, The Company had outstanding par of $235.1 million relating to the subordinated debentures. | |||||||||||||||||||||
Interest Rate Swaps | |||||||||||||||||||||
In October 2010, the Company entered into interest rate swap contracts (the “Swaps”) with $190 million notional value to manage interest costs and cash flows associated with the floating rate subordinated debentures. The Swaps have terms of five years. The Swaps convert the subordinated debentures to rates ranging from 5.1% to 5.9%. As of June 30, 2013 and December 31, 2012, the Swaps had a fair value of $6.8 million and $9.0 million in a liability position, respectively, and are reported in Other Liabilities. | |||||||||||||||||||||
The Company has designated and accounts for the Swaps as cash flow hedges. The Swaps are considered to have no ineffectiveness and changes in their fair values are recorded in accumulated other comprehensive income (“AOCI”), net of tax. For the six months ended June 30, 2013 and 2012, $1.1 million and $0.8 million, respectively, were reclassified from AOCI to interest expense for the effects of the hedges. As of June 30, 2013, the Company had collateral on deposit with the counterparty amounting to $6.9 million pursuant to a Credit Support Annex. | |||||||||||||||||||||
Credit Facility | |||||||||||||||||||||
On April 3, 2013, an increase in borrowing capacity up to $220 million became effective pursuant to the second amendment to the credit agreement and consent by and between TGI and Bank of America, N.A., as administrative agent for the lenders party to the credit agreement, dated as of November 26, 2012, and the limited waiver and amendment agreement, dated as of March 3, 2013. The increase in the Credit Facility was negotiated in the event that holders of the convertible senior notes put their bonds to Tower as a result of the Merger Transaction. This put option expired on April 26, 2013. This second amendment and consent also included (i) TGIL as a guarantor of TGI’s obligations under the credit facility and (ii) consent by the lenders to the change in control triggered by the completion of the Merger Transaction. The maturity date and borrowing fees were not changed in this amendment. | |||||||||||||||||||||
The credit facility contains customary covenants for facilities of this type, including restrictions on indebtedness and liens, limitations on mergers, dividends and the sale of assets, and requirements to maintain certain consolidated net worth, debt to capitalization ratios, minimum risk-based capital and minimum statutory surplus. The credit facility also provides for customary events of default, including failure to pay principal when due, failure to pay interest or fees within three days after becoming due, failure to comply with covenants, any representation or warranty made by TGI or the Company as a guarantor being false in any material respect, default under certain other indebtedness, certain insolvency or receivership events affecting the TGI or the Company as guarantor and its material subsidiaries, the occurrence of certain material judgments, or a change in control of the Company, and upon an event of default, the administrative agent (subject to the consent of the requisite percentage of the lenders) may immediately terminate the obligations to make loans and to issue letters of credit, declare the Company’s obligations under the credit facility to become immediately due and payable, and require the Company to deposit in a collateral account cash collateral with a value equal to the then outstanding amount of the aggregate face amount of any outstanding letters of credit. The Company was in compliance with or obtained waivers for all covenants under the credit facility at June 30, 2013. | |||||||||||||||||||||
The Company had $70.0 million outstanding as of June 30, 2013 and December 31, 2012, respectively. The weighted average interest rate on the amount outstanding as of June 30, 2013 was 1.94%. | |||||||||||||||||||||
On October 11, 2013, the Company amended its credit facility to reduce its capacity from $220 million to $70 million and the maturity date was changed to May 30, 2014. In addition, the Company agreed to several restrictions under the credit facility, including: | |||||||||||||||||||||
• | To not enter into any new borrowings under the credit facility; | ||||||||||||||||||||
• | To pledge to the lending banks any proceeds of new capital raises by TGI or TGIL until such time as the credit facility is paid in full; | ||||||||||||||||||||
• | To pledge to the lending banks proceeds from any sales of assets occurring at TGI; and | ||||||||||||||||||||
• | To submit to regulatory authorities, as appropriate, a request for approval to pledge the capital stock of the U.S. based and Bermuda based insurance subsidiaries. | ||||||||||||||||||||
In addition, the following financial covenants are included in the credit facility: | |||||||||||||||||||||
• | Minimum Consolidated Net Worth is the greater of $553,400,000 or 90 % of Consolidated Net Worth as of June 30, 2013; this covenant increases by 90% of any new capital plus 50% of Net Income above $20,000,000; | ||||||||||||||||||||
• | Debt to capitalization ratio limit of 46%; | ||||||||||||||||||||
• | Minimum risk based capital ratio of 175% at December 31, 2013 for Tower Insurance Company of New York and any other insurance subsidiary that exceeds 10% of the consolidated statutory surplus of all insurances subsidiaries; | ||||||||||||||||||||
• | Bermuda enhanced minimum capital requirement of 150% for CastlePoint Re at December 31, 2013 and 110% for TRL; | ||||||||||||||||||||
• | Minimum statutory surplus for all insurance companies of the greater of $419,000,000 or 85% of Combined Surplus at June 30, 2013; and | ||||||||||||||||||||
• | Independent accountant’s annual report shall not be subject to any “going concern” or like qualification or exception. This financial covenant will remain in effect for the year ending December 31, 2013. Although the independent accountant’s report on the consolidated financial statements for the years ended December 31, 2010, 2011 and 2012 contains a “going concern” explanatory paragraph, on November 14, 2013, the Company received a waiver from the lenders under the credit facility in respect of such “going concern” paragraph. | ||||||||||||||||||||
Tower currently is in compliance with all covenants contained in the credit facility. | |||||||||||||||||||||
The credit facility matures on May 30, 2014, at which point any unpaid balance becomes due. | |||||||||||||||||||||
Convertible Senior Notes | |||||||||||||||||||||
In September 2010, the Company issued $150.0 million principal amount of 5.0% convertible senior notes (“the Notes”), which mature on September 15, 2014. Interest on the Notes is payable semi-annually in arrears on March 15 and September 15 of each year, commencing March 15, 2011. The original terms of the Notes allowed Holders to convert their Notes into cash or common shares, at the Company’s option, at any time on or after March 15, 2014 or earlier under certain circumstances determined by: (i) the market price of the Company’s stock, (ii) the trading price of the Notes, or (iii) the occurrence of specified corporate transactions. Upon conversion, the Company intends to settle its obligation either entirely or partially in cash. Upon completion of the merger, the change in control provision of the Indenture was triggered and the Holders were allowed, at their option, to convert their notes into cash or common shares of Tower Group International, Limited. As required by the terms of the Indenture, the Company filed a Fundamental Company Change Notice (“Change Notice”) to the Holders on March 23, 2013. The Change Notice provided Holders the option to convert the Notes into cash or common shares up to and including April 26, 2013. There were no bonds tendered or converted as a result of the Change Notice filing. | |||||||||||||||||||||
The adjusted conversion rate at June 30, 2013 is 42.3690 shares of common stock per $1,000 principal amount of the Notes (equivalent to a conversion price of $23.60 per share), subject to further adjustment upon the occurrence of certain events, including the following: if Tower issues shares of common stock as a dividend or distribution on shares of the common stock , or if Tower effects a share split or share combination; if Tower issues to all or substantially all holders of common stock any rights, options or warrants entitling them, for a period of not more than 45 calendar days after the announcement date of such issuance, to subscribe for or purchase shares of the common stock at a price per share that is less than the average of the last reported sales price of the common stock for the ten consecutive trading day period ending on the date of announcement of such issuance; if Tower distributes shares of its capital stock, other indebtedness, other assets or property of Tower or rights, options or warrants to acquire capital stock or other securities of Tower, to all or substantially all holders of capital stock; if any cash dividend or distribution is made to all or substantially all holders of the common stock, other than a regular quarterly cash dividend that does not exceed $0.110 per share; if Tower makes a payment in respect of a tender offer or exchange offer for common stock, and the cash and value of any other consideration included in the payment per share of common stock exceeds the last reported sale price of the common stock on the trading day next succeeding the last day on which the tenders or exchange may be made. | |||||||||||||||||||||
As a result of the Merger Transaction, it was determined that a fundamental change occurred that would permit the debt holders to tender their bonds to the Company at par plus any accrued and unpaid interest or to convert such debt. Notice of the fundamental change was sent to the debt holders on March 22, 2013, and such notice permitted the debt holders to redeem or convert the securities until April 26, 2013. There were no bonds tendered or converted as a result of the fundamental change. | |||||||||||||||||||||
The proceeds from the issuance of the Notes were allocated to the liability component and the embedded conversion option, or equity component. The equity component was reported as an adjustment to paid-in-capital, net of tax, and is reflected as an original issue discount (“OID”). After considering the contractual interest payments and amortization of the original issue discount, the Notes’ effective interest rate is 7.2%. Transaction costs of $0.4 million associated with the equity component were netted with the equity component in paid-in-capital. Interest expense, including amortization of deferred origination costs, recognized on the Notes was $5.9 million for the six months ended June 30, 2013. | |||||||||||||||||||||
The following table shows the amounts recorded for the Notes as of June 30, 2013 and December 31, 2012: | |||||||||||||||||||||
June 30, | December 31, | ||||||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||||||
Liability component | |||||||||||||||||||||
Outstanding principal | $ | 150,000 | $ | 150,000 | |||||||||||||||||
Unamortized OID | (3,834 | ) | (5,327 | ) | |||||||||||||||||
Liability component | 146,166 | 144,673 | |||||||||||||||||||
Equity component, net of tax | $ | 7,469 | $ | 7,469 | |||||||||||||||||
To the extent the market value per share of the Company’s common stock exceeds the conversion price, the Company will use the “treasury stock” method in calculating the dilutive effect on earnings per share. | |||||||||||||||||||||
Convertible Senior Notes Hedge and Warrant Transactions | |||||||||||||||||||||
In connection with the offering of the Notes, the Company also entered into convertible senior notes hedge transactions (the “Note Hedges” or “purchased call options”) and warrant transactions (the “Warrants”) with respect to its common stock with financial institutions. The Note Hedges and Warrants were intended generally to reduce the potential dilution of the Company’s common stock and to offset potential cash payments in excess of the principal of the Notes upon conversion. The Note Hedges and Warrants were separate transactions, entered into by the Company with the financial institutions, and were not part of the terms of the Notes. | |||||||||||||||||||||
In March 2013, as a result of the Merger Transaction, the Company terminated the Note Hedges and Warrants. The Company received $2.4 million and paid $1.0 million to terminate the Note Hedges and Warrants, respectively. The effects of the terminations and an associated tax adjustment of $0.8 million were recorded directly to paid-in-capital in shareholders’ equity. | |||||||||||||||||||||
Stock_Based_Compensation
Stock Based Compensation | 6 Months Ended | ||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||
Stock Based Compensation | ' | ||||||||||||||||
Note 13—Stock Based Compensation | |||||||||||||||||
2008 Long-Term Equity Compensation Plan (“2008 LTEP”) | |||||||||||||||||
In 2008, the Company’s Board of Directors adopted and its shareholders approved the 2008 LTEP, which amended and revised the 2004 Long-Term Equity Compensation Plan. | |||||||||||||||||
The 2008 LTEP provides for the granting of non-qualified stock options, incentive stock options (within the meaning of Section 422 of the Internal Revenue Code), stock appreciation rights (“SARs”), restricted stock and restricted stock unit awards, performance shares and other cash or share-based awards. The maximum amount of share-based awards authorized is 2,325,446 of which 30,376 are available for future grants as of June 30, 2013. | |||||||||||||||||
2013 Long-Term Incentive Plan (“2013 LTIP”) | |||||||||||||||||
The Compensation Committee of the Board of Directors has established, beginning in 2013 a new Long Term Incentive Plan (the “2013 LTIP”), to replace the Company’s existing 2008 Long Term Equity Compensation Plan. The 2013 LTIP was approved by the shareholders in May 2013. The maximum amount of share-based awards authorized is 2,150,000 of which 2,147,531 are available for future grants as of June 30, 2013. | |||||||||||||||||
Restricted Stock | |||||||||||||||||
The following table provides an analysis of restricted stock activity for the six months ended June 30, 2013 and 2012 (historical share counts and fair values have been adjusted for the 1.1330 share conversion ratio, as discussed more fully in “Note 4 – Merger Transaction”): | |||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Number | Weighted | Number | Weighted | ||||||||||||||
of Shares | Average | of Shares | Average | ||||||||||||||
Grant Date | Grant Date | ||||||||||||||||
Fair Value | Fair Value | ||||||||||||||||
Outstanding, January 1 | 1,015,902 | $ | 20.19 | 1,120,091 | $ | 20.69 | |||||||||||
Granted | 242,626 | 18.09 | 363,894 | 20.37 | |||||||||||||
Vested | (953,242 | ) | 20.43 | (439,734 | ) | 21.07 | |||||||||||
Forfeitures | (14,015 | ) | 19.26 | (9,874 | ) | 20.83 | |||||||||||
Outstanding, June 30, | 291,271 | $ | 17.68 | 1,034,377 | $ | 20.38 | |||||||||||
On March 13, 2013, 525,548 shares vested as a result of the Merger Transaction. | |||||||||||||||||
Stock Options | |||||||||||||||||
The following table provides an analysis of stock option activity for the six months ended June 30, 2013 and 2012 (historical share counts and fair values have been adjusted for the 1.1330 share conversion ratio, as discussed more fully in “Note 4 – Merger Transaction”): | |||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Number of | Average | Number of | Average | ||||||||||||||
Shares | Exercise | Shares | Exercise | ||||||||||||||
Price | Price | ||||||||||||||||
Outstanding, January 1 | 969,307 | $ | 17.78 | 969,315 | $ | 17.78 | |||||||||||
Exercised | (2,674 | ) | 16.48 | - | - | ||||||||||||
Forfeitures and expirations | (7,657 | ) | 17.72 | - | - | ||||||||||||
Outstanding, June 30 | 958,976 | $ | 17.78 | 969,315 | $ | 17.78 | |||||||||||
Exercisable, June 30 | 958,976 | $ | 17.78 | 969,315 | $ | 17.78 | |||||||||||
Stock Based Compensation Expense | |||||||||||||||||
The following table provides an analysis of stock based compensation expense for the six months ended June 30, 2013 and 2012: | |||||||||||||||||
Six Months | |||||||||||||||||
Ended June 30, | |||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||
Restricted stock | |||||||||||||||||
Expense, net of tax | $ | 8,204 | $ | 896 | |||||||||||||
Value of shares vested | 21,042 | 8,576 | |||||||||||||||
Value of unvested shares | 5,974 | 19,257 | |||||||||||||||
Stock options | |||||||||||||||||
Intrinsic value of outstanding options | 3,471 | 1,632 | |||||||||||||||
Intrinsic value of vested outstanding options | 3,471 | 1,632 | |||||||||||||||
Unrecognized compensation expense | |||||||||||||||||
Unvested restricted stock, net of tax | 5,974 | 12,791 | |||||||||||||||
Weighted average years over which expense will be recognized | 3.6 | 2.5 |
Income_Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2013 | |
Income Taxes | ' |
Note 14—Income Taxes | |
Under current Bermuda Law the Company is not required to pay any taxes on Bermuda based income or capital gains. The Company has received an undertaking from the Minister of Finance in Bermuda that in the event of such taxes being imposed, the Company will be exempted from taxation until the year 2035 pursuant to the Bermuda Exempted Undertakings Tax Protection Act of 1966. The Company’s United States-based subsidiaries are subject to federal, state and local taxes, as applicable, on income and capital gains earned by those subsidiaries. | |
The Company and TRL, its Bermuda reinsurance subsidiary, are deemed to have permanent establishments in Bermuda. The Bermuda companies have not and do not expect to conduct business that is through a permanent establishment in the U.S. All transactions between Tower’s U.S.-based subsidiaries and the Bermuda companies are subject to transfer pricing rules. The Company has executed certain reinsurance treaties and service agreements between its U.S.-based subsidiaries and TRL and management believes these arrangements to be conducted at current market rates and in accordance with transfer pricing rules. | |
During the three and six months ended June 30, 2013, Tower’s U.S. taxed subsidiaries (excluding the Reciprocal Exchanges) recognized pre-tax losses of approximately $493.8 million and $509.3 million, respectively. This resulted in $111.0 million of net operating loss carryforwards in the deferred tax inventory and a net deferred tax asset, before any valuation allowance, of $141.5 million (excluding the Reciprocal Exchanges) as of June 30, 2013. Including the Reciprocal Exchanges, the net deferred tax asset, before any valuation allowance, was $134.5 million. | |
At June 30, 2013, a full valuation allowance was recorded against the deferred tax assets. In the second quarter of 2013 | |
$113.9 million of the valuation allowance was recorded in income tax expense (benefit) in the statement of operations and $25.8 million was recorded in other comprehensive income as a direct charge to shareholder’s equity (as a component of accumulated other comprehensive income). | |
Management in its judgment concluded that a full valuation allowance was required for Tower’s U.S. taxed subsidiaries after its consideration of the cumulative three-year pre-tax loss in its U.S. taxed subsidiaries resulting from certain second quarter 2013 events and the 2012 pre-tax loss of $61.3 million. In the second quarter of 2013, the following items contributed significantly to pre-tax losses in Tower’s U.S. taxed subsidiaries: (i) $325.6 million of prior year reserve strengthening was recorded, of which $149.7 million related to Tower’s U.S. taxed subsidiaries, and (ii) a $214.0 million goodwill impairment charge, of which $185.9 million related to Tower’s U.S. taxed subsidiaries. Management believes that the negative evidence associated with the realizability of its net deferred tax asset, including the cumulative three-year pre-tax loss, the prior year adverse reserve development recorded in 2012 and 2013, and the effects of Hurricane Irene in 2011 and Superstorm Sandy in 2012 outweighed the positive evidence that the deferred tax assets, including the net operating loss carryforward, would be realized, and recorded the full valuation allowance. | |
The Company’s effective tax rates of 0.4% and 0.7% for the three and six months ended June 30, 3013, respectively, reflect the recording of the full valuation allowance in the second quarter of 2013. Prior to the second quarter of 2013, Tower calculated an estimated annual effective tax rate on its U.S. taxed subsidiaries that differed from the U.S. statutory rate due to costs associated with tax exempt interest and dividends received deductions. | |
The United States also imposes an excise tax on insurance and reinsurance premiums paid to non-U.S. insurers or reinsurers with respect to risks located in the United States. The rates of tax, unless reduced by an applicable U.S. tax treaty, are four percent for non-life insurance premiums and one percent for life insurance and all reinsurance premiums. The Company incurs federal excise taxes on certain of its reinsurance transactions, including amounts ceded through intercompany transactions. Tower incurred $6.3 million of federal excise tax in 2013. | |
Earnings_Loss_per_Share
Earnings (Loss) per Share | 6 Months Ended | ||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||
Earnings (Loss) per Share | ' | ||||||||||||||||
Note 15—Earnings (Loss) per Share | |||||||||||||||||
Undistributed net earnings (net income less dividends declared during the period) are allocated to both common stock and unvested share-based payment awards (“unvested restricted stock”). Because the common shareholders and unvested restricted stock holders share in dividends on a 1:1 basis, the earnings per share on undistributed earnings is equivalent, however, undistributed losses are allocated only to common stock holders. Undistributed earnings are allocated to all outstanding share-based payment awards, including those for which the requisite service period is not expected to be rendered. | |||||||||||||||||
The following table shows the computation of the earnings per share (historical earnings per share amounts have been adjusted for the 1.1330 share conversion ratio in connection with the Merger Transaction): | |||||||||||||||||
Three Months | Six Months | ||||||||||||||||
Ended June 30, | Ended June 30, | ||||||||||||||||
($ in thousands, except per share amounts) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Numerator | |||||||||||||||||
Net income (loss) attributable to Tower Group International, Ltd. | $ | (507,342 | ) | $ | (16,809 | ) | $ | (494,425 | ) | $ | 2,356 | ||||||
Less: Allocation of income for unvested participating restricted stock | - | - | - | - | |||||||||||||
Less: Dividends on unvested participating restricted stock | (48 | ) | (173 | ) | (215 | ) | (347 | ) | |||||||||
Net income available to common shareholders - Basic | (507,390 | ) | (16,982 | ) | (494,640 | ) | 2,009 | ||||||||||
Reallocation of income for unvested participating restricted stock | - | - | - | - | |||||||||||||
Net income available to common shareholders - Diluted | (507,390 | ) | (16,982 | ) | (494,640 | ) | 2,009 | ||||||||||
Denominator | |||||||||||||||||
Basic earning per share denominator | 57,135 | 43,289 | 51,487 | 43,340 | |||||||||||||
Effect of dilutive securities | - | - | - | 70 | |||||||||||||
Diluted earnings per share denominator | 57,135 | 43,289 | 51,487 | 43,410 | |||||||||||||
Earnings (loss) per share attributable to Tower Group International, Ltd. - Basic | |||||||||||||||||
Common stock: | |||||||||||||||||
Distributed earnings | $ | 0.17 | $ | 0.17 | $ | 0.34 | $ | 0.34 | |||||||||
Undistributed earnings | $ | (9.05 | ) | $ | (0.56 | ) | $ | (9.95 | ) | $ | (0.29 | ) | |||||
Total | $ | (8.88 | ) | $ | (0.39 | ) | $ | (9.61 | ) | $ | 0.05 | ||||||
Earnings (loss) per share attributable to Tower Group International, Ltd. - Diluted | $ | (8.88 | ) | $ | (0.39 | ) | $ | (9.61 | ) | $ | 0.05 | ||||||
The computation of diluted earnings (loss) per share excludes outstanding options and other common stock equivalents in periods where inclusion of such potential common stock instruments would be anti-dilutive. For the three and six months ended June 30, 2013, 958,980 and, 958,980, respectively, options to purchase Company shares were excluded from the computation of diluted earnings (loss) per share because the exercise price of the options was greater than the average market price. For the three and six months ended June 30, 2012, 969,310 and, 190,500, respectively, options to purchase Company shares were excluded from the computation of diluted earnings (loss) per share because the exercise price of the options was greater than the average market price. | |||||||||||||||||
Statutory_Financial_Informatio
Statutory Financial Information | 6 Months Ended |
Jun. 30, 2013 | |
Statutory Financial Information | ' |
Note 16—Statutory Financial Information | |
The Company is required to maintain minimum capital and surplus for each of its insurance subsidiaries. Management determined the minimum capital and surplus requirements for its U.S. based insurance subsidiaries to be at a level above “Company Action Level.” | |
Company Action Level is a calculated capital and surplus number using a risk-based formula adopted by the state insurance regulators. The basis for this formula is the NAIC’s risk-based capital (RBC) system and is designed to measure the adequacy of U.S. regulated insurer’s statutory capital and surplus compared to risks inherent in its business. If an insurance entity falls into Company Action Level, its management is required to submit a comprehensive financial plan that identifies the conditions that contributed to the financial condition. This plan must contain proposals to correct the financial problems and provide projections of the financial condition, both with and without the proposed corrections. The plan must also outline the key assumptions underlying the projections and identify the quality of, and problems associated with, the underlying business. Depending on the level of actual capital and surplus in comparison to the Company Action Level, the state insurance regulators could increase their regulatory oversight, restrict the placement of new business, or place the company under regulatory control. Bermuda based insurance entity’s minimum capital and surplus requirements are calculated from a solvency formula prescribed by the BMA. | |
Tower has in place several intercompany reinsurance transactions between its U.S. based insurance subsidiaries and its Bermuda based insurance subsidiaries. The U.S. based insurance subsidiaries have historically reinsured on a quota share basis obligations to CastlePoint Re, the Company’s other Bermuda based reinsurer. The 2013 obligations that CastlePoint Re assumes from the U.S. based insurance subsidiaries are then retroceded to TRL. In addition, CastlePoint Re also entered into a loss portfolio transaction with TRL where its reserves associated with the U.S. insurance subsidiary business for underwriting years prior to 2013 were all transferred to TRL. Therefore, TRL recorded $175 million of reserve strengthening on its balance sheet as of June 30, 2013 and, consequently, the financial result of such development was a reduction in the capital of TRL to $8.3 million at June 30, 2013. In addition TRL is required to collateralize the additional $175 million of assumed reserves in a trust for the benefit of TICNY, the lead pool company of the U.S. insurance companies. TRL had unencumbered liquid assets of $96 million at June 30, 2013, and during October of 2013, TRL commuted two reinsurance treaties which provided an additional $79 million in unencumbered assets. | |
The funding of the trust to support TICNY’s reinsurance recoverable has not yet occurred and requires approval by the Bermuda regulator. The Company can provide no assurance that it will be successful in finalizing the business combination or in funding the trust. If the trust funding is not approved, 1) the statutory capital of TICNY would be at a level that the New York Department of Financial Services could place TICNY under regulatory control; and 2) Tower Group, Inc. could violate the revised debt covenants of the bank credit facility at December 31, 2013, which violation, if not waived, would result in a cross default of our convertible notes. Statutory capital and surplus would be further reduced by whatever amounts are due from CastlePoint Re or from TRL that are not supported by assets held in trust. At June 30, 2013, all other U.S. based insurance subsidiaries maintained capital and surplus above company action level. | |
As of June 30, 2013, TRL had capital and surplus that did not meet the minimum capital and surplus requirements of the BMA. | |
The Company has discussed with the BMA its intention to combine a substantial portion of the business and the capital of CastlePoint Re with TRL. Through this combination, management believes that the combined entity’s capital would meet the minimum capital and surplus thresholds determined by the BMA. The Company is currently developing this plan and expects to deliver this plan to its Bermuda regulators in the next several weeks. The Company cannot provide assurance that it will be successful in pursuing this alternative. Should the business combination not be approved, TRL would be operating at a capital level that is below the regulatory minimums as designated by the BMA. As such, TRL may be subject to significant additional regulatory oversight or, in the event that such oversight did not satisfy the BMA, placed into liquidation. | |
Two Insurance Subsidiaries that do not constitute “significant subsidiaries” of the Company under Regulation S-X are in discussions with the insurance regulatory authority in their state of domicile with respect to the imposition of restrictions on the operation of their businesses. These discussions may result in such subsidiaries’ agreeing to provide the regulatory authority with increased information with respect to their business, operations and financial condition, as well as limitations on payments and transactions outside the ordinary course of business and material changes in their management and related matters. | |
In addition, U.S. state insurance regulations restrict the ability of our insurance subsidiaries to pay dividends to Tower Group International, Ltd. as their ultimate parent (the “Holding Company”). Generally dividends may only be paid out of earned surplus, and the amount of an insurer’s surplus following payment of any dividends must be reasonable in relation to the insurer’s outstanding liabilities and adequate to meet its financial needs. As of June 30, 2013, no dividends may be paid to the Holding Company without the approval of the state regulators or BMA, as appropriate. |
Segment_Information
Segment Information | 6 Months Ended | ||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||
Segment Information | ' | ||||||||||||||||
Note 17—Segment Information | |||||||||||||||||
The accounting policies of the segments are the same as those described in TGI’s summary of significant accounting policies in its Amendment No. 2 to the Annual Report on Form 10-K for the year ended December 31, 2012. | |||||||||||||||||
As disclosed in “Note 1 – Nature of Business”, the Company revised its business segments to present Commercial Insurance, Specialty Insurance and Reinsurance and Personal Insurance segments. The Company has restated prior period segments to be consistent with the current presentation. | |||||||||||||||||
Segment performance is evaluated based on segment profit, which excludes investment income, realized gains and losses, interest expense, income taxes and corporate expenses. Intangibles and goodwill are allocated to each of the segments. All other assets are not allocated to segments because the other assets are considered in total by management for decision-making purposes. | |||||||||||||||||
The Personal Insurance segment, which includes the Reciprocal Exchanges and the management companies, reports the management fees earned by Tower from the Reciprocal Exchanges for underwriting, investment management and other services as a reduction to other underwriting expenses. The effects of these management fees between Tower and the Reciprocal Exchanges are eliminated in consolidation to derive consolidated net income. However, the management fee income is reported in net income attributable to Tower Group International, Ltd. and included in basic and diluted earnings (loss) per share. | |||||||||||||||||
Business segment results are as follows: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
($ in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Commercial Insurance Segment | |||||||||||||||||
Revenues | |||||||||||||||||
Premiums earned | $ | 170,832 | $ | 193,793 | $ | 348,827 | $ | 381,651 | |||||||||
Ceding commission revenue | (8,301 | ) | (732 | ) | (8,237 | ) | (2,778 | ) | |||||||||
Policy billing fees | 1,422 | 1,390 | 2,792 | 2,903 | |||||||||||||
Total revenues | 163,953 | 194,451 | 343,382 | 381,776 | |||||||||||||
Expenses | |||||||||||||||||
Loss and loss adjustment expenses | 249,906 | 155,395 | 373,293 | 272,239 | |||||||||||||
Underwriting expenses | 66,614 | 63,832 | 129,383 | 128,245 | |||||||||||||
Total expenses | 316,520 | 219,227 | 502,676 | 400,484 | |||||||||||||
Underwriting profit (loss) | $ | (152,567 | ) | $ | (24,776 | ) | $ | (159,294 | ) | $ | (18,708 | ) | |||||
Specialty Insurance and Reinsurance Segment | |||||||||||||||||
Revenues | |||||||||||||||||
Premiums earned | $ | 122,211 | $ | 143,857 | $ | 251,999 | $ | 253,834 | |||||||||
Ceding commission revenue | 3,528 | 4,626 | 6,751 | 6,682 | |||||||||||||
Total revenues | 125,739 | 148,483 | 258,750 | 260,516 | |||||||||||||
Expenses | |||||||||||||||||
Loss and loss adjustment expenses | 248,466 | 125,814 | 321,442 | 210,408 | |||||||||||||
Underwriting expenses | 56,772 | 50,122 | 106,915 | 88,851 | |||||||||||||
Total expenses | 305,238 | 175,936 | 428,357 | 299,259 | |||||||||||||
Underwriting profit (loss) | $ | (179,499 | ) | $ | (27,453 | ) | $ | (169,607 | ) | $ | (38,743 | ) | |||||
Personal Insurance Segment | |||||||||||||||||
Revenues | |||||||||||||||||
Premiums earned | $ | 125,321 | $ | 122,503 | $ | 239,424 | $ | 244,826 | |||||||||
Ceding commission revenue | 12,044 | 6,186 | 22,908 | 11,339 | |||||||||||||
Policy billing fees | 1,899 | 1,610 | 3,679 | 3,231 | |||||||||||||
Total revenues | 139,264 | 130,299 | 266,011 | 259,396 | |||||||||||||
Expenses | |||||||||||||||||
Loss and loss adjustment expenses | 61,520 | 68,566 | 140,889 | 134,621 | |||||||||||||
Underwriting expenses | 63,709 | 56,164 | 121,696 | 107,617 | |||||||||||||
Total expenses | 125,229 | 124,730 | 262,585 | 242,238 | |||||||||||||
Underwriting profit (loss) | $ | 14,035 | $ | 5,569 | $ | 3,426 | $ | 17,158 | |||||||||
Tower | $ | 14,139 | $ | 9,376 | $ | 16,156 | $ | 21,213 | |||||||||
Reciprocal Exchanges | (104 | ) | (3,807 | ) | (12,730 | ) | (4,055 | ) | |||||||||
Total underwriting profit (loss) | $ | 14,035 | $ | 5,569 | $ | 3,426 | $ | 17,158 | |||||||||
The following table reconciles revenue by segment to consolidated revenues: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
($ in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Commercial Insurance segment | $ | 163,953 | $ | 194,451 | $ | 343,382 | $ | 381,776 | |||||||||
Specialty Insurance and Reinsurance segment | 125,739 | 148,483 | 258,750 | 260,516 | |||||||||||||
Personal Insurance segment | 139,264 | 130,299 | 266,011 | 259,396 | |||||||||||||
Total segment revenues | 428,956 | 473,233 | 868,143 | 901,688 | |||||||||||||
Net investment income | 28,402 | 31,781 | 58,719 | 65,724 | |||||||||||||
Net realized gains (losses) on investments, including other-than-temporary impairments | (2,034 | ) | 19 | 4,817 | 3,347 | ||||||||||||
Corporate and other | 5,194 | 1,359 | 5,322 | 1,856 | |||||||||||||
Consolidated revenues | $ | 460,518 | $ | 506,392 | $ | 937,001 | $ | 972,615 | |||||||||
The following table reconciles the results of the Company’s individual segments to consolidated income before income taxes: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
($ in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Commercial Insurance segment underwriting profit (loss) | $ | (152,567 | ) | $ | (24,776 | ) | $ | (159,294 | ) | $ | (18,708 | ) | |||||
Specialty Insurance and Reinsurance segment underwriting profit (loss) | (179,499 | ) | (27,453 | ) | (169,607 | ) | (38,743 | ) | |||||||||
Personal Insurance segment underwriting profit (loss) | 14,035 | 5,569 | 3,426 | 17,158 | |||||||||||||
Net investment income | 28,402 | 31,781 | 58,719 | 65,724 | |||||||||||||
Net realized gains on investments, including other-than-temporary impairments | (2,034 | ) | 19 | 4,817 | 3,347 | ||||||||||||
Corporate and other | (2,297 | ) | (1,809 | ) | (5,239 | ) | (4,173 | ) | |||||||||
Acquisition-related transaction costs | (665 | ) | (720 | ) | (19,721 | ) | (1,982 | ) | |||||||||
Interest expense | (7,635 | ) | (7,902 | ) | (15,443 | ) | (16,513 | ) | |||||||||
Goodwill impairment | (214,049 | ) | - | (214,049 | ) | - | |||||||||||
Equity income in unconsolidated affiliate | 7,838 | - | 7,966 | - | |||||||||||||
Income before income taxes | $ | (508,471 | ) | $ | (25,291 | ) | $ | (508,425 | ) | $ | 6,110 |
Contingencies
Contingencies | 6 Months Ended |
Jun. 30, 2013 | |
Contingencies | ' |
Note 18—Contingencies | |
Legal Proceedings | |
On August 20, 2013, Robert P. Lang, a purported shareholder of Tower Group International Ltd. (“Tower”), filed a purported class action complaint (the “Lang Complaint”) against Tower and certain of its officers in the United States District Court for the Southern District of New York. The Lang Complaint alleges that Tower and certain of its officers violated federal securities laws and seeks unspecified damages. On September 3, 2013, a second purported shareholder class action complaint was filed by Dennis Feighay, another purported Tower shareholder, containing similar allegations to those set forth in the Lang Complaint (the “Feighay Complaint”). On October 4, 2013, a third complaint was filed by Sanju Sharma (the “Sharma Complaint”). The Sharma Complaint names as defendants Tower and certain of its officers, and purports to be asserted on behalf of a plaintiff class who purchased Tower stock between May 10, 2011 and September 17, 2013. On October 18, 2013, an amended complaint was filed in the Sharma case (the “Sharma Amended Complaint”). The Sharma Amended Complaint alleges additional false and misleading statements, and purports to be asserted on behalf of a plaintiff class who purchased Tower stock between March 1, 2011 and October 7, 2013. On October 21, 2013, a number of motions were filed seeking to consolidate the shareholder class actions into one matter and for appointment of a lead plaintiff. The Company believes that it is not probable that the Lang and Feighay Complaints and the Sharma Amended Complaint will result in a loss, and that the amount of any loss cannot reasonably be estimated. | |
On October 18, 2013, Cinium Financial Services Corporation (“Cinium”) and certain other affiliated parties (collectively, “Plaintiffs”) filed a complaint against, among others, Tower, CastlePoint Insurance Company (“CastlePoint”), an indirect wholly owned subsidiary of Tower, and certain officers of Tower (the “Cinium Complaint”) in New York State Supreme Court. CastlePoint is a party to a Securityholders’ Agreement, dated as of June 14, 2012 (the “Securityholders’ Agreement”), among certain parties including Plaintiffs, and is also the holder of a senior note issued by Cinium dated May 15, 2012 that is convertible into shares of Cinium common stock (the “Senior Note”). Plaintiffs seek, among other things, (i) a declaratory judgment that CastlePoint has no right to exercise any control over Cinium under the Securityholders’ Agreement or to convert the Senior Note without prior regulatory approval; (ii) rescission of the Senior Note and Securityholders’ Agreement based on alleged fraudulent misrepresentations by Tower at the time these agreements were entered into; and (iii) damages of $150 million for alleged breach of fiduciary duties to Cinium and its shareholders by certain directors. The Company believes that it is not probable that the Cinium Complaint will result in a loss, and that the amount of any loss cannot reasonably be estimated. | |
From time to time, the Company is involved in other various legal proceedings in the ordinary course of business. The Company does not believe that the resolution of any currently pending legal proceedings, either individually or taken as a whole, will have a material adverse effect on its business, results of operations or financial condition. | |
Subsequent_Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2013 | |
Subsequent Events | ' |
Note 19—Subsequent Events | |
Miscellaneous | |
On August 19, 2013, Tower announced it terminated its previously announced agreement to acquire American Safety Reinsurance, Ltd., the Bermuda-based reinsurance subsidiary of American Safety Insurance Holdings, Ltd., from Fairfax Financial Holdings Limited. Tower received $5 million in exchange for the termination of such agreement. | |
In August 2013, management has begun to reorganize the way in which it will manage the business for operating decisions and assessing profitability. This reorganization is attributed to events occurring subsequent to the second quarter of 2013. As a result, the Company will reassess its segment reporting for the third quarter 2013 financial reporting purposes. | |
On October 11, 2013, the Company amended its Credit Facility to reduce its capacity from $220 million to $70 million and change its maturity date to May 30, 2014. See “Note 1 – Nature of Business” for additional information. | |
Reinsurance Agreements | |
On October 1, 2013, Tower announced that it entered into agreements with three reinsurers, Arch Reinsurance Ltd. (“Arch”), Hannover Re (Ireland) Plc. (“Hannover”) and Southport Re (Cayman), Ltd. (“Southport Re”). These agreements provided for surplus enhancement and improved certain financial leverage ratios, while increasing the Company’s financial flexibility. The agreements with Arch and Hannover each consists of one reinsurance agreement while the arrangement with Southport Re consists of several reinsurance agreements. Each of these is described below. | |
The first agreement was between TICNY on its behalf and on behalf of each of its pool participants and Arch. Under this multi-line quota share agreement, TICNY will cede 17.5% on a quota share certain brokerage commercial automobile liability, brokerage commercial multi-peril property, brokerage commercial multi-peril liability and brokerage other liability (mono line liability) business. The agreement covers losses occurring on or after July 1, 2013 for policies in-force as at June 30, 2013 and policies written or renewed from July 1, 2013 to December 31, 2013. The agreement has a special termination clause whereby either party may terminate the agreement upon the occurrence of certain circumstances, including an A.M. Best financial strength rating downgrade to below A-. As noted below, A.M. Best downgraded Tower’s financial strength rating to B++. Neither party has provided notice to terminate the agreement. | |
The second agreement was between TICNY, on its behalf and on behalf of each of its pool participants, and Hannover. Under this multi-line quota share agreement, TICNY will cede 14% on a quota share certain brokerage commercial automobile liability, brokerage commercial multi-peril property, brokerage commercial multi-peril liability, brokerage other liability (mono line liability) and brokerage workers’ compensation business. The agreement covers losses occurring on or after July 1, 2013 for policies in-force as at June 30, 2013 and policies written or renewed from July 1, 2013 to December 31, 2013. The agreement has a special termination clause whereby either party may terminate the agreement upon the occurrence of certain circumstances, including an A.M. Best financial strength rating downgrade to below A-. As noted below, A.M. Best downgraded Tower’s financial strength rating to B++. Neither party has provided notice to terminate the agreement. | |
The third reinsurance arrangement with Southport Re consisted of two separate reinsurance agreements with TICNY, on its behalf and on behalf of each of its pool participants, and a third reinsurance agreement with Tower Reinsurance, Ltd. (“TRL”). Under the first of the agreements with TICNY, TICNY ceded to Southport Re a 30% quota share of its workers’ compensation and employer’s liability business. The agreement covers losses occurring on or after July 1, 2013 for policies in force at June 30, 2013 and policies written or renewed during the term of the agreement. Under the second of these agreements with TICNY, an aggregate excess of loss agreement, Southport Re assumed a portion of the losses incurred by TICNY on its workers’ compensation and employer’s liability business between January 1, 2011 and June 30, 2013, but paid by TICNY on or after June 1, 2013. Finally, TRL, a wholly-owned Bermuda-domiciled reinsurance subsidiary of Tower, also entered into an aggregate excess of loss agreement with Southport Re, in which Southport Re assumed a portion of the losses incurred by TRL on its assumed workers’ compensation and employer’s liability business between January 1, 2011 and June 30, 2013, but paid by TRL on or after June 1, 2013. The agreement has a special termination clause whereby either party may terminate the agreement upon the occurrence of certain circumstances, including an A.M. Best financial strength rating downgrade to below A-. As noted below, A.M. Best downgraded Tower’s financial strength rating to B++. Neither party has provided notice to terminate the agreement. | |
A.M. Best, Fitch and Demotech Downgrade the Company’s Financial Strength and Issuer Credit Ratings | |
On October 7, 2013, Fitch downgraded Tower’s Issuer Default Rating from “BBB” to “B” and Tower’s insurance subsidiaries’ Insurer Financial Strength ratings from “A-” to “BB”. The ratings will continue to remain on negative watch until Tower’s exploration of strategic alternatives. | |
On October 8, 2013, A.M. Best, lowered Tower’s issuer credit, as well as its financial strength ratings, from “A-” (Excellent) to “B++” (Good). The ratings remain under review with negative implications pending further discussions between A.M. Best and Tower’s management. | |
On October 7, 2013, Demotech lowered its rating on TICNY and three other U.S. based insurance subsidiaries (Kodiak Insurance Company, Massachusetts Homeland Insurance Company and York Insurance Company of Maine) from A’ (A prime) to A (A exceptional). In addition, Demotech removed its previous A’ (A prime) rating on six other U.S. based insurance subsidiaries (CastlePoint Florida Insurance Company, CastlePoint Insurance Company, CastlePoint National Insurance Company, Hermitage Insurance Company, North East Insurance Company and Preserver Insurance Company). Demotech also affirmed its A ratings on Adirondack Insurance Exchange, New Jersey Skylands Insurance Association, New Jersey Skylands Insurance Company and Mountain Valley Indemnity Company. | |
Management expects these rating actions, in combination with other items that have impacted the Company in the second quarter of 2013, to result in a decrease in the amount of premiums the insurance subsidiaries are able to write. The net written premiums in the Commercial Insurance segment were $169.1 million and $343.6 million for the three and six months ended June 30, 2013. The net written premiums in the Specialty Insurance and Reinsurance segment were $103.7 million and $306.6 million for the three and six months ended June 30, 2013. Business written through program underwriting agents and assumed reinsurance generally requires an A.M. Best rating of A- or greater. | |
Regulation | |
Two insurance subsidiaries that do not constitute “significant subsidiaries” of the Company under Regulation S-X are in discussions with the insurance regulatory authority in their state of domicile with respect to the imposition of restrictions on the operation of their businesses. These discussions may result in such subsidiaries’ agreeing to provide the regulatory authority with increased information with respect to their business, operations and financial condition, as well as limitations on payments and transactions outside the ordinary course of business and material changes in their management and related matters. | |
Accounting_Policies_and_Basis_1
Accounting Policies and Basis of Presentation (Policies) | 6 Months Ended | ||||||||
Jun. 30, 2013 | |||||||||
Basis of Presentation | ' | ||||||||
Basis of Presentation | |||||||||
The Merger Transaction was accounted for as a reverse acquisition, under which TGI was identified and treated as the accounting acquirer. As such, the Company’s unaudited consolidated financial statements include the accounts and operations of TGI and its insurance subsidiaries, managing general agencies and management companies as its historical financial statements, with the results of Tower Group International, Ltd., as accounting acquiree, being included from March 13, 2013, the effective date of the Merger Transaction. The unaudited consolidated financial statements also include the accounts of Adirondack Insurance Exchange, a New York reciprocal insurer, and New Jersey Skylands Insurance Association, a New Jersey reciprocal insurer (together, the “Reciprocal Exchanges”). The Company does not own the Reciprocal Exchanges but manages their business operations through its wholly-owned management companies. | |||||||||
The accompanying unaudited consolidated financial statements included in this report have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q and Article 10 of SEC Regulation S-X. The principles for condensed interim financial information do not require the inclusion of all the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with TGI’s consolidated financial statements as of and for the year ended December 31, 2012 and notes thereto included in TGI’s Amendment No. 2 to the Annual Report on Form 10-K for the year ended December 31, 2012. The accompanying consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with standards of the Public Company Accounting Oversight Board (United States) but, in the opinion of management, such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Company’s financial position, results of operations and cash flows. All intercompany transactions have been eliminated in consolidation. | |||||||||
Use of Estimates | ' | ||||||||
Use of Estimates | |||||||||
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |||||||||
Moreover, the results of operations for the six months ended June 30, 2013 may not be indicative of the results that may be expected for the year ending December 31, 2013. | |||||||||
Intercompany Transactions | ' | ||||||||
Intercompany transactions | |||||||||
In the first quarter of 2012, the Company transferred a licensed insurance subsidiary shell to the Reciprocal Exchanges and received cash for its statutory book value. At the date of the transfer, the Company’s GAAP carrying basis in this subsidiary exceeded the statutory book value and the transfer resulted in a loss to the Company of $1.8 million. Since this was a non-recurring transaction between entities under common control, assets were transferred at historical book value. The difference in the consideration paid and the book value of the assets transferred was treated as an adjustment to equity. This transaction had no effect on consolidated shareholders’ equity. | |||||||||
Reclassifications and Adjustments | ' | ||||||||
Reclassifications and Adjustments | |||||||||
Since the Company accounted for the Merger Transaction as a reverse acquisition and recapitalization, it has retroactively restated Common Stock, Treasury Stock and Paid-in-Capital accounts and earnings per share for periods prior to the Merger Transaction to reflect the historical capitalization of TGI, adjusted for the 1.1330 conversion ratio as discussed in “Note 4 – Merger Transaction”. Certain other reclassifications have also been made to prior years’ financial information to conform to the current year presentation, including the changes in segment presentation discussed in “Note 1 – Nature of Business.” | |||||||||
The table below reflects the previously reported and revised shareholders’ equity accounts resulting from the Merger Transaction: | |||||||||
As previously | Revised | ||||||||
($ in thousands, except per share amounts) | Reported | Amount | |||||||
As of December 31, 2012 | |||||||||
Common stock | $ | 469 | $ | 530 | |||||
Treasury stock | (181,435 | ) | (181,435 | ) | |||||
Paid-in-capital | 780,097 | 780,036 | |||||||
For the three-months ended June 30, 2012 | |||||||||
Earnings (Loss) per Share: | |||||||||
Basic | $ | (0.43 | ) | $ | (0.39 | ) | |||
Diluted | (0.43 | ) | (0.39 | ) | |||||
Weighted average common shares outstanding | |||||||||
Basic | 39,117 | 43,289 | |||||||
Diluted | 39,117 | 43,289 | |||||||
For the six-months ended June 30, 2012 | |||||||||
Earnings (Loss) per Share: | |||||||||
Basic | $ | 0.06 | $ | 0.05 | |||||
Diluted | 0.06 | 0.05 | |||||||
Weighted average common shares outstanding | |||||||||
Basic | 39,206 | 43,340 | |||||||
Diluted | 39,268 | 43,410 | |||||||
See “Note 15 – Earnings (loss) per Share” for the computation of the earnings per share. | |||||||||
Accounting Pronouncements | ' | ||||||||
Accounting Pronouncements | |||||||||
Accounting guidance adopted in 2012 and 2013 | |||||||||
In July 2012, the Financial Accounting Standards Board (“FASB”) issued amended guidance on testing indefinite-lived intangible assets for impairment. This guidance is intended to reduce the cost and complexity of the annual impairment test by allowing an entity to utilize more qualitative factors and is effective for annual and interim tests performed for fiscal years beginning after September 15, 2012. The Company will consider this guidance in connection with the annual impairment testing of its indefinite-lived intangible assets, which is performed annually in the fourth quarter based on data as of September 30. This guidance does not affect existing guidance on recognition or measurement of impairment losses on indefinite-lived intangible assets, and as such it will not affect the Company’s financial position, results of operations or cash flows. | |||||||||
In February 2013, the FASB issued amended guidance on the presentation of amounts reclassified out of accumulated other comprehensive income in one place, either on the face of the income statement or in the footnotes to the financial statements. The Company adopted this guidance effective January 1, 2013 on a prospective basis as prescribed by the amended guidance. As all of the information that this guidance requires to be disclosed is already presented elsewhere in the Company’s financial statements under existing GAAP, and it does not affect the classification, recognition or measurement of items within other comprehensive income, the adoption will not affect the Company’s financial position, results of operations or cash flows. | |||||||||
Accounting guidance not yet effective | ' | ||||||||
Accounting guidance not yet effective | |||||||||
In July 2013, the FASB issued new guidance that permits the use of a new benchmark for hedges. This guidance is effective prospectively for new or re-designated hedges as of July 17, 2013. The Company will consider this guidance if and when it enters into any new hedging relationships. | |||||||||
Accounting for the Merger Transaction | ' | ||||||||
Accounting for the Merger Transaction | |||||||||
The Company has accounted for the Merger Transaction as a reverse acquisition in which TGI, the legal acquiree, was identified and treated as the accounting acquirer and Tower Group International, Ltd., the legal acquirer, was identified and treated as the accounting acquiree. The identification of the accounting acquirer and acquiree in the Merger Transaction was primarily based on the fact that immediately following the close of the Merger Transaction there was a change in control of the Company with TGI designees to the Company’s Board of Directors comprising all of its directors and TGI’s former senior management comprising the Company’s entire senior management team. In accordance with accounting guidance for reverse acquisitions, the unaudited consolidated financial statements of the Company following the Merger Transaction have been issued under the name of the Company, as the legal parent, but reflect a continuation of the financial statements of TGI, as the accounting acquirer, with one exception, which was the retroactive adjustment of TGI’s historical legal capital to reflect the transaction as a recapitalization of TGI’s historical capital accounts. On the effective date of the Merger Transaction, the assets and liabilities of Tower Group International, Ltd. were accounted for under the acquisition method, under which they have been reflected at their respective acquisition date fair values. | |||||||||
Prior to the Merger Transaction, Canopius Bermuda restructured its insurance operations as contemplated in the Master Transaction Agreement. This restructuring occurred primarily through the execution of retrocession agreements with Canopius Reinsurance Limited (“CRL”), an indirectly wholly-owned subsidiary of Canopius Group, to retrocede a percentage of Lloyd’s of London Syndicate 4444 (“Syndicate 4444”) business for the Year of Account (“YOA”) 2012, YOA 2011 and prior years, which Canopius Bermuda assumed from Canopius Group. Syndicate 4444 is an insurance syndicate managed by Canopius Group. The Company accounts for these retrocession agreements in accordance with prospective accounting treatment, and reports the assumed and ceded assets and liabilities on a gross basis on the consolidated balance sheet. On September 30, 2013, Tower commuted the Syndicate 4444 YOA 2012 and YOA 2011 and prior years retrocession agreements with CRL and novated the assumed reinsurance with Canopius Group on these same contracts. | |||||||||
In addition, effective January 1, 2013, pursuant to the terms of the Master Transaction Agreement, prior to the Merger Transaction, TGI entered into a commutation agreement whereby the TGI commuted Syndicate 4444 YOA 2012 and YOA 2011 business TGI previously reinsured from Canopius Group in prior years. There was no gain or loss recognized on this commutation. | |||||||||
Goodwill Impairment Testing and Charge | ' | ||||||||
Goodwill Impairment Testing and Charge | |||||||||
The Company tests goodwill balances for impairment annually in the fourth quarter of each year using a September 30 measurement date, or more frequently if circumstances indicate that the value of goodwill may be impaired. Goodwill impairment is performed at the reporting unit level and the test requires a two-step process. In performing Step 1of the impairment test, management compared the estimated fair values of the applicable reporting units to their aggregate carrying values, including goodwill. If the carrying amount of a reporting unit including goodwill were to exceed the fair value of the reporting unit, Step 2 of the goodwill impairment would be performed. Step 2 of the goodwill impairment test requires comparing the implied fair value of the affected reporting unit’s goodwill against the carrying value of that goodwill. | |||||||||
In its 2012 annual impairment test, management determined that a greater risk of future impairment existed for the Commercial Insurance reporting unit. During the second quarter of 2013, management concluded an impairment test was required as a result of the significant prior years’ loss reserves incurred (see “Note 9 – Loss and Loss Adjustment Expense”) and the 2013 reorganization. | |||||||||
In conducting the goodwill impairment analysis as of June 30, 2013, the Company tested the reporting units prior to the reorganization as required by GAAP. The Company estimated each of the reporting units’ fair values using a market multiple approach based on tangible book values. Historically, the Company also utilized market multiple approaches based on (i) book value, (ii) estimates of projected results for future periods, and (iii) a valuation technique using discounted cash flows. However, based upon the significance of the loss reserve charge recorded in the second quarter of 2013, the reduction to Tower’s insurance subsidiaries’ capital and surplus levels (see “Note 16 – Statutory Financial Information”), management in its judgment concluded a multiple of tangible book value was most indicative of a price a market participant would pay for the reporting units. In addition, the Commercial Insurance reporting unit’s estimated fair value was adjusted for the expected capital infusion a market participant would be expected to fund into the insurance businesses to maintain historical rating agency ratings. | |||||||||
Step 1 of the impairment test indicated the Commercial Insurance unit’s carrying value exceeded its fair value and the Personal Insurance unit’s fair value exceeded its carrying value. | |||||||||
Accordingly, the Company performed a Step 2 impairment test on the Commercial Insurance reporting unit. Based on the results, the Company recorded a non-cash goodwill impairment charge of $214.0 million to write-down all of the goodwill in the Commercial Insurance reporting unit as of June 30, 2013. | |||||||||
Variable Interest Entities | ' | ||||||||
The Company determined that each of the Reciprocal Exchanges qualifies as a VIE and that the Company is the primary beneficiary as it has both the power to direct the activities of the Reciprocal Exchanges that most significantly impact their economic performance and the risk of economic loss through its ownership of the surplus notes. Accordingly, the Company consolidates these Reciprocal Exchanges and eliminates all intercompany balances and transactions with Tower. | |||||||||
Impairment Review | ' | ||||||||
Impairment Review | |||||||||
Management regularly reviews the Company’s fixed-maturity and equity security portfolios in accordance with its impairment policy to evaluate the necessity of recording impairment losses for OTTI. The determination of OTTI is a subjective process and different judgments and assumptions could affect the timing of loss realization. | |||||||||
Management, in conjunction with its outside portfolio managers, analyzes its non-agency residential mortgage-backed securities (“RMBS”) using default loss models based on the performance of the underlying loans. Performance metrics include delinquencies, defaults, foreclosures, anticipated cash flow prepayments and cumulative losses incurred. The expected losses for a mortgage pool are compared to the break-even loss, which represents the point at which the Company’s tranche begins to experience losses. | |||||||||
The commercial mortgage-backed securities (“CMBS”) holdings are evaluated using analytical techniques and various metrics including the level of subordination, debt-service-coverage ratios, loan-to-value ratios, delinquencies, defaults and foreclosures. | |||||||||
For the non-structured fixed-maturity securities (U.S. Treasury and Agency securities, municipal bonds, and corporate debt), unrealized losses are reviewed to determine whether full recovery of principal and interest will be received. The estimate of expected cash flows is determined by projecting a recovery value and a recovery time frame and assessing whether further principal and interest will be received. The determination of recovery value incorporates an issuer valuation assumption utilizing one or a combination of valuation methods as deemed appropriate by management. The present value of the cash flows is determined by applying the effective yield of the security at the date of acquisition (or the most recent implied rate used to accrete the security if the implied rate has changed as a result of a previous impairment) and an estimated recovery time frame. For securities for which the issuer is financially troubled but not in bankruptcy, that time frame is generally longer. Included in the present value calculation are expected principal and interest payments; however, for securities for which the issuer is classified as bankrupt or in default, the present value calculation assumes no interest payments and a single recovery amount. In situations for which a present value of cash flows cannot be estimated, a write-down to fair value is recorded. | |||||||||
In estimating the recovery value, significant judgment is involved in the development of assumptions relating to a number of factors related to the issuer including, but not limited to, revenue, margin and earnings projections, the likely market or liquidation values of assets, potential additional debt to be incurred pre- or post- bankruptcy/restructuring, the ability to shift existing or new debt to different priority layers, the amount of restructuring/bankruptcy expenses, the size and priority of unfunded pension obligations, litigation or other contingent claims, the treatment of intercompany claims and the likely outcome with respect to inter-creditor conflicts. | |||||||||
The evaluation of equity securities includes management’s intent and ability to hold the security to recovery. Management will record OTTI in those situations where it does not intend to hold the security to recovery or if the security is not expected to recover in value in the near term. | |||||||||
Fair Value Measurements | ' | ||||||||
GAAP establishes a three-level hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets or liabilities fall within different levels of the hierarchy, the classification is based on the lowest level input that is significant to the fair value measurement of the asset or liability. Classification of assets and liabilities within the hierarchy considers the markets in which the assets and liabilities are traded, including during periods of market disruption, and the reliability and transparency of the assumptions used to determine fair value. The hierarchy requires the use of observable market data when available. The levels of the hierarchy are as follows: | |||||||||
Level 1 — Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active markets. Included are those equity securities that are traded on active exchanges, such as the NASDAQ Global Select Market. | |||||||||
Level 2 — Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs. Included are investments in U.S. Treasury and Agency securities and, together with municipal bonds, corporate debt securities, commercial mortgages, residential mortgage-backed securities and asset-backed securities. Additionally, interest-rate swap contracts utilize Level 2 inputs in deriving fair values. | |||||||||
Level 3 — Inputs to the valuation methodology are unobservable in the market for the asset or liability and are significant to the fair value measurement. Material assumptions and factors considered in pricing investment securities may include projected cash flows, collateral performance including delinquencies, defaults and recoveries, and any market clearing activity or liquidity circumstances in the security or similar securities that may have occurred since the prior pricing period. | |||||||||
Earnings (Loss) Per Share | ' | ||||||||
Undistributed net earnings (net income less dividends declared during the period) are allocated to both common stock and unvested share-based payment awards (“unvested restricted stock”). Because the common shareholders and unvested restricted stock holders share in dividends on a 1:1 basis, the earnings per share on undistributed earnings is equivalent, however, undistributed losses are allocated only to common stock holders. Undistributed earnings are allocated to all outstanding share-based payment awards, including those for which the requisite service period is not expected to be rendered. | |||||||||
Segment Information | ' | ||||||||
The accounting policies of the segments are the same as those described in TGI’s summary of significant accounting policies in its Amendment No. 2 to the Annual Report on Form 10-K for the year ended December 31, 2012. | |||||||||
As disclosed in “Note 1 – Nature of Business”, the Company revised its business segments to present Commercial Insurance, Specialty Insurance and Reinsurance and Personal Insurance segments. The Company has restated prior period segments to be consistent with the current presentation. | |||||||||
Segment performance is evaluated based on segment profit, which excludes investment income, realized gains and losses, interest expense, income taxes and corporate expenses. Intangibles and goodwill are allocated to each of the segments. All other assets are not allocated to segments because the other assets are considered in total by management for decision-making purposes. | |||||||||
The Personal Insurance segment, which includes the Reciprocal Exchanges and the management companies, reports the management fees earned by Tower from the Reciprocal Exchanges for underwriting, investment management and other services as a reduction to other underwriting expenses. The effects of these management fees between Tower and the Reciprocal Exchanges are eliminated in consolidation to derive consolidated net income. However, the management fee income is reported in net income attributable to Tower Group International, Ltd. and included in basic and diluted earnings (loss) per share. |
Restatement_of_Previously_Issu1
Restatement of Previously Issued Financial Statements (Tables) | 6 Months Ended | ||||||||||||
Jun. 30, 2013 | |||||||||||||
Restatement on Consolidated Balance Sheets | ' | ||||||||||||
The effect of the restatement on the consolidated balance sheets are presented in the table below: | |||||||||||||
December 31, 2012 | |||||||||||||
($ in thousands, except par value and share amounts) | As | Restated | Effect of | ||||||||||
Previously | Adjustments | ||||||||||||
Reported | |||||||||||||
Assets | |||||||||||||
Total investments | 2,554,505 | 2,553,505 | (1,000 | ) | |||||||||
Cash and cash equivalents | 100,293 | 102,269 | 1,976 | ||||||||||
Investment income receivable | 25,332 | 25,332 | — | ||||||||||
Investment in unconsolidated affiliate | 70,830 | 71,894 | 1,064 | ||||||||||
Premiums receivable | 422,112 | 412,045 | (10,067 | ) | |||||||||
Reinsurance recoverable on paid losses | 17,609 | 17,609 | — | ||||||||||
Reinsurance recoverable on unpaid losses | 496,192 | 459,457 | (36,735 | ) | |||||||||
Prepaid reinsurance premiums | 63,923 | 63,923 | — | ||||||||||
Deferred acquisition costs, net | 180,941 | 181,198 | 257 | ||||||||||
Intangible assets | 106,768 | 106,768 | — | ||||||||||
Goodwill | 241,458 | 241,458 | — | ||||||||||
Funds held by reinsured companies | 137,545 | 137,545 | — | ||||||||||
Other assets | 331,506 | 338,769 | 7,263 | ||||||||||
Total Assets | 4,749,014 | $ | 4,711,772 | $ | (37,242 | ) | |||||||
Liabilities | |||||||||||||
Loss and loss adjustment expenses | 1,895,073 | $ | 1,895,679 | $ | 606 | ||||||||
Unearned premium | 920,859 | 921,271 | 412 | ||||||||||
Reinsurance balances payable | 40,569 | 40,569 | — | ||||||||||
Funds held under reinsurance agreements | 98,581 | 98,581 | — | ||||||||||
Other liabilities | 292,239 | 296,960 | 4,721 | ||||||||||
Deferred income taxes | 36,464 | 24,763 | (11,701 | ) | |||||||||
Debt | 449,731 | 449,731 | — | ||||||||||
Total liabilities | 3,733,516 | 3,727,554 | (5,962 | ) | |||||||||
Contingencies | — | — | — | ||||||||||
Stockholders’ equity | |||||||||||||
Common stock | 530 | 530 | — | ||||||||||
Treasury stock | (181,435 | ) | (181,435 | ) | — | ||||||||
Paid-in-capital | 780,036 | 780,036 | — | ||||||||||
Accumulated other comprehensive income | 83,406 | 82,756 | (650 | ) | |||||||||
Retained earnings | 298,299 | 268,171 | (30,128 | ) | |||||||||
Tower Group, Inc. stockholders’ equity | 980,836 | 950,058 | (30,778 | ) | |||||||||
Noncontrolling interests | 34,662 | 34,160 | (502 | ) | |||||||||
Total stockholders’ equity | 1,015,498 | 984,218 | (31,280 | ) | |||||||||
Total liabilities and stockholders’ equity | 4,749,014 | $ | 4,711,772 | $ | (37,242 | ) |
Accounting_Policies_and_Basis_2
Accounting Policies and Basis of Presentation (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2013 | |||||||||
Reflects Previously Reported and Revised Shareholders' Equity Accounts Resulting from Merger Transaction | ' | ||||||||
The table below reflects the previously reported and revised shareholders’ equity accounts resulting from the Merger Transaction: | |||||||||
As previously | Revised | ||||||||
($ in thousands, except per share amounts) | Reported | Amount | |||||||
As of December 31, 2012 | |||||||||
Common stock | $ | 469 | $ | 530 | |||||
Treasury stock | (181,435 | ) | (181,435 | ) | |||||
Paid-in-capital | 780,097 | 780,036 | |||||||
For the three-months ended June 30, 2012 | |||||||||
Earnings (Loss) per Share: | |||||||||
Basic | $ | (0.43 | ) | $ | (0.39 | ) | |||
Diluted | (0.43 | ) | (0.39 | ) | |||||
Weighted average common shares outstanding | |||||||||
Basic | 39,117 | 43,289 | |||||||
Diluted | 39,117 | 43,289 | |||||||
For the six-months ended June 30, 2012 | |||||||||
Earnings (Loss) per Share: | |||||||||
Basic | $ | 0.06 | $ | 0.05 | |||||
Diluted | 0.06 | 0.05 | |||||||
Weighted average common shares outstanding | |||||||||
Basic | 39,206 | 43,340 | |||||||
Diluted | 39,268 | 43,410 | |||||||
Merger_Transaction_Tables
Merger Transaction (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||
Preliminary Purchase Consideration | ' | ||||||||||||||||
The purchase consideration was determined based on the total consideration received by Canopius Group for its sale of 100% of its equity ownership of Canopius Bermuda, and the proceeds received for the issuance and exercise of the Merger Option from TGI. | |||||||||||||||||
(in thousands) | |||||||||||||||||
Consideration received by Canopius Group from the third party sale | $ | 205,863 | |||||||||||||||
Fair value of Merger Option received in connection with TGI’s investment in Canopius Group | 484 | ||||||||||||||||
Exercise price of Merger Right received from TGI upon exercise | 1,000 | ||||||||||||||||
Total preliminary purchase consideration | $ | 207,347 | |||||||||||||||
Fair Values of Respective Assets Acquired and Liabilities Assumed | ' | ||||||||||||||||
($ in thousands) | |||||||||||||||||
Assets | |||||||||||||||||
Cash and cash equivalents | $ | 134,741 | |||||||||||||||
Investments | 26,485 | ||||||||||||||||
Reinsurance recoverables | 468,727 | ||||||||||||||||
Prepaid reinsurance | 152,431 | ||||||||||||||||
Funds held by reinsured companies | 698,819 | ||||||||||||||||
Other assets | 75,219 | ||||||||||||||||
Liabilities | |||||||||||||||||
Loss and loss adjustment expenses | 630,613 | ||||||||||||||||
Unearned premiums | 169,963 | ||||||||||||||||
Funds held under reinsurance agreements | 560,714 | ||||||||||||||||
Other liabilities | 15,916 | ||||||||||||||||
Net assets acquired | $ | 179,216 | |||||||||||||||
Purchase Consideration | 207,347 | ||||||||||||||||
Goodwill | $ | 28,131 | |||||||||||||||
Pro Forma Financial Information | ' | ||||||||||||||||
These pro forma amounts exclude any pro forma impacts to the Company’s effective federal income tax rates. | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
($ in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Revenues | $ | 460,518 | $ | 509,666 | $ | 940,145 | $ | 979,033 | |||||||||
Net Income (Loss) | (505,876 | ) | (16,887 | ) | (485,248 | ) | 10,074 |
Goodwill_and_Intangible_Assets1
Goodwill and Intangible Assets (Tables) | 6 Months Ended | ||||||||||||
Jun. 30, 2013 | |||||||||||||
Summary of Goodwill by Reporting Units | ' | ||||||||||||
The following table reflects the changes to goodwill during 2013 and is presented using the reporting units prior to the reorganization. | |||||||||||||
($ in thousands) | Commercial | Personal | Total | ||||||||||
Insurance | Insurance | ||||||||||||
Balance, January 1, 2013 | $ | 185,918 | $ | 55,540 | $ | 241,458 | |||||||
Goodwill from Merger Transaction | 28,131 | - | 28,131 | ||||||||||
Goodwill impairment | (214,049 | ) | - | (214,049 | ) | ||||||||
Total, June 30, 2013 | $ | - | $ | 55,540 | $ | 55,540 | |||||||
Investments_Tables
Investments (Tables) | 6 Months Ended | ||||||||||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||||||||||
Summary of Cost or Amortized Cost and Fair Value of Investments in Fixed Maturity and Equity Securities, Gross Unrealized Gains and Losses, and Other-Than-Temporary Impairment Losses | ' | ||||||||||||||||||||||||
The cost or amortized cost and fair value of the Company’s investments in fixed maturity and equity securities, gross unrealized gains and losses, and other-than-temporary impairment losses (“OTTI”) as of June 30, 2013 and December 31, 2012 are summarized as follows: | |||||||||||||||||||||||||
($ in thousands) | Cost or | Gross | Gross | Fair Value | Unrealized | ||||||||||||||||||||
Amortized | Unrealized | Unrealized | OTTI | ||||||||||||||||||||||
Cost | Gains | Losses | Losses (1) | ||||||||||||||||||||||
June 30, 2013 | |||||||||||||||||||||||||
U.S. Treasury securities | $ | 390,003 | $ | 1,024 | $ | (5,780 | ) | $ | 385,247 | $ | - | ||||||||||||||
U.S. Agency securities | 104,099 | 2,189 | (965 | ) | 105,323 | - | |||||||||||||||||||
Municipal bonds | 568,991 | 24,132 | (5,732 | ) | 587,391 | (71 | ) | ||||||||||||||||||
Corporate and other bonds | |||||||||||||||||||||||||
Finance | 246,779 | 14,594 | (4,240 | ) | 257,133 | - | |||||||||||||||||||
Industrial | 406,976 | 13,171 | (5,675 | ) | 414,472 | - | |||||||||||||||||||
Utilities | 58,368 | 2,078 | (2,152 | ) | 58,294 | (203 | ) | ||||||||||||||||||
Commercial mortgage-backed securities | 217,531 | 21,439 | (2,351 | ) | 236,619 | (604 | ) | ||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency backed securities | 161,783 | 4,891 | (1,614 | ) | 165,060 | - | |||||||||||||||||||
Non-agency backed securities | 35,583 | 4,059 | (30 | ) | 39,612 | (6 | ) | ||||||||||||||||||
Asset-backed securities | 39,294 | 1,102 | (2 | ) | 40,394 | - | |||||||||||||||||||
Total fixed-maturity securities | 2,229,407 | 88,679 | (28,541 | ) | 2,289,545 | (884 | ) | ||||||||||||||||||
Preferred stocks, principally financial sector | 21,584 | 188 | (1,137 | ) | 20,635 | - | |||||||||||||||||||
Common stocks, principally financial and industrial sectors | 108,765 | 8,463 | (463 | ) | 116,765 | - | |||||||||||||||||||
Short-term investments | 13,415 | - | (36 | ) | 13,379 | - | |||||||||||||||||||
Total, June 30, 2013 | $ | 2,373,171 | $ | 97,330 | $ | (30,177 | ) | $ | 2,440,324 | $ | (884 | ) | |||||||||||||
Tower | $ | 2,121,665 | $ | 87,920 | $ | (25,786 | ) | $ | 2,183,799 | $ | (884 | ) | |||||||||||||
Reciprocal Exchanges | 251,506 | 9,410 | (4,391 | ) | 256,525 | - | |||||||||||||||||||
Total, June 30, 2013 | $ | 2,373,171 | $ | 97,330 | $ | (30,177 | ) | $ | 2,440,324 | $ | (884 | ) | |||||||||||||
December 31, 2012, as restated | |||||||||||||||||||||||||
U.S. Treasury securities | $ | 183,462 | $ | 1,500 | $ | (13 | ) | $ | 184,949 | $ | - | ||||||||||||||
U.S. Agency securities | 98,502 | 4,351 | (76 | ) | 102,777 | - | |||||||||||||||||||
Municipal bonds | 633,373 | 52,914 | (244 | ) | 686,043 | - | |||||||||||||||||||
Corporate and other bonds | |||||||||||||||||||||||||
Finance | 233,849 | 21,293 | (1,095 | ) | 254,047 | - | |||||||||||||||||||
Industrial | 412,465 | 26,556 | (868 | ) | 438,153 | - | |||||||||||||||||||
Utilities | 51,698 | 2,958 | (191 | ) | 54,465 | - | |||||||||||||||||||
Commercial mortgage-backed securities | 211,819 | 30,375 | (141 | ) | 242,053 | - | |||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency backed securities | 283,652 | 12,326 | (262 | ) | 295,716 | - | |||||||||||||||||||
Non-agency backed securities | 38,615 | 3,575 | (34 | ) | 42,156 | (6 | ) | ||||||||||||||||||
Asset-backed securities | 42,751 | 1,615 | (14 | ) | 44,352 | - | |||||||||||||||||||
Total fixed-maturity securities | 2,190,186 | 157,463 | (2,938 | ) | 2,344,711 | (6 | ) | ||||||||||||||||||
Preferred stocks, principally financial sector | 31,272 | 730 | (481 | ) | 31,521 | - | |||||||||||||||||||
Common stocks, principally industrial and financial sectors | 118,076 | 953 | (4,292 | ) | 114,737 | - | |||||||||||||||||||
Short-term investments | 4,749 | 1 | - | 4,750 | - | ||||||||||||||||||||
Total, December 31, 2012, as restated | $ | 2,344,283 | $ | 159,147 | $ | (7,711 | ) | $ | 2,495,719 | $ | (6 | ) | |||||||||||||
Tower | $ | 2,075,189 | $ | 141,614 | $ | (7,210 | ) | $ | 2,209,593 | $ | (6 | ) | |||||||||||||
Reciprocal Exchanges | 269,094 | 17,533 | (501 | ) | 286,126 | - | |||||||||||||||||||
Total, December 31, 2012, as restated | $ | 2,344,283 | $ | 159,147 | $ | (7,711 | ) | $ | 2,495,719 | $ | (6 | ) | |||||||||||||
(1) Represents the gross unrealized loss on other-than-temporarily impaired securities recognized in accumulated other comprehensive income (loss). | |||||||||||||||||||||||||
Summary of Major Categories of Net Investment Income | ' | ||||||||||||||||||||||||
Major categories of net investment income are summarized as follows: | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||
Income | |||||||||||||||||||||||||
Fixed-maturity securities | $ | 20,562 | $ | 24,511 | $ | 41,535 | $ | 49,924 | |||||||||||||||||
Equity securities | 6,808 | 6,603 | 13,292 | 14,239 | |||||||||||||||||||||
Cash and cash equivalents | 19 | 505 | 70 | 798 | |||||||||||||||||||||
Other invested assets | 2,158 | 1,313 | 6,414 | 3,146 | |||||||||||||||||||||
Other | 287 | 203 | 615 | 349 | |||||||||||||||||||||
Total | 29,834 | 33,135 | 61,926 | 68,456 | |||||||||||||||||||||
Expenses | |||||||||||||||||||||||||
Investment expenses | (1,432 | ) | (1,354 | ) | (3,207 | ) | (2,732 | ) | |||||||||||||||||
Net investment income | $ | 28,402 | $ | 31,781 | $ | 58,719 | $ | 65,724 | |||||||||||||||||
Tower | 27,612 | 30,267 | 57,195 | 62,525 | |||||||||||||||||||||
Reciprocal Exchanges | 2,458 | 3,177 | 4,839 | 6,526 | |||||||||||||||||||||
Elimination of interest on Reciprocal Exchange surplus notes | (1,668 | ) | (1,663 | ) | (3,315 | ) | (3,327 | ) | |||||||||||||||||
Net investment income | $ | 28,402 | $ | 31,781 | $ | 58,719 | $ | 65,724 | |||||||||||||||||
Summary of Gross Realized Gains, Losses and Impairment Write-Downs on Investments | ' | ||||||||||||||||||||||||
Gross realized gains, losses and impairment write-downs on investments are summarized as follows: | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||
Fixed-maturity securities | |||||||||||||||||||||||||
Gross realized gains | $ | 10,479 | $ | 12,354 | $ | 17,843 | $ | 25,162 | |||||||||||||||||
Gross realized losses | (1,672 | ) | (609 | ) | (1,862 | ) | (2,551 | ) | |||||||||||||||||
8,807 | 11,745 | 15,981 | 22,611 | ||||||||||||||||||||||
Equity securities | |||||||||||||||||||||||||
Gross realized gains | 5,323 | 2,685 | 9,559 | 4,179 | |||||||||||||||||||||
Gross realized losses | (12,717 | ) | (9,808 | ) | (17,530 | ) | (16,160 | ) | |||||||||||||||||
(7,394 | ) | (7,123 | ) | (7,971 | ) | (11,981 | ) | ||||||||||||||||||
Other | |||||||||||||||||||||||||
Gross realized gains | 2,100 | 555 | 3,855 | 1,790 | |||||||||||||||||||||
Gross realized losses | (1,091 | ) | (3,174 | ) | (1,903 | ) | (4,113 | ) | |||||||||||||||||
1,009 | (2,619 | ) | 1,952 | (2,323 | ) | ||||||||||||||||||||
Net realized gains (losses) on investments | 2,422 | 2,003 | 9,962 | 8,307 | |||||||||||||||||||||
Other-than-temporary impairment losses: | |||||||||||||||||||||||||
Fixed-maturity securities | (23 | ) | (765 | ) | (187 | ) | (882 | ) | |||||||||||||||||
Equity securities | (4,433 | ) | (1,219 | ) | (4,958 | ) | (4,078 | ) | |||||||||||||||||
Total other-than-temporary impairment losses recognized in earnings | (4,456 | ) | (1,984 | ) | (5,145 | ) | (4,960 | ) | |||||||||||||||||
Total net realized investment gains (losses) | $ | (2,034 | ) | $ | 19 | $ | 4,817 | $ | 3,347 | ||||||||||||||||
Tower | $ | (2,243 | ) | $ | (110 | ) | $ | 3,990 | $ | 1,028 | |||||||||||||||
Reciprocal Exchanges | 209 | 129 | 827 | 2,319 | |||||||||||||||||||||
Total net realized investment gains (losses) | $ | (2,034 | ) | $ | 19 | $ | 4,817 | $ | 3,347 | ||||||||||||||||
Amount of Fixed-Maturity and Equity Securities that were Other-Than-Temporary Impairment | ' | ||||||||||||||||||||||||
The following table shows the fixed-maturity and equity securities OTTI amounts for the three and six months ended June 30, 2013 and 2012: | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||
Corporate and other bonds | $ | - | $ | (648 | ) | $ | - | $ | (737 | ) | |||||||||||||||
Commercial mortgage-backed securities | (23 | ) | (403 | ) | (47 | ) | (403 | ) | |||||||||||||||||
Residential mortgage-backed securities | (140 | ) | - | (140 | ) | (28 | ) | ||||||||||||||||||
Equities | (4,293 | ) | (1,219 | ) | (4,958 | ) | (4,078 | ) | |||||||||||||||||
Other-than-temporary-impairments | (4,456 | ) | (2,270 | ) | (5,145 | ) | (5,246 | ) | |||||||||||||||||
Portion of loss recognized in accumulated other comprehensive income (loss) | - | 286 | - | 286 | |||||||||||||||||||||
Impairment losses recognized in earnings | $ | (4,456 | ) | $ | (1,984 | ) | $ | (5,145 | ) | $ | (4,960 | ) | |||||||||||||
Tower | $ | (4,456 | ) | $ | (1,984 | ) | $ | (5,145 | ) | $ | (4,960 | ) | |||||||||||||
Reciprocal Exchanges | - | - | - | - | |||||||||||||||||||||
Impairment losses recognized in earnings | $ | (4,456 | ) | $ | (1,984 | ) | $ | (5,145 | ) | $ | (4,960 | ) | |||||||||||||
Rollforward of Cumulative Amount of Other-Than-Temporary Impairment for Securities Still Held Showing Amounts that have been Included in Earnings on Pretax Basis | ' | ||||||||||||||||||||||||
The following table provides a rollforward of the cumulative amounts of credit OTTI for securities still held showing the amounts that have been included in earnings on a pretax basis for the three months ended June 30, 2013 and 2012: | |||||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||||
June 30, | |||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||||||||||
Balance, April 1, | $ | 4,516 | $ | 6,084 | |||||||||||||||||||||
Additional credit losses recognized during the period, related to securities for which: | |||||||||||||||||||||||||
No OTTI has been previously recognized | 23 | 765 | |||||||||||||||||||||||
OTTI has been previously recognized | - | - | |||||||||||||||||||||||
Reductions due to: | |||||||||||||||||||||||||
Securities sold during the period (realized) | - | (730 | ) | ||||||||||||||||||||||
Balance, June 30, | $ | 4,539 | $ | 6,119 | |||||||||||||||||||||
The following table provides a rollforward of the cumulative amounts of credit OTTI for securities still held showing the amounts that have been included in earnings on a pretax basis for the six months ended June 30, 2013 and 2012: | |||||||||||||||||||||||||
Six Months Ended | |||||||||||||||||||||||||
June 30, | |||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||||||||||
Balance, January 1, | $ | 4,492 | $ | 12,666 | |||||||||||||||||||||
Additional credit losses recognized during the period, related to securities for which: | |||||||||||||||||||||||||
No OTTI has been previously recognized | 47 | 854 | |||||||||||||||||||||||
OTTI has been previously recognized | - | 28 | |||||||||||||||||||||||
Reductions due to: | |||||||||||||||||||||||||
Securities sold during the period (realized) | - | (7,429 | ) | ||||||||||||||||||||||
Balance, June 30, | $ | 4,539 | $ | 6,119 | |||||||||||||||||||||
Information Regarding Invested Assets that were in Unrealized Loss Position | ' | ||||||||||||||||||||||||
The following table presents information regarding invested assets that were in an unrealized loss position at June 30, 2013 and December 31, 2012 by amount of time in a continuous unrealized loss position: | |||||||||||||||||||||||||
Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Aggregate | Unrealized | ||||||||||||||||||||
($ in thousands) | Value | Losses | Value | Losses | Fair Value | Losses | |||||||||||||||||||
June 30, 2013 | |||||||||||||||||||||||||
U.S. Treasury securities | $ | 318,415 | $ | (5,780 | ) | $ | - | $ | - | $ | 318,415 | $ | (5,780 | ) | |||||||||||
U.S. Agency securities | 32,802 | (965 | ) | - | - | 32,802 | (965 | ) | |||||||||||||||||
Municipal bonds | 151,394 | (5,688 | ) | 218 | (44 | ) | 151,612 | (5,732 | ) | ||||||||||||||||
Corporate and other bonds | |||||||||||||||||||||||||
Finance | 76,192 | (4,240 | ) | - | - | 76,192 | (4,240 | ) | |||||||||||||||||
Industrial | 188,193 | (5,635 | ) | 1,184 | (40 | ) | 189,377 | (5,675 | ) | ||||||||||||||||
Utilities | 42,328 | (2,152 | ) | - | - | 42,328 | (2,152 | ) | |||||||||||||||||
Commercial mortgage-backed securities | 50,984 | (2,351 | ) | - | - | 50,984 | (2,351 | ) | |||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency backed | 54,462 | (1,613 | ) | 229 | (1 | ) | 54,691 | (1,614 | ) | ||||||||||||||||
Non-agency backed | 639 | (16 | ) | 199 | (14 | ) | 838 | (30 | ) | ||||||||||||||||
Asset-backed securities | 2,507 | (2 | ) | - | - | 2,507 | (2 | ) | |||||||||||||||||
Total fixed-maturity securities | 917,916 | (28,442 | ) | 1,830 | (99 | ) | 919,746 | (28,541 | ) | ||||||||||||||||
Preferred stocks | 9,802 | (821 | ) | 6,089 | (316 | ) | 15,891 | (1,137 | ) | ||||||||||||||||
Common stocks | 44,338 | (463 | ) | - | - | 44,338 | (463 | ) | |||||||||||||||||
Short-term investments | 11,379 | (36 | ) | - | - | 11,379 | (36 | ) | |||||||||||||||||
Total, June 30, 2013 | $ | 983,435 | $ | (29,762 | ) | $ | 7,919 | $ | (415 | ) | $ | 991,354 | $ | (30,177 | ) | ||||||||||
Tower | $ | 875,960 | $ | (25,386 | ) | $ | 7,553 | $ | (400 | ) | $ | 883,513 | $ | (25,786 | ) | ||||||||||
Reciprocal Exchanges | 107,475 | (4,376 | ) | 366 | (15 | ) | 107,841 | (4,391 | ) | ||||||||||||||||
Total, June 30, 2013 | $ | 983,435 | $ | (29,762 | ) | $ | 7,919 | $ | (415 | ) | $ | 991,354 | $ | (30,177 | ) | ||||||||||
December 31, 2012, as restated | |||||||||||||||||||||||||
U.S. Treasury securities | $ | 44,347 | $ | (13 | ) | $ | - | $ | - | $ | 44,347 | $ | (13 | ) | |||||||||||
U.S. Agency securities | 22,345 | (76 | ) | - | - | 22,345 | (76 | ) | |||||||||||||||||
Municipal bonds | 21,532 | (235 | ) | 251 | (9 | ) | 21,783 | (244 | ) | ||||||||||||||||
Corporate and other bonds | |||||||||||||||||||||||||
Finance | 16,853 | (1,095 | ) | - | - | 16,853 | (1,095 | ) | |||||||||||||||||
Industrial | 53,576 | (666 | ) | 4,188 | (202 | ) | 57,764 | (868 | ) | ||||||||||||||||
Utilities | 20,143 | (191 | ) | 7 | - | 20,150 | (191 | ) | |||||||||||||||||
Commercial mortgage-backed securities | 23,223 | (141 | ) | 95 | - | 23,318 | (141 | ) | |||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency backed | 59,009 | (261 | ) | 25 | (1 | ) | 59,034 | (262 | ) | ||||||||||||||||
Non-agency backed | 815 | (6 | ) | 588 | (28 | ) | 1,403 | (34 | ) | ||||||||||||||||
Asset-backed securities | 1,499 | (3 | ) | 4,232 | (11 | ) | 5,731 | (14 | ) | ||||||||||||||||
Total fixed-maturity securities | 263,342 | (2,687 | ) | 9,386 | (251 | ) | 272,728 | (2,938 | ) | ||||||||||||||||
Preferred stocks | 9,716 | (155 | ) | 5,724 | (326 | ) | 15,440 | (481 | ) | ||||||||||||||||
Common stocks | 55,560 | (4,292 | ) | - | - | 55,560 | (4,292 | ) | |||||||||||||||||
Total, December 31, 2012, as restated | $ | 328,618 | $ | (7,134 | ) | $ | 15,110 | $ | (577 | ) | $ | 343,728 | $ | (7,711 | ) | ||||||||||
Tower | $ | 270,609 | $ | (6,732 | ) | $ | 13,338 | $ | (478 | ) | $ | 283,947 | $ | (7,210 | ) | ||||||||||
Reciprocal Exchanges | 58,009 | (402 | ) | 1,772 | (99 | ) | 59,781 | (501 | ) | ||||||||||||||||
Total, December 31, 2012, as restated | $ | 328,618 | $ | (7,134 | ) | $ | 15,110 | $ | (577 | ) | $ | 343,728 | $ | (7,711 | ) | ||||||||||
Amortized Cost and Fair Value of Fixed-Maturity Portfolio by Contractual Time to Maturity | ' | ||||||||||||||||||||||||
The following table shows the amortized cost and fair value of the fixed-maturity portfolio by contractual time to maturity at June 30, 2013 and December 31, 2012: | |||||||||||||||||||||||||
Tower | Reciprocal Exchanges | Total | |||||||||||||||||||||||
($ in thousands) | Amortized | Fair Value | Amortized | Fair | Amortized | Fair Value | |||||||||||||||||||
Cost | Cost | Value | Cost | ||||||||||||||||||||||
June 30, 2013 | |||||||||||||||||||||||||
Remaining Time to Maturity | |||||||||||||||||||||||||
Less than one year | $ | 38,967 | $ | 39,597 | $ | 3,996 | $ | 4,148 | $ | 42,963 | $ | 43,745 | |||||||||||||
One to five years | 614,572 | 626,489 | 41,860 | 43,790 | 656,432 | 670,279 | |||||||||||||||||||
Five to ten years | 646,016 | 654,732 | 66,201 | 65,527 | 712,217 | 720,259 | |||||||||||||||||||
More than 10 years | 301,473 | 310,890 | 62,131 | 62,685 | 363,604 | 373,575 | |||||||||||||||||||
Mortgage and asset-backed securities | 379,624 | 404,062 | 74,567 | 77,625 | 454,191 | 481,687 | |||||||||||||||||||
Total, June 30, 2013 | $ | 1,980,652 | $ | 2,035,770 | $ | 248,755 | $ | 253,775 | $ | 2,229,407 | $ | 2,289,545 | |||||||||||||
December 31, 2012, as restated | |||||||||||||||||||||||||
Remaining Time to Maturity | |||||||||||||||||||||||||
Less than one year | $ | 30,082 | $ | 30,614 | $ | 2,678 | $ | 2,715 | $ | 32,760 | $ | 33,329 | |||||||||||||
One to five years | 489,939 | 510,523 | 45,576 | 47,275 | 535,515 | 557,798 | |||||||||||||||||||
Five to ten years | 564,556 | 607,711 | 76,480 | 80,009 | 641,036 | 687,720 | |||||||||||||||||||
More than 10 years | 346,410 | 379,045 | 57,628 | 62,542 | 404,038 | 441,587 | |||||||||||||||||||
Mortgage and asset-backed securities | 495,249 | 536,255 | 81,588 | 88,022 | 576,837 | 624,277 | |||||||||||||||||||
Total, December 31, 2012, as restated | $ | 1,926,236 | $ | 2,064,148 | $ | 263,950 | $ | 280,563 | $ | 2,190,186 | $ | 2,344,711 | |||||||||||||
Composition of Other Invested Assets | ' | ||||||||||||||||||||||||
The following table shows the composition of the other invested assets as of June 30, 2013 and December 31, 2012: | |||||||||||||||||||||||||
June 30, | December 31, | ||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||||||||||
Limited partnerships, equity method | $ | 34,843 | $ | 23,864 | |||||||||||||||||||||
Real estate, amortized cost | 7,645 | 7,422 | |||||||||||||||||||||||
Securities reported under the fair value option | 30,250 | 25,000 | |||||||||||||||||||||||
Other | 4,300 | 1,500 | |||||||||||||||||||||||
Total | $ | 77,038 | $ | 57,786 |
Fair_Value_Measurements_Tables
Fair Value Measurements (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||
Financial Instruments at Fair Value among Levels | ' | ||||||||||||||||
As at June 30, 2013 and December 31, 2012, the Company’s financial instruments carried at fair value are allocated among levels as follows: | |||||||||||||||||
($ in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
June 30, 2013 | |||||||||||||||||
Fixed-maturity securities | |||||||||||||||||
U.S. Treasury securities | $ | - | $ | 385,247 | $ | - | $ | 385,247 | |||||||||
U.S. Agency securities | - | 105,323 | - | 105,323 | |||||||||||||
Municipal bonds | - | 587,391 | - | 587,391 | |||||||||||||
Corporate and other bonds | - | 729,899 | - | 729,899 | |||||||||||||
Commercial mortgage-backed securities | - | 236,619 | - | 236,619 | |||||||||||||
Residential mortgage-backed securities | |||||||||||||||||
Agency | - | 165,060 | - | 165,060 | |||||||||||||
Non-agency | - | 39,612 | - | 39,612 | |||||||||||||
Asset-backed securities | - | 40,394 | - | 40,394 | |||||||||||||
Total fixed-maturities | - | 2,289,545 | - | 2,289,545 | |||||||||||||
Equity securities | 137,400 | - | - | 137,400 | |||||||||||||
Short-term investments | - | 13,379 | - | 13,379 | |||||||||||||
Total investments at fair value | 137,400 | 2,302,924 | - | 2,440,324 | |||||||||||||
Other invested assets (1) | - | - | 30,250 | 30,250 | |||||||||||||
Other liabilities | - | ||||||||||||||||
Interest rate swap contracts | - | (6,830 | ) | - | (6,830 | ) | |||||||||||
Debt and equity securities sold, not yet purchased | - | (25,570 | ) | - | (25,570 | ) | |||||||||||
Total, June 30, 2013 | $ | 137,400 | $ | 2,270,524 | $ | 30,250 | $ | 2,438,174 | |||||||||
Tower | $ | 134,650 | $ | 2,016,748 | $ | 30,250 | $ | 2,181,648 | |||||||||
Reciprocal Exchanges | 2,750 | 253,776 | - | 256,526 | |||||||||||||
Total, June 30, 2013 | $ | 137,400 | $ | 2,270,524 | $ | 30,250 | $ | 2,438,174 | |||||||||
December 31, 2012, as restated | |||||||||||||||||
Fixed-maturity securities | |||||||||||||||||
U.S. Treasury securities | $ | - | $ | 184,949 | $ | - | $ | 184,949 | |||||||||
U.S. Agency securities | - | 102,777 | - | 102,777 | |||||||||||||
Municipal bonds | - | 686,043 | - | 686,043 | |||||||||||||
Corporate and other bonds | - | 746,665 | - | 746,665 | |||||||||||||
Commercial mortgage-backed securities | - | 242,053 | - | 242,053 | |||||||||||||
Residential mortgage-backed securities | |||||||||||||||||
Agency | - | 295,716 | - | 295,716 | |||||||||||||
Non-agency | - | 42,156 | - | 42,156 | |||||||||||||
Asset-backed securities | - | 44,352 | - | 44,352 | |||||||||||||
Total fixed-maturities | - | 2,344,711 | - | 2,344,711 | |||||||||||||
Equity securities | 146,258 | - | - | 146,258 | |||||||||||||
Short-term investments | - | 4,750 | - | 4,750 | |||||||||||||
Total investments at fair value | 146,258 | 2,349,461 | - | 2,495,719 | |||||||||||||
Other invested assets (2) | - | - | 25,000 | 25,000 | |||||||||||||
Other liabilities | |||||||||||||||||
Interest rate swap contracts | - | (9,016 | ) | - | (9,016 | ) | |||||||||||
Debt and equity securities sold, not yet purchased | - | (17,101 | ) | - | (17,101 | ) | |||||||||||
Total, December 31, 2012, as restated | $ | 146,258 | $ | 2,323,344 | $ | 25,000 | $ | 2,494,602 | |||||||||
Tower | $ | 140,695 | $ | 2,042,780 | $ | 25,000 | $ | 2,208,475 | |||||||||
Reciprocal Exchanges | 5,563 | 280,564 | - | 286,127 | |||||||||||||
Total, December 31, 2012, as restated | $ | 146,258 | $ | 2,323,344 | $ | 25,000 | $ | 2,494,602 | |||||||||
(1) $30.3 million of the $77.0 million Other invested assets reported on the consolidated balance sheet at June 30, 2013 is reported at fair value. The remaining $46.7 million of Other invested assets is reported under the equity method of accounting or at amortized cost. | |||||||||||||||||
(2) $25.0 million of the $57.8 million Other invested assets reported on the consolidated balance sheet at December 31, 2012 is reported at fair value. The remaining $32.8 million of Other invested assets is reported under the equity method of accounting or at amortized cost. | |||||||||||||||||
Summary of Changes in Level Three Assets Measured at Fair Value | ' | ||||||||||||||||
The following table summarizes the changes in Level 3 assets measured at fair value for the three months ended June 30, 2013 and 2012 for Tower (the Reciprocal Exchanges have no Level 3 assets): | |||||||||||||||||
Three Months Ended | |||||||||||||||||
June 30, | |||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||
Beginning balance, April 1, | $ | 25,000 | $ | 24,914 | |||||||||||||
Total gains (losses)-realized / unrealized | |||||||||||||||||
Included in net income | - | 86 | |||||||||||||||
Included in other comprehensive income (loss) | - | - | |||||||||||||||
Purchases, issuances and settlements | 5,250 | - | |||||||||||||||
Net transfers into (out of) Level 3 | - | - | |||||||||||||||
Ending balance, June 30, | $ | 30,250 | $ | 25,000 | |||||||||||||
The following table summarizes the changes in Level 3 assets measured at fair value for the six months ended June 30, 2013 and 2012 for Tower (the Reciprocal Exchanges have no Level 3 assets): | |||||||||||||||||
Six Months Ended | |||||||||||||||||
June 30, | |||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||
Beginning balance, January 1 | $ | 25,000 | $ | 25,000 | |||||||||||||
Total gains (losses)-realized / unrealized - included in net income | - | - | |||||||||||||||
Included in other comprehensive income (loss) | - | - | |||||||||||||||
Purchases, issuances and settlements | 5,250 | - | |||||||||||||||
Net transfers into (out of) Level 3 | - | - | |||||||||||||||
Ending balance, June 30, | $ | 30,250 | $ | 25,000 |
Loss_and_Loss_Adjustment_Expen1
Loss and Loss Adjustment Expense (Tables) | 6 Months Ended | ||||||||||||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||||||||||||
Reconciliation of Beginning and Ending Consolidated Balances for Unpaid Losses and Loss Adjustment Expense | ' | ||||||||||||||||||||||||||
The following table provides a reconciliation of the beginning and ending consolidated balances for unpaid losses and loss adjustment expense (“LAE”) for the six months ended June 30, 2013 and 2012: | |||||||||||||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | Tower | Reciprocal | Total | |||||||||||||||||||||
Exchanges | Exchanges | ||||||||||||||||||||||||||
Balance at January 1, as restated | $ | 1,759,888 | $ | 135,791 | $ | 1,895,679 | $ | 1,495,839 | $ | 136,274 | $ | 1,632,113 | |||||||||||||||
Less reinsurance recoverables on unpaid losses | (407,068 | ) | (52,389 | ) | (459,457 | ) | (280,968 | ) | (11,253 | ) | (292,221 | ) | |||||||||||||||
1,352,820 | 83,402 | 1,436,222 | 1,214,871 | 125,021 | 1,339,892 | ||||||||||||||||||||||
Net reserves, at fair value, of acquired entities | 161,886 | - | 161,886 | - | - | - | |||||||||||||||||||||
Incurred related to: | |||||||||||||||||||||||||||
Current year | 451,020 | 57,688 | 508,708 | 487,837 | 57,430 | 545,267 | |||||||||||||||||||||
Prior years unfavorable/(favorable) development | 326,749 | 167 | 326,916 | 78,254 | (6,253 | ) | 72,001 | ||||||||||||||||||||
Total incurred | 777,769 | 57,855 | 835,624 | 566,091 | 51,177 | 617,268 | |||||||||||||||||||||
Paid related to: | |||||||||||||||||||||||||||
Current year | 164,774 | 36,669 | 201,443 | 153,792 | 31,369 | 185,161 | |||||||||||||||||||||
Prior years | 359,786 | 10,221 | 370,007 | 313,400 | 30,943 | 344,343 | |||||||||||||||||||||
Total paid | 524,560 | 46,890 | 571,450 | 467,192 | 62,312 | 529,504 | |||||||||||||||||||||
Net balance at end of period | 1,767,915 | 94,367 | 1,862,282 | 1,313,770 | 113,886 | 1,427,656 | |||||||||||||||||||||
Add reinsurance recoverables on unpaid losses | 665,172 | 24,897 | 690,069 | 254,516 | 19,661 | 274,177 | |||||||||||||||||||||
Balance at June 30, | $ | 2,433,087 | $ | 119,264 | $ | 2,552,351 | $ | 1,568,286 | $ | 133,547 | $ | 1,701,833 |
Accumulated_Other_Comprehensiv1
Accumulated Other Comprehensive Income (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||
Summary of Changes in Accumulated Other Comprehensive Income | ' | ||||||||||||||||
The following table provides a summary of changes in accumulated other comprehensive income, by component, for the six months ended June 30, 2013, with all amounts reflected net of income taxes and noncontrolling interest: | |||||||||||||||||
($ in thousands) | Unrealized | Gains | Cumulative | Total | |||||||||||||
gains (losses) | (losses) on | translation | |||||||||||||||
on available for | cash flow | adjustments | |||||||||||||||
sale securities | hedges | ||||||||||||||||
Balance at December 31, 2012, as restated | $ | 87,412 | $ | -5,860 | $ | 1,204 | $ | 82,756 | |||||||||
Other comprehensive income before reclassifications, net of tax | (71,210 | ) | 1,406 | (2,382 | ) | (72,186 | ) | ||||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax | (2,594 | ) | 1,084 | - | (1,510 | ) | |||||||||||
Net current period other comprehensive income | (73,804 | ) | 2,490 | (2,382 | ) | (73,696 | ) | ||||||||||
Balance at June 30, 2013 | $ | 13,608 | $ | -3,370 | $ | (1,178 | ) | $ | 9,060 | ||||||||
Reclassified from Accumulated Other Comprehensive Income to Net Income | ' | ||||||||||||||||
The following provides a summary of the items that have been reclassified from accumulated other comprehensive income to net income in their entirety during the six months ended June 30, 2013, including the line item on the consolidated statement of operations on which the impact is reflected. Unrealized gains (losses) on available for sale securities are reclassified from accumulated other comprehensive income when a security is sold or when a non-credit impairment is recorded. Gains (losses) on cash flow hedges are reclassified from accumulated other comprehensive income when the related hedged item (subordinated debentures floating rate interest payments) are recorded in the statement of operations. | |||||||||||||||||
($ in thousands) | |||||||||||||||||
Accumulated other comprehensive income components | Amounts reclassified | Affected line item in the consolidated statement of operations | |||||||||||||||
from accumulated other | |||||||||||||||||
comprehensive income | |||||||||||||||||
Unrealized gains (losses) on available for sale securities | $ | -2,594 | Other net realized investment gains | ||||||||||||||
- | Income tax expense | ||||||||||||||||
$ | -2,594 | Total net of income taxes | |||||||||||||||
Gains (losses) on cash flow hedges interest rate swaps | $ | 1,084 | Interest expense | ||||||||||||||
- | Income tax expense | ||||||||||||||||
$ | 1,084 | Total net of income taxes | |||||||||||||||
Debt_Tables
Debt (Tables) | 6 Months Ended | ||||||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||||||
Borrowings | ' | ||||||||||||||||||||
The Company’s borrowings consisted of the following at June 30, 2013 and December 31, 2012: | |||||||||||||||||||||
June 30, 2013 | December 31, 2012 | ||||||||||||||||||||
($ in thousands) | Carrying | Fair | Carrying | Fair | |||||||||||||||||
Value | Value | Value | Value | ||||||||||||||||||
Credit facility | $ | 70,000 | $ | 70,000 | $ | 70,000 | $ | 70,000 | |||||||||||||
Convertible senior notes | 146,166 | 158,243 | 144,673 | 152,063 | |||||||||||||||||
Subordinated debentures | 235,058 | 240,010 | 235,058 | 232,678 | |||||||||||||||||
Total | $ | 451,224 | $ | 468,253 | $ | 449,731 | $ | 454,741 | |||||||||||||
Amounts Recorded for Notes | ' | ||||||||||||||||||||
The following table shows the amounts recorded for the Notes as of June 30, 2013 and December 31, 2012: | |||||||||||||||||||||
June 30, | December 31, | ||||||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||||||
Liability component | |||||||||||||||||||||
Outstanding principal | $ | 150,000 | $ | 150,000 | |||||||||||||||||
Unamortized OID | (3,834 | ) | (5,327 | ) | |||||||||||||||||
Liability component | 146,166 | 144,673 | |||||||||||||||||||
Equity component, net of tax | $ | 7,469 | $ | 7,469 | |||||||||||||||||
Stock_Based_Compensation_Table
Stock Based Compensation (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||
Analysis of Restricted Stock Activity | ' | ||||||||||||||||
The following table provides an analysis of restricted stock activity for the six months ended June 30, 2013 and 2012 (historical share counts and fair values have been adjusted for the 1.1330 share conversion ratio, as discussed more fully in “Note 4 – Merger Transaction”): | |||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Number | Weighted | Number | Weighted | ||||||||||||||
of Shares | Average | of Shares | Average | ||||||||||||||
Grant Date | Grant Date | ||||||||||||||||
Fair Value | Fair Value | ||||||||||||||||
Outstanding, January 1 | 1,015,902 | $ | 20.19 | 1,120,091 | $ | 20.69 | |||||||||||
Granted | 242,626 | 18.09 | 363,894 | 20.37 | |||||||||||||
Vested | (953,242 | ) | 20.43 | (439,734 | ) | 21.07 | |||||||||||
Forfeitures | (14,015 | ) | 19.26 | (9,874 | ) | 20.83 | |||||||||||
Outstanding, June 30, | 291,271 | $ | 17.68 | 1,034,377 | $ | 20.38 | |||||||||||
Analysis of Stock Option Activity | ' | ||||||||||||||||
The following table provides an analysis of stock option activity for the six months ended June 30, 2013 and 2012 (historical share counts and fair values have been adjusted for the 1.1330 share conversion ratio, as discussed more fully in “Note 4 – Merger Transaction”): | |||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Number of | Average | Number of | Average | ||||||||||||||
Shares | Exercise | Shares | Exercise | ||||||||||||||
Price | Price | ||||||||||||||||
Outstanding, January 1 | 969,307 | $ | 17.78 | 969,315 | $ | 17.78 | |||||||||||
Exercised | (2,674 | ) | 16.48 | - | - | ||||||||||||
Forfeitures and expirations | (7,657 | ) | 17.72 | - | - | ||||||||||||
Outstanding, June 30 | 958,976 | $ | 17.78 | 969,315 | $ | 17.78 | |||||||||||
Exercisable, June 30 | 958,976 | $ | 17.78 | 969,315 | $ | 17.78 | |||||||||||
Analysis of Stock Based Compensation Expense | ' | ||||||||||||||||
The following table provides an analysis of stock based compensation expense for the six months ended June 30, 2013 and 2012: | |||||||||||||||||
Six Months | |||||||||||||||||
Ended June 30, | |||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||
Restricted stock | |||||||||||||||||
Expense, net of tax | $ | 8,204 | $ | 896 | |||||||||||||
Value of shares vested | 21,042 | 8,576 | |||||||||||||||
Value of unvested shares | 5,974 | 19,257 | |||||||||||||||
Stock options | |||||||||||||||||
Intrinsic value of outstanding options | 3,471 | 1,632 | |||||||||||||||
Intrinsic value of vested outstanding options | 3,471 | 1,632 | |||||||||||||||
Unrecognized compensation expense | |||||||||||||||||
Unvested restricted stock, net of tax | 5,974 | 12,791 | |||||||||||||||
Weighted average years over which expense will be recognized | 3.6 | 2.5 |
Earnings_Loss_per_Share_Tables
Earnings (Loss) per Share (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||
Computation of Earnings Per Share | ' | ||||||||||||||||
The following table shows the computation of the earnings per share (historical earnings per share amounts have been adjusted for the 1.1330 share conversion ratio in connection with the Merger Transaction): | |||||||||||||||||
Three Months | Six Months | ||||||||||||||||
Ended June 30, | Ended June 30, | ||||||||||||||||
($ in thousands, except per share amounts) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Numerator | |||||||||||||||||
Net income (loss) attributable to Tower Group International, Ltd. | $ | (507,342 | ) | $ | (16,809 | ) | $ | (494,425 | ) | $ | 2,356 | ||||||
Less: Allocation of income for unvested participating restricted stock | - | - | - | - | |||||||||||||
Less: Dividends on unvested participating restricted stock | (48 | ) | (173 | ) | (215 | ) | (347 | ) | |||||||||
Net income available to common shareholders - Basic | (507,390 | ) | (16,982 | ) | (494,640 | ) | 2,009 | ||||||||||
Reallocation of income for unvested participating restricted stock | - | - | - | - | |||||||||||||
Net income available to common shareholders - Diluted | (507,390 | ) | (16,982 | ) | (494,640 | ) | 2,009 | ||||||||||
Denominator | |||||||||||||||||
Basic earning per share denominator | 57,135 | 43,289 | 51,487 | 43,340 | |||||||||||||
Effect of dilutive securities | - | - | - | 70 | |||||||||||||
Diluted earnings per share denominator | 57,135 | 43,289 | 51,487 | 43,410 | |||||||||||||
Earnings (loss) per share attributable to Tower Group International, Ltd. - Basic | |||||||||||||||||
Common stock: | |||||||||||||||||
Distributed earnings | $ | 0.17 | $ | 0.17 | $ | 0.34 | $ | 0.34 | |||||||||
Undistributed earnings | $ | (9.05 | ) | $ | (0.56 | ) | $ | (9.95 | ) | $ | (0.29 | ) | |||||
Total | $ | (8.88 | ) | $ | (0.39 | ) | $ | (9.61 | ) | $ | 0.05 | ||||||
Earnings (loss) per share attributable to Tower Group International, Ltd. - Diluted | $ | (8.88 | ) | $ | (0.39 | ) | $ | (9.61 | ) | $ | 0.05 |
Segment_Information_Tables
Segment Information (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2013 | |||||||||||||||||
Business Segments Results | ' | ||||||||||||||||
Business segment results are as follows: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
($ in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Commercial Insurance Segment | |||||||||||||||||
Revenues | |||||||||||||||||
Premiums earned | $ | 170,832 | $ | 193,793 | $ | 348,827 | $ | 381,651 | |||||||||
Ceding commission revenue | (8,301 | ) | (732 | ) | (8,237 | ) | (2,778 | ) | |||||||||
Policy billing fees | 1,422 | 1,390 | 2,792 | 2,903 | |||||||||||||
Total revenues | 163,953 | 194,451 | 343,382 | 381,776 | |||||||||||||
Expenses | |||||||||||||||||
Loss and loss adjustment expenses | 249,906 | 155,395 | 373,293 | 272,239 | |||||||||||||
Underwriting expenses | 66,614 | 63,832 | 129,383 | 128,245 | |||||||||||||
Total expenses | 316,520 | 219,227 | 502,676 | 400,484 | |||||||||||||
Underwriting profit (loss) | $ | (152,567 | ) | $ | (24,776 | ) | $ | (159,294 | ) | $ | (18,708 | ) | |||||
Specialty Insurance and Reinsurance Segment | |||||||||||||||||
Revenues | |||||||||||||||||
Premiums earned | $ | 122,211 | $ | 143,857 | $ | 251,999 | $ | 253,834 | |||||||||
Ceding commission revenue | 3,528 | 4,626 | 6,751 | 6,682 | |||||||||||||
Total revenues | 125,739 | 148,483 | 258,750 | 260,516 | |||||||||||||
Expenses | |||||||||||||||||
Loss and loss adjustment expenses | 248,466 | 125,814 | 321,442 | 210,408 | |||||||||||||
Underwriting expenses | 56,772 | 50,122 | 106,915 | 88,851 | |||||||||||||
Total expenses | 305,238 | 175,936 | 428,357 | 299,259 | |||||||||||||
Underwriting profit (loss) | $ | (179,499 | ) | $ | (27,453 | ) | $ | (169,607 | ) | $ | (38,743 | ) | |||||
Personal Insurance Segment | |||||||||||||||||
Revenues | |||||||||||||||||
Premiums earned | $ | 125,321 | $ | 122,503 | $ | 239,424 | $ | 244,826 | |||||||||
Ceding commission revenue | 12,044 | 6,186 | 22,908 | 11,339 | |||||||||||||
Policy billing fees | 1,899 | 1,610 | 3,679 | 3,231 | |||||||||||||
Total revenues | 139,264 | 130,299 | 266,011 | 259,396 | |||||||||||||
Expenses | |||||||||||||||||
Loss and loss adjustment expenses | 61,520 | 68,566 | 140,889 | 134,621 | |||||||||||||
Underwriting expenses | 63,709 | 56,164 | 121,696 | 107,617 | |||||||||||||
Total expenses | 125,229 | 124,730 | 262,585 | 242,238 | |||||||||||||
Underwriting profit (loss) | $ | 14,035 | $ | 5,569 | $ | 3,426 | $ | 17,158 | |||||||||
Tower | $ | 14,139 | $ | 9,376 | $ | 16,156 | $ | 21,213 | |||||||||
Reciprocal Exchanges | (104 | ) | (3,807 | ) | (12,730 | ) | (4,055 | ) | |||||||||
Total underwriting profit (loss) | $ | 14,035 | $ | 5,569 | $ | 3,426 | $ | 17,158 | |||||||||
Reconciliation of Revenue by Segment to Consolidated Revenues | ' | ||||||||||||||||
The following table reconciles revenue by segment to consolidated revenues: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
($ in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Commercial Insurance segment | $ | 163,953 | $ | 194,451 | $ | 343,382 | $ | 381,776 | |||||||||
Specialty Insurance and Reinsurance segment | 125,739 | 148,483 | 258,750 | 260,516 | |||||||||||||
Personal Insurance segment | 139,264 | 130,299 | 266,011 | 259,396 | |||||||||||||
Total segment revenues | 428,956 | 473,233 | 868,143 | 901,688 | |||||||||||||
Net investment income | 28,402 | 31,781 | 58,719 | 65,724 | |||||||||||||
Net realized gains (losses) on investments, including other-than-temporary impairments | (2,034 | ) | 19 | 4,817 | 3,347 | ||||||||||||
Corporate and other | 5,194 | 1,359 | 5,322 | 1,856 | |||||||||||||
Consolidated revenues | $ | 460,518 | $ | 506,392 | $ | 937,001 | $ | 972,615 | |||||||||
Reconciliation of Results of Individual Segments to Consolidated Income Before Income Taxes | ' | ||||||||||||||||
The following table reconciles the results of the Company’s individual segments to consolidated income before income taxes: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
($ in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Commercial Insurance segment underwriting profit (loss) | $ | (152,567 | ) | $ | (24,776 | ) | $ | (159,294 | ) | $ | (18,708 | ) | |||||
Specialty Insurance and Reinsurance segment underwriting profit (loss) | (179,499 | ) | (27,453 | ) | (169,607 | ) | (38,743 | ) | |||||||||
Personal Insurance segment underwriting profit (loss) | 14,035 | 5,569 | 3,426 | 17,158 | |||||||||||||
Net investment income | 28,402 | 31,781 | 58,719 | 65,724 | |||||||||||||
Net realized gains on investments, including other-than-temporary impairments | (2,034 | ) | 19 | 4,817 | 3,347 | ||||||||||||
Corporate and other | (2,297 | ) | (1,809 | ) | (5,239 | ) | (4,173 | ) | |||||||||
Acquisition-related transaction costs | (665 | ) | (720 | ) | (19,721 | ) | (1,982 | ) | |||||||||
Interest expense | (7,635 | ) | (7,902 | ) | (15,443 | ) | (16,513 | ) | |||||||||
Goodwill impairment | (214,049 | ) | - | (214,049 | ) | - | |||||||||||
Equity income in unconsolidated affiliate | 7,838 | - | 7,966 | - | |||||||||||||
Income before income taxes | $ | (508,471 | ) | $ | (25,291 | ) | $ | (508,425 | ) | $ | 6,110 |
Nature_of_Business_Additional_
Nature of Business - Additional Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | 6 Months Ended | 6 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | ||||||||||||
Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2012 | Dec. 31, 2012 | Jun. 30, 2013 | Jun. 30, 2013 | Dec. 31, 2012 | Jun. 30, 2013 | Oct. 01, 2013 | Oct. 01, 2013 | Oct. 01, 2013 | Oct. 01, 2013 | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | |
Segment | Maximum | Convertible Senior Notes | Convertible Senior Notes | Tower Reinsurance, Ltd. | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | New Reinsurance Program | Scenario, Forecast | Scenario, Forecast | Scenario, Forecast | Scenario, Forecast | Commercial Insurance | Commercial Insurance | Specialty Insurance and Reinsurance | Specialty Insurance and Reinsurance | ||||
Tower Insurance Company of New York | Tower Insurance Company of New York | Tower Insurance Company of New York | Tower Reinsurance, Ltd. | Tower Reinsurance, Ltd. | Minimum | Tower Reinsurance, Ltd. | Tower Reinsurance, Ltd. | CastlePoint Reinsurance Company, Ltd. | |||||||||||||
Southport Re | Hannover | Arch | Agreement | Minimum | Minimum | Minimum | |||||||||||||||
Nature Of Business [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Reserve charge from adverse development associated with prior accident years | $326,700,000 | $326,916,000 | $72,001,000 | ' | ' | ' | ' | $175,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of loss reserves covered by reserve study | ' | 90.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Goodwill impairment charge | 214,049,000 | 214,049,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 214,049,000 | ' | ' |
Quota share reinsurance cede, percentage | ' | ' | ' | ' | ' | ' | ' | ' | 30.00% | 14.00% | 17.50% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net written premiums | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 169,100,000 | 343,600,000 | 103,700,000 | 306,600,000 |
Additional collateral requested | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 26,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Adverse loss reserve development from loss portfolio transaction | ' | ' | ' | ' | ' | ' | ' | 175,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Reinsurance capital reserve | 890,186,000 | 890,186,000 | ' | 137,545,000 | ' | ' | ' | 8,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amount required to be collateralized against adverse loss reserve development | 657,275,000 | 657,275,000 | ' | 98,581,000 | ' | ' | ' | 175,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unencumbered liquid assets | 27,333,000 | 27,333,000 | ' | 17,609,000 | ' | ' | ' | 96,000,000 | ' | ' | ' | ' | 79,000,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Number of reinsurance treaties commuted | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2 | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility outstanding | 70,000,000 | 70,000,000 | ' | 70,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Outstanding principal | ' | ' | ' | ' | ' | 150,000,000 | 150,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, Consolidated Net Worth | ' | 553,400,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, percentage of Consolidated Net Worth | 90.00% | 90.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, covenant increase as a percentage of any new capital | ' | 90.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, additional covenant increase as a percentage of net income above base | ' | 50.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, net income amount base for additional covenant increase | ' | 20,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, Debt to capitalization ratio limit | ' | 46.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, risk based capital ratio | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 175.00% | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, consolidated statutory surplus | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 10.00% | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, percentage of required capital | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 110.00% | 110.00% | 150.00% | ' | ' | ' | ' |
Credit facility covenant, minimum statutory surplus | 419,000,000 | 419,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, combined surplus | ' | 85.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Subordinated debentures outstanding | 235,058,000 | 235,058,000 | ' | 235,058,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Subordinated debentures | $10,000,000 | $10,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Subordinated debentures maturity date | 'May 2033 | 'May 2033 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Maximum number of quarters to defer interest payments | ' | ' | ' | ' | '60 months | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of business segments | ' | 3 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Restatement_of_Previously_Issu2
Restatement of Previously Issued Financial Statements - Additional Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | 6 Months Ended | 12 Months Ended | |||||||
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 | Dec. 31, 2012 | Jun. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 | Dec. 31, 2009 |
Revised Amount | Revised Amount | Revised Amount | Revised Amount | Revised Amount | Revised Amount | ||||||
Material Error in Liability for Unpaid Claims and Claims Adjustment Expense | Material Error in Liability for Unpaid Claims and Claims Adjustment Expense | Material Error in Liability for Unpaid Claims and Claims Adjustment Expense | Material Error in Liability for Unpaid Claims and Claims Adjustment Expense | ||||||||
Reserve charge from adverse development associated with prior accident years | $326,700 | ' | $326,916 | $72,001 | ' | $365,000 | ' | ' | ' | ' | ' |
Loss and loss adjustment expenses | 559,892 | 349,775 | 835,624 | 617,268 | ' | ' | ' | 9,600 | 21,700 | 5,700 | ' |
Reinsurance recoverables on unpaid losses | 690,069 | ' | 690,069 | ' | 459,457 | ' | -36,735 | -37,000 | -27,400 | -5,700 | ' |
Premium receivable | 392,433 | ' | 392,433 | ' | 412,045 | ' | -10,067 | -11,000 | -10,000 | -5,600 | -7,200 |
Other operating expenses | $88,308 | $78,100 | $172,701 | $155,171 | ' | ' | ' | $1,000 | $4,400 | ($1,600) | $7,200 |
Effect_of_Restatement_and_Rela
Effect of Restatement and Related Tax Effects on Previously Filled Consolidated Balance Sheet (Detail) (USD $) | Jun. 30, 2013 | Dec. 31, 2012 | Jun. 30, 2012 | Dec. 31, 2011 |
In Thousands, unless otherwise specified | ||||
Assets | ' | ' | ' | ' |
Total investments | $2,517,362 | $2,553,505 | ' | ' |
Cash and cash equivalents | 108,535 | 102,269 | 199,005 | 114,098 |
Investment income receivable | 26,182 | 25,332 | ' | ' |
Investment in unconsolidated affiliate | ' | 71,894 | ' | ' |
Premiums receivable | 392,433 | 412,045 | ' | ' |
Reinsurance recoverable on paid losses | 27,333 | 17,609 | ' | ' |
Reinsurance recoverable on unpaid losses | 690,069 | 459,457 | ' | ' |
Prepaid reinsurance premiums | 126,159 | 63,923 | ' | ' |
Deferred acquisition costs, net | 192,887 | 181,198 | ' | ' |
Intangible assets | 99,507 | 106,768 | ' | ' |
Goodwill | 55,540 | 241,458 | ' | ' |
Funds held by reinsured companies | 890,186 | 137,545 | ' | ' |
Other assets | 465,548 | 338,769 | ' | ' |
Total assets | 5,667,937 | 4,711,772 | ' | ' |
Liabilities | ' | ' | ' | ' |
Loss and loss adjustment expenses | 2,552,351 | 1,895,679 | 1,701,833 | 1,632,113 |
Unearned premium | 998,624 | 921,271 | ' | ' |
Reinsurance balances payable | 46,442 | 40,569 | ' | ' |
Funds held under reinsurance agreements | 657,275 | 98,581 | ' | ' |
Other liabilities | 350,838 | 296,960 | ' | ' |
Deferred income taxes | ' | 24,763 | ' | ' |
Debt | 451,224 | 449,731 | ' | ' |
Total liabilities | 5,077,036 | 3,727,554 | ' | ' |
Contingencies | ' | ' | ' | ' |
Stockholders' equity | ' | ' | ' | ' |
Common stock | 574 | 530 | ' | ' |
Treasury stock | -17 | -181,435 | ' | ' |
Paid-in-capital | 812,547 | 780,036 | ' | ' |
Accumulated other comprehensive income | 9,060 | 82,756 | ' | ' |
Retained earnings | -242,930 | 268,171 | ' | ' |
Tower Group, Inc. stockholders' equity | 579,234 | 950,058 | ' | ' |
Noncontrolling interests | 11,667 | 34,160 | ' | ' |
Total stockholders' equity | 590,901 | 984,218 | 1,029,052 | 1,037,131 |
Total liabilities and stockholders' equity | 5,667,937 | 4,711,772 | ' | ' |
As previously Reported | ' | ' | ' | ' |
Assets | ' | ' | ' | ' |
Total investments | ' | 2,554,505 | ' | ' |
Cash and cash equivalents | ' | 100,293 | ' | ' |
Investment income receivable | ' | 25,332 | ' | ' |
Investment in unconsolidated affiliate | ' | 70,830 | ' | ' |
Premiums receivable | ' | 422,112 | ' | ' |
Reinsurance recoverable on paid losses | ' | 17,609 | ' | ' |
Reinsurance recoverable on unpaid losses | ' | 496,192 | ' | ' |
Prepaid reinsurance premiums | ' | 63,923 | ' | ' |
Deferred acquisition costs, net | ' | 180,941 | ' | ' |
Intangible assets | ' | 106,768 | ' | ' |
Goodwill | ' | 241,458 | ' | ' |
Funds held by reinsured companies | ' | 137,545 | ' | ' |
Other assets | ' | 331,506 | ' | ' |
Total assets | ' | 4,749,014 | ' | ' |
Liabilities | ' | ' | ' | ' |
Loss and loss adjustment expenses | ' | 1,895,073 | ' | ' |
Unearned premium | ' | 920,859 | ' | ' |
Reinsurance balances payable | ' | 40,569 | ' | ' |
Funds held under reinsurance agreements | ' | 98,581 | ' | ' |
Other liabilities | ' | 292,239 | ' | ' |
Deferred income taxes | ' | 36,464 | ' | ' |
Debt | ' | 449,731 | ' | ' |
Total liabilities | ' | 3,733,516 | ' | ' |
Contingencies | ' | ' | ' | ' |
Stockholders' equity | ' | ' | ' | ' |
Common stock | ' | 530 | ' | ' |
Treasury stock | ' | -181,435 | ' | ' |
Paid-in-capital | ' | 780,036 | ' | ' |
Accumulated other comprehensive income | ' | 83,406 | ' | ' |
Retained earnings | ' | 298,299 | ' | ' |
Tower Group, Inc. stockholders' equity | ' | 980,836 | ' | ' |
Noncontrolling interests | ' | 34,662 | ' | ' |
Total stockholders' equity | ' | 1,015,498 | ' | ' |
Total liabilities and stockholders' equity | ' | 4,749,014 | ' | ' |
Revised Amount | ' | ' | ' | ' |
Assets | ' | ' | ' | ' |
Total investments | ' | -1,000 | ' | ' |
Cash and cash equivalents | ' | 1,976 | ' | ' |
Investment in unconsolidated affiliate | ' | 1,064 | ' | ' |
Premiums receivable | ' | -10,067 | ' | ' |
Reinsurance recoverable on unpaid losses | ' | -36,735 | ' | ' |
Deferred acquisition costs, net | ' | 257 | ' | ' |
Other assets | ' | 7,263 | ' | ' |
Total assets | ' | -37,242 | ' | ' |
Liabilities | ' | ' | ' | ' |
Loss and loss adjustment expenses | ' | 606 | ' | ' |
Unearned premium | ' | 412 | ' | ' |
Other liabilities | ' | 4,721 | ' | ' |
Deferred income taxes | ' | -11,701 | ' | ' |
Total liabilities | ' | -5,962 | ' | ' |
Contingencies | ' | ' | ' | ' |
Stockholders' equity | ' | ' | ' | ' |
Accumulated other comprehensive income | ' | -650 | ' | ' |
Retained earnings | ' | -30,128 | ' | ' |
Tower Group, Inc. stockholders' equity | ' | -30,778 | ' | ' |
Noncontrolling interests | ' | -502 | ' | ' |
Total stockholders' equity | ' | -31,280 | ' | ' |
Total liabilities and stockholders' equity | ' | ($37,242) | ' | ' |
Accounting_Policies_and_Basis_3
Accounting Policies and Basis of Presentation - Additional Information (Detail) (USD $) | Jun. 30, 2013 | Jun. 30, 2012 | Mar. 31, 2012 | Mar. 31, 2012 |
In Thousands, unless otherwise specified | Reciprocal Exchanges | Tower | ||
Significant Accounting Policies [Line Items] | ' | ' | ' | ' |
Transfer of assets | ' | ' | $1,800 | $1,800 |
Conversion ratio | 1.133 | 1.133 | ' | ' |
Reflects_the_Previously_Report
Reflects the Previously Reported and Revised Shareholders' Equity Accounts (Detail) (USD $) | 3 Months Ended | 6 Months Ended | |||
In Thousands, except Per Share data, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 | Dec. 31, 2012 |
Common stock | $574 | ' | $574 | ' | $530 |
Treasury stock | -17 | ' | -17 | ' | -181,435 |
Paid-in-capital | 812,547 | ' | 812,547 | ' | 780,036 |
Earnings (Loss) per Share: | ' | ' | ' | ' | ' |
Basic | ($8.88) | ($0.39) | ($9.61) | $0.05 | ' |
Diluted | ($8.88) | ($0.39) | ($9.61) | $0.05 | ' |
Weighted average common shares outstanding | ' | ' | ' | ' | ' |
Basic | 57,135 | 43,289 | 51,487 | 43,340 | ' |
Diluted | 57,135 | 43,289 | 51,487 | 43,410 | ' |
As Previously Reported | ' | ' | ' | ' | ' |
Common stock | ' | ' | ' | ' | 469 |
Treasury stock | ' | ' | ' | ' | -181,435 |
Paid-in-capital | ' | ' | ' | ' | 780,097 |
Earnings (Loss) per Share: | ' | ' | ' | ' | ' |
Basic | ' | ($0.43) | ' | $0.06 | ' |
Diluted | ' | ($0.43) | ' | $0.06 | ' |
Weighted average common shares outstanding | ' | ' | ' | ' | ' |
Basic | ' | 39,117 | ' | 39,206 | ' |
Diluted | ' | 39,117 | ' | 39,268 | ' |
Revised | ' | ' | ' | ' | ' |
Common stock | ' | ' | ' | ' | 530 |
Treasury stock | ' | ' | ' | ' | -181,435 |
Paid-in-capital | ' | ' | ' | ' | $780,036 |
Earnings (Loss) per Share: | ' | ' | ' | ' | ' |
Basic | ' | ($0.39) | ' | $0.05 | ' |
Diluted | ' | ($0.39) | ' | $0.05 | ' |
Weighted average common shares outstanding | ' | ' | ' | ' | ' |
Basic | ' | 43,289 | ' | 43,340 | ' |
Diluted | ' | 43,289 | ' | 43,410 | ' |
Merger_Transaction_Additional_
Merger Transaction - Additional Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 1 Months Ended | 1 Months Ended | ||||||||||||
Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2012 | Dec. 31, 2012 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jul. 30, 2012 | Jun. 30, 2013 | Mar. 06, 2013 | Aug. 20, 2012 | Mar. 06, 2013 | |
Direct cost | Direct cost | Compensation expense | Compensation expense | Professional Fees And Other | Tower Group International Ltd | Third Party Investors | Canopius Group Limited | Canopius Group Limited | Canopius Group Limited | Canopius Group Limited | Canopius Group Limited | |||||||
Restricted Stock | Third Party Investors | |||||||||||||||||
Business Acquisition [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Investments | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $26,485,000 | ' | $74,900,000 | ' |
Percentage of ownership interest | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 100.00% | ' | 10.70% | ' |
Payment to exercise merger option | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,000,000 | ' | ' | ' | ' |
Percentage of private sale of shares to third party investor | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 100.00% | ' | ' |
Net consideration of sale of shares to third party | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 205,862,755 |
Shares issued in private placement | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 14,025,737 | ' | ' |
Merger agreement terms | ' | ' | ' | '(i) 100% of the issued and outstanding shares of TGI common stock was cancelled and automatically converted into the right to receive 1.1330 common shares of the Company, par value $0.01 per share (the "Common Share"), (ii) each outstanding option to acquire TGI common stock, whether vested or unvested and whether granted under TGIbs 2008 Long-Term Equity Compensation Plan or otherwise, automatically vested, free of any forfeiture conditions, and constituted a fully vested option to acquire that number of Common Shares (rounded down to the nearest whole number) equal to the number of shares of TGI common stock subject to such option multiplied by 1.1330, on the same terms and conditions (other than vesting and performance conditions) as were applicable to such TGI stock option immediately prior to the Merger Transaction, with the exercise price of such option adjusted to be the original exercise price divided by 1.1330, and (iii) substantially all issued and outstanding shares of TGI restricted stock, whether granted under TGI's 2008 Long-Term Equity Compensation Plan or otherwise, automatically vested, free of any forfeiture conditions, and was converted into the right to receive, as soon as reasonably practicable after the effective time, 1.1330 Common Shares. | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Conversion ratio | 1.133 | 1.133 | 1.133 | 1.133 | 1.133 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of outstanding shares | 57,429,099 | ' | 57,429,099 | 57,429,099 | ' | 43,513,678 | ' | ' | ' | ' | ' | ' | ' | ' | 57,432,150 | ' | ' | ' |
Percentage of outstanding shares held | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 76.00% | 24.00% | ' | ' | ' | ' | ' |
Direct cost of the acquisition | 665,000 | 720,000 | ' | 19,721,000 | 1,982,000 | ' | 700,000 | 19,700,000 | 11,600,000 | 10,300,000 | 8,100,000 | ' | ' | ' | ' | ' | ' | ' |
Unamortized reserve for risk premium | 19,100,000 | ' | 19,100,000 | 19,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consolidated revenue since effective date of merger | ' | ' | 40,800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consolidated net income (loss) since effective date of merger | ' | ' | ($22,000,000) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Preliminary_Purchase_Considera
Preliminary Purchase Consideration (Detail) (Canopius Group Limited, USD $) | Jun. 30, 2013 |
In Thousands, unless otherwise specified | |
Business Acquisition [Line Items] | ' |
Preliminary purchase consideration | $207,347 |
Consideration received by Canopius Group from the third party sale | ' |
Business Acquisition [Line Items] | ' |
Preliminary purchase consideration | 205,863 |
Fair value of Merger Option received in connection with TGI's investment in Canopius Group | ' |
Business Acquisition [Line Items] | ' |
Preliminary purchase consideration | 484 |
Exercise price of Merger Right received from TGI upon exercise | ' |
Business Acquisition [Line Items] | ' |
Preliminary purchase consideration | $1,000 |
Fair_Values_of_Respective_Asse
Fair Values of Respective Assets Acquired and Liabilities Assumed (Detail) (USD $) | Jun. 30, 2013 | Dec. 31, 2012 | Jun. 30, 2013 | Aug. 20, 2012 | Jun. 30, 2013 |
In Thousands, unless otherwise specified | Canopius Group Limited | Canopius Group Limited | Canopius Group Limited | ||
Unpaid Losses and Loss Adjustment Expenses | |||||
Assets | ' | ' | ' | ' | ' |
Cash and cash equivalents | ' | ' | $134,741 | ' | ' |
Investments | ' | ' | 26,485 | 74,900 | ' |
Reinsurance recoverables | ' | ' | 468,727 | ' | ' |
Prepaid reinsurance | ' | ' | 152,431 | ' | ' |
Funds held by reinsured companies | ' | ' | 698,819 | ' | ' |
Other assets | ' | ' | 75,219 | ' | ' |
Liabilities | ' | ' | ' | ' | ' |
Unearned premiums | ' | ' | 169,963 | ' | ' |
Funds held under reinsurance agreements | ' | ' | 560,714 | ' | ' |
Other liabilities | ' | ' | 15,916 | ' | 630,613 |
Net assets acquired | ' | ' | 179,216 | ' | ' |
Purchase Consideration | ' | ' | 207,347 | ' | ' |
Goodwill | $55,540 | $241,458 | $28,131 | ' | ' |
Pro_Forma_Financial_Informatio
Pro Forma Financial Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 |
Business Acquisition, Pro Forma Information [Line Items] | ' | ' | ' | ' |
Revenues | $460,518 | $509,666 | $940,145 | $979,033 |
Net Income (Loss) | ($505,876) | ($16,887) | ($485,248) | $10,074 |
Goodwill_and_Intangible_Assets2
Goodwill and Intangible Assets - Additional Information (Detail) (USD $) | 1 Months Ended | 3 Months Ended | 6 Months Ended |
In Thousands, unless otherwise specified | Mar. 13, 2013 | Jun. 30, 2013 | Jun. 30, 2013 |
Segment | |||
Intangible Assets And Goodwill [Line Items] | ' | ' | ' |
Goodwill from Merger Transaction | $28,100 | ' | $28,131 |
Number of business segments | ' | ' | 3 |
Goodwill impairment charge | ' | 214,049 | 214,049 |
Customer relationships | ' | ' | ' |
Intangible Assets And Goodwill [Line Items] | ' | ' | ' |
Impairment of intangible assets | ' | ' | $3,800 |
Summary_of_Goodwill_by_Reporti
Summary of Goodwill by Reporting Units (Detail) (USD $) | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||
In Thousands, unless otherwise specified | Mar. 13, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Dec. 31, 2012 |
Commercial Insurance | Personal Insurance | Personal Insurance | ||||
Goodwill [Line Items] | ' | ' | ' | ' | ' | ' |
Opening balance | ' | ' | $241,458 | $185,918 | $55,540 | $55,540 |
Goodwill from Merger Transaction | 28,100 | ' | 28,131 | 28,131 | ' | ' |
Goodwill impairment | ' | -214,049 | -214,049 | -214,049 | ' | ' |
Closing balance | ' | $55,540 | $55,540 | ' | $55,540 | $55,540 |
Variable_Interest_Entities_VIE1
Variable Interest Entities ("VIEs") - Additional Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 |
Variable Interest Entity [Line Items] | ' | ' | ' | ' |
Total revenues | $460,518 | $506,392 | $937,001 | $972,615 |
Total expenses | 762,778 | 531,683 | 1,239,343 | 966,505 |
Net income (loss) | 801 | 437 | -10,480 | 3,448 |
Reciprocal Exchanges | ' | ' | ' | ' |
Variable Interest Entity [Line Items] | ' | ' | ' | ' |
Total revenues | 49,100 | 49,200 | 96,400 | 99,400 |
Total expenses | 48,300 | 48,800 | 106,900 | 96,000 |
Net income (loss) | $800 | $400 | ($10,500) | $3,400 |
Summary_of_Cost_or_Amortized_C
Summary of Cost or Amortized Cost and Fair Value of Investments in Fixed Maturity and Equity Securities, Gross Unrealized Gains and Losses, and Other-Than-Temporary Impairment Losses (Detail) (USD $) | Jun. 30, 2013 | Dec. 31, 2012 | ||
In Thousands, unless otherwise specified | ||||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | $2,373,171 | $2,344,283 | ||
Gross Unrealized Gains | 97,330 | 159,147 | ||
Gross Unrealized Losses | -30,177 | -7,711 | ||
Investments | 2,440,324 | 2,495,719 | ||
Unrealized OTTI Losses | -884 | [1] | -6 | [1] |
Tower | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 2,121,665 | 2,075,189 | ||
Gross Unrealized Gains | 87,920 | 141,614 | ||
Gross Unrealized Losses | -25,786 | -7,210 | ||
Investments | 2,183,799 | 2,209,593 | ||
Unrealized OTTI Losses | -884 | [1] | -6 | [1] |
Reciprocal Exchanges | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 251,506 | 269,094 | ||
Gross Unrealized Gains | 9,410 | 17,533 | ||
Gross Unrealized Losses | -4,391 | -501 | ||
Investments | 256,525 | 286,126 | ||
Fixed-maturity securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 2,229,407 | 2,190,186 | ||
Gross Unrealized Gains | 88,679 | 157,463 | ||
Gross Unrealized Losses | -28,541 | -2,938 | ||
Investments | 2,289,545 | 2,344,711 | ||
Unrealized OTTI Losses | -884 | [1] | -6 | [1] |
Fixed-maturity securities | U.S. Treasury Securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 390,003 | 183,462 | ||
Gross Unrealized Gains | 1,024 | 1,500 | ||
Gross Unrealized Losses | -5,780 | -13 | ||
Investments | 385,247 | 184,949 | ||
Fixed-maturity securities | U.S. Agency securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 104,099 | 98,502 | ||
Gross Unrealized Gains | 2,189 | 4,351 | ||
Gross Unrealized Losses | -965 | -76 | ||
Investments | 105,323 | 102,777 | ||
Fixed-maturity securities | Municipal Bonds | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 568,991 | 633,373 | ||
Gross Unrealized Gains | 24,132 | 52,914 | ||
Gross Unrealized Losses | -5,732 | -244 | ||
Investments | 587,391 | 686,043 | ||
Unrealized OTTI Losses | -71 | [1] | ' | |
Fixed-maturity securities | Corporate Securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Investments | 729,899 | 746,665 | ||
Fixed-maturity securities | Corporate Securities | Finance | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 246,779 | 233,849 | ||
Gross Unrealized Gains | 14,594 | 21,293 | ||
Gross Unrealized Losses | -4,240 | -1,095 | ||
Investments | 257,133 | 254,047 | ||
Fixed-maturity securities | Corporate Securities | Industrial | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 406,976 | 412,465 | ||
Gross Unrealized Gains | 13,171 | 26,556 | ||
Gross Unrealized Losses | -5,675 | -868 | ||
Investments | 414,472 | 438,153 | ||
Fixed-maturity securities | Corporate Securities | Utilities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 58,368 | 51,698 | ||
Gross Unrealized Gains | 2,078 | 2,958 | ||
Gross Unrealized Losses | -2,152 | -191 | ||
Investments | 58,294 | 54,465 | ||
Unrealized OTTI Losses | -203 | [1] | ' | |
Fixed-maturity securities | Commercial mortgage-backed securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 217,531 | 211,819 | ||
Gross Unrealized Gains | 21,439 | 30,375 | ||
Gross Unrealized Losses | -2,351 | -141 | ||
Investments | 236,619 | 242,053 | ||
Unrealized OTTI Losses | -604 | [1] | ' | |
Fixed-maturity securities | Residential mortgage-backed securities, Agency backed securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 161,783 | 283,652 | ||
Gross Unrealized Gains | 4,891 | 12,326 | ||
Gross Unrealized Losses | -1,614 | -262 | ||
Investments | 165,060 | 295,716 | ||
Fixed-maturity securities | Residential mortgage-backed securities, Non-agency backed securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 35,583 | 38,615 | ||
Gross Unrealized Gains | 4,059 | 3,575 | ||
Gross Unrealized Losses | -30 | -34 | ||
Investments | 39,612 | 42,156 | ||
Unrealized OTTI Losses | -6 | [1] | -6 | [1] |
Fixed-maturity securities | Asset-Backed Securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 39,294 | 42,751 | ||
Gross Unrealized Gains | 1,102 | 1,615 | ||
Gross Unrealized Losses | -2 | -14 | ||
Investments | 40,394 | 44,352 | ||
Preferred stocks | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 21,584 | 31,272 | ||
Gross Unrealized Gains | 188 | 730 | ||
Gross Unrealized Losses | -1,137 | -481 | ||
Investments | 20,635 | 31,521 | ||
Common Stocks | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 108,765 | 118,076 | ||
Gross Unrealized Gains | 8,463 | 953 | ||
Gross Unrealized Losses | -463 | -4,292 | ||
Investments | 116,765 | 114,737 | ||
Short-term investments | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 13,415 | 4,749 | ||
Gross Unrealized Gains | ' | 1 | ||
Gross Unrealized Losses | -36 | ' | ||
Investments | $13,379 | $4,750 | ||
[1] | Represents the gross unrealized loss on other-than-temporarily impaired securities recognized in accumulated other comprehensive income (loss). |
Investments_Additional_Informa
Investments - Additional Information (Detail) (USD $) | 6 Months Ended | ||
Jun. 30, 2013 | Jun. 30, 2012 | Dec. 31, 2012 | |
Investment | |||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Restricted assets, cash and cash equivalents | $32,000,000 | ' | ' |
Investment, carrying values | 2,373,171,000 | ' | 2,344,283,000 |
Proceeds from sale of equity securities | 802,297,000 | 745,618,000 | ' |
Number of securities in unrealized loss position not deemed OTTI | 668 | ' | ' |
Unrealized losses | 30,177,000 | ' | 7,711,000 |
Unrealized losses related to securities in loss position for more than 12 months | 415,000 | ' | 577,000 |
Future funding commitments to limited partnerships | 47,000,000 | ' | ' |
Fixed-maturity securities | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Number of securities in unrealized loss position not deemed OTTI | 644 | ' | ' |
Unrealized losses | 28,500,000 | ' | ' |
Percentage of fixed maturity securities in unrealized loss position below amortized cost | 3.00% | ' | ' |
Number of securities in unrealized loss position for more than 12 months | 27 | ' | ' |
Unrealized losses related to securities in loss position for more than 12 months | 100,000 | ' | ' |
Common Stocks | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Number of securities in unrealized loss position not deemed OTTI | 17 | ' | ' |
Unrealized losses | 500,000 | ' | ' |
Fixed-maturity securities | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Proceeds from sale or maturity of fixed maturity securities | 759,000,000 | 980,000,000 | ' |
Equity securities | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Proceeds from sale of equity securities | 796,800,000 | 745,600,000 | ' |
US Treasury Notes and Other Securities | Held by Counterparties | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Restricted assets, cash and cash equivalents | 457,300,000 | ' | ' |
Investment, carrying values | ' | ' | 481,500,000 |
Corporate bonds and mortgage-backed securities | Fixed-maturity securities | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Unrealized losses | 16,100,000 | ' | ' |
Tower | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Investment, carrying values | 2,121,665,000 | ' | 2,075,189,000 |
Unrealized losses | 25,786,000 | ' | 7,210,000 |
Unrealized losses related to securities in loss position for more than 12 months | $400,000 | ' | $478,000 |
Tower | Other | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Number of securities purchased | 5 | ' | ' |
Summary_of_Major_Categories_of
Summary of Major Categories of Net Investment Income (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Income | $29,834 | $33,135 | $61,926 | $68,456 |
Investment expenses | -1,432 | -1,354 | -3,207 | -2,732 |
Net investment income | 28,402 | 31,781 | 58,719 | 65,724 |
Tower | ' | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Net investment income | 27,612 | 30,267 | 57,195 | 62,525 |
Reciprocal Exchanges | ' | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Net investment income | 2,458 | 3,177 | 4,839 | 6,526 |
Consolidation, Eliminations | ' | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Net investment income | -1,668 | -1,663 | -3,315 | -3,327 |
Fixed-maturity securities | ' | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Income | 20,562 | 24,511 | 41,535 | 49,924 |
Equity securities | ' | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Income | 6,808 | 6,603 | 13,292 | 14,239 |
Cash and cash equivalents | ' | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Income | 19 | 505 | 70 | 798 |
Other invested asset | ' | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Income | 2,158 | 1,313 | 6,414 | 3,146 |
Other | ' | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Income | $287 | $203 | $615 | $349 |
Summary_of_Gross_Realized_Gain
Summary of Gross Realized Gains, Losses and Impairment Write-Downs on Investments (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 |
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ' |
Net realized gains (losses) on investments | $2,422 | $2,003 | $9,962 | $8,307 |
Other-than-temporary impairment losses | -4,456 | -1,984 | -5,145 | -4,960 |
Total net realized investment gains (losses) | -2,034 | 19 | 4,817 | 3,347 |
Tower | ' | ' | ' | ' |
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ' |
Other-than-temporary impairment losses | -4,456 | -1,984 | -5,145 | -4,960 |
Total net realized investment gains (losses) | -2,243 | -110 | 3,990 | 1,028 |
Reciprocal Exchanges | ' | ' | ' | ' |
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ' |
Total net realized investment gains (losses) | 209 | 129 | 827 | 2,319 |
Fixed-maturity securities | ' | ' | ' | ' |
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ' |
Gross realized gains | 10,479 | 12,354 | 17,843 | 25,162 |
Gross realized losses | -1,672 | -609 | -1,862 | -2,551 |
Net realized gains (losses) on investments | 8,807 | 11,745 | 15,981 | 22,611 |
Other-than-temporary impairment losses | -23 | -765 | -187 | -882 |
Equity securities | ' | ' | ' | ' |
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ' |
Gross realized gains | 5,323 | 2,685 | 9,559 | 4,179 |
Gross realized losses | -12,717 | -9,808 | -17,530 | -16,160 |
Net realized gains (losses) on investments | -7,394 | -7,123 | -7,971 | -11,981 |
Other-than-temporary impairment losses | -4,433 | -1,219 | -4,958 | -4,078 |
Other | ' | ' | ' | ' |
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ' |
Gross realized gains | 2,100 | 555 | 3,855 | 1,790 |
Gross realized losses | -1,091 | -3,174 | -1,903 | -4,113 |
Net realized gains (losses) on investments | $1,009 | ($2,619) | $1,952 | ($2,323) |
Amount_of_FixedMaturity_and_Eq
Amount of Fixed-Maturity and Equity Securities that were Other-Than-Temporary Impairment (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' | ' |
Other-than-temporary impairments | ($4,456) | ($2,270) | ($5,145) | ($5,246) |
Portion of loss recognized in accumulated other comprehensive income (loss) | ' | 286 | ' | 286 |
Other-than-temporary impairment losses | -4,456 | -1,984 | -5,145 | -4,960 |
Tower | ' | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' | ' |
Other-than-temporary impairment losses | -4,456 | -1,984 | -5,145 | -4,960 |
Corporate Securities | ' | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' | ' |
Other-than-temporary impairments | ' | -648 | ' | -737 |
Commercial mortgage-backed securities | ' | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' | ' |
Other-than-temporary impairments | -23 | -403 | -47 | -403 |
Residential mortgage-backed securities | ' | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' | ' |
Other-than-temporary impairments | -140 | ' | -140 | -28 |
Equity securities | ' | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' | ' |
Other-than-temporary impairments | ($4,293) | ($1,219) | ($4,958) | ($4,078) |
Rollforward_of_Cumulative_Amou
Rollforward of Cumulative Amount of Other-Than-Temporary Impairment for Securities Still Held Showing Amounts that have been Included in Earnings on Pretax Basis (Detail) (Tower, USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 |
Tower | ' | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' | ' |
Balance at beginning of period | $4,516 | $6,084 | $4,492 | $12,666 |
Additional credit losses recognized during the period, related to securities for which no OTTI has been previously recognized | 23 | 765 | 47 | 854 |
Additional credit losses recognized during the period, related to securities for which OTTI has been previously recognized | ' | ' | ' | 28 |
Reductions due to Securities sold during the period (realized) | ' | -730 | ' | -7,429 |
Balance at end of period | $4,539 | $6,119 | $4,539 | $6,119 |
Information_Regarding_Invested
Information Regarding Invested Assets that were in Unrealized Loss Position (Detail) (USD $) | Jun. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | $983,435 | $328,618 |
Less than 12 Months, Unrealized Losses | -29,762 | -7,134 |
12 Months or Longer, Fair Value | 7,919 | 15,110 |
12 Months or Longer, Unrealized Losses | -415 | -577 |
Total, Aggregate Fair Value | 991,354 | 343,728 |
Total, Unrealized Losses | -30,177 | -7,711 |
Tower | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 875,960 | 270,609 |
Less than 12 Months, Unrealized Losses | -25,386 | -6,732 |
12 Months or Longer, Fair Value | 7,553 | 13,338 |
12 Months or Longer, Unrealized Losses | -400 | -478 |
Total, Aggregate Fair Value | 883,513 | 283,947 |
Total, Unrealized Losses | -25,786 | -7,210 |
Reciprocal Exchanges | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 107,475 | 58,009 |
Less than 12 Months, Unrealized Losses | -4,376 | -402 |
12 Months or Longer, Fair Value | 366 | 1,772 |
12 Months or Longer, Unrealized Losses | -15 | -99 |
Total, Aggregate Fair Value | 107,841 | 59,781 |
Total, Unrealized Losses | -4,391 | -501 |
Fixed-maturity securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 917,916 | 263,342 |
Less than 12 Months, Unrealized Losses | -28,442 | -2,687 |
12 Months or Longer, Fair Value | 1,830 | 9,386 |
12 Months or Longer, Unrealized Losses | -99 | -251 |
Total, Aggregate Fair Value | 919,746 | 272,728 |
Total, Unrealized Losses | -28,541 | -2,938 |
Fixed-maturity securities | U.S. Treasury Securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 318,415 | 44,347 |
Less than 12 Months, Unrealized Losses | -5,780 | -13 |
Total, Aggregate Fair Value | 318,415 | 44,347 |
Total, Unrealized Losses | -5,780 | -13 |
Fixed-maturity securities | U.S. Agency securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 32,802 | 22,345 |
Less than 12 Months, Unrealized Losses | -965 | -76 |
Total, Aggregate Fair Value | 32,802 | 22,345 |
Total, Unrealized Losses | -965 | -76 |
Fixed-maturity securities | Municipal Bonds | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 151,394 | 21,532 |
Less than 12 Months, Unrealized Losses | -5,688 | -235 |
12 Months or Longer, Fair Value | 218 | 251 |
12 Months or Longer, Unrealized Losses | -44 | -9 |
Total, Aggregate Fair Value | 151,612 | 21,783 |
Total, Unrealized Losses | -5,732 | -244 |
Fixed-maturity securities | Corporate Securities | Finance | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 76,192 | 16,853 |
Less than 12 Months, Unrealized Losses | -4,240 | -1,095 |
Total, Aggregate Fair Value | 76,192 | 16,853 |
Total, Unrealized Losses | -4,240 | -1,095 |
Fixed-maturity securities | Corporate Securities | Industrial | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 188,193 | 53,576 |
Less than 12 Months, Unrealized Losses | -5,635 | -666 |
12 Months or Longer, Fair Value | 1,184 | 4,188 |
12 Months or Longer, Unrealized Losses | -40 | -202 |
Total, Aggregate Fair Value | 189,377 | 57,764 |
Total, Unrealized Losses | -5,675 | -868 |
Fixed-maturity securities | Corporate Securities | Utilities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 42,328 | 20,143 |
Less than 12 Months, Unrealized Losses | -2,152 | -191 |
12 Months or Longer, Fair Value | ' | 7 |
Total, Aggregate Fair Value | 42,328 | 20,150 |
Total, Unrealized Losses | -2,152 | -191 |
Fixed-maturity securities | Commercial mortgage-backed securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 50,984 | 23,223 |
Less than 12 Months, Unrealized Losses | -2,351 | -141 |
12 Months or Longer, Fair Value | ' | 95 |
Total, Aggregate Fair Value | 50,984 | 23,318 |
Total, Unrealized Losses | -2,351 | -141 |
Fixed-maturity securities | Residential mortgage-backed securities, Agency backed securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 54,462 | 59,009 |
Less than 12 Months, Unrealized Losses | -1,613 | -261 |
12 Months or Longer, Fair Value | 229 | 25 |
12 Months or Longer, Unrealized Losses | -1 | -1 |
Total, Aggregate Fair Value | 54,691 | 59,034 |
Total, Unrealized Losses | -1,614 | -262 |
Fixed-maturity securities | Residential mortgage-backed securities, Non-agency backed securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 639 | 815 |
Less than 12 Months, Unrealized Losses | -16 | -6 |
12 Months or Longer, Fair Value | 199 | 588 |
12 Months or Longer, Unrealized Losses | -14 | -28 |
Total, Aggregate Fair Value | 838 | 1,403 |
Total, Unrealized Losses | -30 | -34 |
Fixed-maturity securities | Asset-Backed Securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 2,507 | 1,499 |
Less than 12 Months, Unrealized Losses | -2 | -3 |
12 Months or Longer, Fair Value | ' | 4,232 |
12 Months or Longer, Unrealized Losses | ' | -11 |
Total, Aggregate Fair Value | 2,507 | 5,731 |
Total, Unrealized Losses | -2 | -14 |
Preferred stocks | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 9,802 | 9,716 |
Less than 12 Months, Unrealized Losses | -821 | -155 |
12 Months or Longer, Fair Value | 6,089 | 5,724 |
12 Months or Longer, Unrealized Losses | -316 | -326 |
Total, Aggregate Fair Value | 15,891 | 15,440 |
Total, Unrealized Losses | -1,137 | -481 |
Common Stocks | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 44,338 | 55,560 |
Less than 12 Months, Unrealized Losses | -463 | -4,292 |
Total, Aggregate Fair Value | 44,338 | 55,560 |
Total, Unrealized Losses | -463 | -4,292 |
Short-term investments | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 11,379 | ' |
Less than 12 Months, Unrealized Losses | -36 | ' |
Total, Aggregate Fair Value | 11,379 | ' |
Total, Unrealized Losses | ($36) | ' |
Amortized_Cost_and_Fair_Value_
Amortized Cost and Fair Value of Fixed-Maturity Portfolio by Contractual Time to Maturity (Detail) (USD $) | Jun. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Less than one year, amortized cost | $42,963 | $32,760 |
One to five years, amortized cost | 656,432 | 535,515 |
Five to ten years, amortized cost | 712,217 | 641,036 |
More than 10 years, amortized cost | 363,604 | 404,038 |
Mortgage and asset-backed securities, amortized cost | 454,191 | 576,837 |
Total at end of period, amortized cost | 2,229,407 | 2,190,186 |
Less than one year, fair value | 43,745 | 33,329 |
One to five years, fair value | 670,279 | 557,798 |
Five to ten years, fair value | 720,259 | 687,720 |
More than 10 years, fair value | 373,575 | 441,587 |
Mortgage and asset-backed securities, fair value | 481,687 | 624,277 |
Total at end of period, fair value | 2,289,545 | 2,344,711 |
Tower | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Less than one year, amortized cost | 38,967 | 30,082 |
One to five years, amortized cost | 614,572 | 489,939 |
Five to ten years, amortized cost | 646,016 | 564,556 |
More than 10 years, amortized cost | 301,473 | 346,410 |
Mortgage and asset-backed securities, amortized cost | 379,624 | 495,249 |
Total at end of period, amortized cost | 1,980,652 | 1,926,236 |
Less than one year, fair value | 39,597 | 30,614 |
One to five years, fair value | 626,489 | 510,523 |
Five to ten years, fair value | 654,732 | 607,711 |
More than 10 years, fair value | 310,890 | 379,045 |
Mortgage and asset-backed securities, fair value | 404,062 | 536,255 |
Total at end of period, fair value | 2,035,770 | 2,064,148 |
Reciprocal Exchanges | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Less than one year, amortized cost | 3,996 | 2,678 |
One to five years, amortized cost | 41,860 | 45,576 |
Five to ten years, amortized cost | 66,201 | 76,480 |
More than 10 years, amortized cost | 62,131 | 57,628 |
Mortgage and asset-backed securities, amortized cost | 74,567 | 81,588 |
Total at end of period, amortized cost | 248,755 | 263,950 |
Less than one year, fair value | 4,148 | 2,715 |
One to five years, fair value | 43,790 | 47,275 |
Five to ten years, fair value | 65,527 | 80,009 |
More than 10 years, fair value | 62,685 | 62,542 |
Mortgage and asset-backed securities, fair value | 77,625 | 88,022 |
Total at end of period, fair value | $253,775 | $280,563 |
Composition_of_Other_Invested_
Composition of Other Invested Assets (Detail) (Tower, USD $) | Jun. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Schedule of Investments [Line Items] | ' | ' |
Other invested assets | $77,038 | $57,786 |
Limited partnerships, equity method | ' | ' |
Schedule of Investments [Line Items] | ' | ' |
Other invested assets | 34,843 | 23,864 |
Real estate, amortized cost | ' | ' |
Schedule of Investments [Line Items] | ' | ' |
Other invested assets | 7,645 | 7,422 |
Securities reported under the fair value option | ' | ' |
Schedule of Investments [Line Items] | ' | ' |
Other invested assets | 30,250 | 25,000 |
Other | ' | ' |
Schedule of Investments [Line Items] | ' | ' |
Other invested assets | $4,300 | $1,500 |
Financial_Instruments_at_Fair_
Financial Instruments at Fair Value among Levels (Detail) (USD $) | Jun. 30, 2013 | Dec. 31, 2012 | ||
In Thousands, unless otherwise specified | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | $2,440,324 | $2,495,719 | ||
Other invested assets | 30,250 | [1] | 25,000 | [2] |
Interest rate swap contracts | -6,830 | -9,016 | ||
Debt and equity securities sold, not yet purchased | -25,570 | -17,101 | ||
Total investments and Other liabilities | 2,438,174 | 2,494,602 | ||
Tower | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 2,183,799 | 2,209,593 | ||
Total investments and Other liabilities | 2,181,648 | 2,208,475 | ||
Reciprocal Exchanges | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 256,525 | 286,126 | ||
Total investments and Other liabilities | 256,526 | 286,127 | ||
Level 1 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 137,400 | 146,258 | ||
Total investments and Other liabilities | 137,400 | 146,258 | ||
Level 1 | Tower | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Total investments and Other liabilities | 134,650 | 140,695 | ||
Level 1 | Reciprocal Exchanges | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Total investments and Other liabilities | 2,750 | 5,563 | ||
Level 2 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 2,302,924 | 2,349,461 | ||
Interest rate swap contracts | -6,830 | -9,016 | ||
Debt and equity securities sold, not yet purchased | -25,570 | -17,101 | ||
Total investments and Other liabilities | 2,270,524 | 2,323,344 | ||
Level 2 | Tower | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Total investments and Other liabilities | 2,016,748 | 2,042,780 | ||
Level 2 | Reciprocal Exchanges | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Total investments and Other liabilities | 253,776 | 280,564 | ||
Level 3 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Other invested assets | 30,250 | [1] | 25,000 | [2] |
Total investments and Other liabilities | 30,250 | 25,000 | ||
Level 3 | Tower | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Total investments and Other liabilities | 30,250 | 25,000 | ||
Fixed-maturity securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 2,289,545 | 2,344,711 | ||
Fixed-maturity securities | U.S. Treasury Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 385,247 | 184,949 | ||
Fixed-maturity securities | U.S. Agency securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 105,323 | 102,777 | ||
Fixed-maturity securities | Municipal Bonds | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 587,391 | 686,043 | ||
Fixed-maturity securities | Corporate Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 729,899 | 746,665 | ||
Fixed-maturity securities | Commercial mortgage-backed securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 236,619 | 242,053 | ||
Fixed-maturity securities | Residential mortgage-backed securities, Agency backed securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 165,060 | 295,716 | ||
Fixed-maturity securities | Residential mortgage-backed securities, Non-agency backed securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 39,612 | 42,156 | ||
Fixed-maturity securities | Asset-Backed Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 40,394 | 44,352 | ||
Fixed-maturity securities | Level 2 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 2,289,545 | 2,344,711 | ||
Fixed-maturity securities | Level 2 | U.S. Treasury Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 385,247 | 184,949 | ||
Fixed-maturity securities | Level 2 | U.S. Agency securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 105,323 | 102,777 | ||
Fixed-maturity securities | Level 2 | Municipal Bonds | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 587,391 | 686,043 | ||
Fixed-maturity securities | Level 2 | Corporate Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 729,899 | 746,665 | ||
Fixed-maturity securities | Level 2 | Commercial mortgage-backed securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 236,619 | 242,053 | ||
Fixed-maturity securities | Level 2 | Residential mortgage-backed securities, Agency backed securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 165,060 | 295,716 | ||
Fixed-maturity securities | Level 2 | Residential mortgage-backed securities, Non-agency backed securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 39,612 | 42,156 | ||
Fixed-maturity securities | Level 2 | Asset-Backed Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 40,394 | 44,352 | ||
Equity securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 137,400 | 146,258 | ||
Equity securities | Level 1 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 137,400 | 146,258 | ||
Short-term investments | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 13,379 | 4,750 | ||
Short-term investments | Level 2 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | $13,379 | $4,750 | ||
[1] | $30.3 million of the $77.0 million Other invested assets reported on the consolidated balance sheet at June 30, 2013 is reported at fair value. The remaining $46.7 million of Other invested assets is reported under the equity method of accounting or at amortized cost. | |||
[2] | $25.0 million of the $57.8 million Other invested assets reported on the consolidated balance sheet at December 31, 2012 is reported at fair value. The remaining $32.8 million of Other invested assets is reported under the equity method of accounting or at amortized cost. |
Financial_Instruments_at_Fair_1
Financial Instruments at Fair Value among Levels (Parenthetical) (Detail) (USD $) | Jun. 30, 2013 | Dec. 31, 2012 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Other invested assets, fair value | $30,250,000 | [1] | $25,000,000 | [2] |
Other invested assets, amortized cost | 46,700,000 | 32,800,000 | ||
Tower | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Other invested asset | $77,038,000 | $57,786,000 | ||
[1] | $30.3 million of the $77.0 million Other invested assets reported on the consolidated balance sheet at June 30, 2013 is reported at fair value. The remaining $46.7 million of Other invested assets is reported under the equity method of accounting or at amortized cost. | |||
[2] | $25.0 million of the $57.8 million Other invested assets reported on the consolidated balance sheet at December 31, 2012 is reported at fair value. The remaining $32.8 million of Other invested assets is reported under the equity method of accounting or at amortized cost. |
Fair_Value_Measurements_Additi
Fair Value Measurements - Additional Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2012 | |
Fair Value [Line Items] | ' | ' | ' |
Gross transfers out of Level 3 | ' | $0 | $0 |
Gross transfers out of Level 1 into Level 2 | 0 | 0 | 0 |
Gross transfers out of Level 2 into Level 1 | 0 | 0 | 0 |
Net realized gains (losses) from fair value of debt and equity securities sold, not yet purchased | $700,000 | $800,000 | ' |
Tower | Other | ' | ' | ' |
Fair Value [Line Items] | ' | ' | ' |
Number of securities purchased | ' | 5 | ' |
Summary_of_Changes_in_Level_Th
Summary of Changes in Level Three Assets Measured at Fair Value (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ' | ' | ' | ' |
Beginning balance | $25,000 | $24,914 | $25,000 | $25,000 |
Total gains (losses)-realized / unrealized - included in net income | ' | 86 | ' | ' |
Included in other comprehensive income (loss) | ' | ' | ' | ' |
Purchases, issuances and settlements | 5,250 | ' | 5,250 | ' |
Net transfers into (out of) Level 3 | ' | ' | ' | ' |
Ending balance | $30,250 | $25,000 | $30,250 | $25,000 |
Reconciliation_of_Beginning_an
Reconciliation of Beginning and Ending Consolidated Balances for Unpaid Losses and Loss Adjustment Expense (Detail) (USD $) | 3 Months Ended | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2012 |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' |
Balance at beginning of year | ' | $1,895,679 | $1,632,113 |
Less reinsurance recoverables on unpaid losses | -459,457 | -459,457 | -292,221 |
Liability for Unpaid Claims and Claims Adjustment Expense, Net | ' | 1,436,222 | 1,339,892 |
Net reserves, at fair value, of acquired entities | 161,886 | 161,886 | ' |
Incurred related to: | ' | ' | ' |
Current year | ' | 508,708 | 545,267 |
Prior years unfavorable/(favorable) development | 326,700 | 326,916 | 72,001 |
Total incurred | ' | 835,624 | 617,268 |
Paid related to: | ' | ' | ' |
Current year | ' | 201,443 | 185,161 |
Prior years | ' | 370,007 | 344,343 |
Total paid | ' | 571,450 | 529,504 |
Net balance at end of period | 1,862,282 | 1,862,282 | 1,427,656 |
Add reinsurance recoverables on unpaid losses | 690,069 | 690,069 | 274,177 |
Net balance at end of year | 2,552,351 | 2,552,351 | 1,701,833 |
Tower | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' |
Balance at beginning of year | ' | 1,759,888 | 1,495,839 |
Less reinsurance recoverables on unpaid losses | -407,068 | -407,068 | -280,968 |
Liability for Unpaid Claims and Claims Adjustment Expense, Net | ' | 1,352,820 | 1,214,871 |
Net reserves, at fair value, of acquired entities | 161,886 | 161,886 | ' |
Incurred related to: | ' | ' | ' |
Current year | ' | 451,020 | 487,837 |
Prior years unfavorable/(favorable) development | 325,600 | 326,749 | 78,254 |
Total incurred | ' | 777,769 | 566,091 |
Paid related to: | ' | ' | ' |
Current year | ' | 164,774 | 153,792 |
Prior years | ' | 359,786 | 313,400 |
Total paid | ' | 524,560 | 467,192 |
Net balance at end of period | 1,767,915 | 1,767,915 | 1,313,770 |
Add reinsurance recoverables on unpaid losses | 665,172 | 665,172 | 254,516 |
Net balance at end of year | 2,433,087 | 2,433,087 | 1,568,286 |
Reciprocal Exchanges | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' |
Balance at beginning of year | ' | 135,791 | 136,274 |
Less reinsurance recoverables on unpaid losses | -52,389 | -52,389 | -11,253 |
Liability for Unpaid Claims and Claims Adjustment Expense, Net | ' | 83,402 | 125,021 |
Incurred related to: | ' | ' | ' |
Current year | ' | 57,688 | 57,430 |
Prior years unfavorable/(favorable) development | ' | 167 | -6,253 |
Total incurred | ' | 57,855 | 51,177 |
Paid related to: | ' | ' | ' |
Current year | ' | 36,669 | 31,369 |
Prior years | ' | 10,221 | 30,943 |
Total paid | ' | 46,890 | 62,312 |
Net balance at end of period | 94,367 | 94,367 | 113,886 |
Add reinsurance recoverables on unpaid losses | 24,897 | 24,897 | 19,661 |
Net balance at end of year | $119,264 | $119,264 | $133,547 |
Loss_and_Loss_Adjustment_Expen2
Loss and Loss Adjustment Expense - Additional Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 | Dec. 31, 2012 | |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' | ' |
Loss and loss adjustment expenses ratio | 133.80% | 76.00% | 99.40% | 70.10% | ' |
Prior years unfavorable/(favorable) development | $326,700,000 | ' | $326,916,000 | $72,001,000 | ' |
Percentage of loss reserves covered by reserve study | ' | ' | 90.00% | ' | ' |
Unfavorable/(favorable) development during the period | ' | ' | 127,100,000 | ' | ' |
Unfavorable/(favorable) development during the period | ' | ' | 835,624,000 | 617,268,000 | ' |
Worker compensation discount amount | 9,800,000 | ' | 9,800,000 | ' | 8,400,000 |
Unamortized reserve for risk premium | 19,100,000 | ' | 19,100,000 | ' | ' |
Amortization reserve for risk premium | ' | ' | 2,200,000 | ' | ' |
Actuarial Gain Loss | ' | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' | ' |
Unfavorable/(favorable) development during the period | ' | ' | 201,100,000 | ' | ' |
Offset | ' | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' | ' |
Unfavorable/(favorable) development during the period | ' | ' | 900,000 | ' | ' |
Workers' Compensation | ' | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | ' | 122,100,000 | ' | ' |
Commercial Automobile Liability | ' | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | ' | 74,400,000 | ' | ' |
Commercial Package Liability | ' | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | ' | 89,200,000 | ' | ' |
Other liability | ' | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | ' | 42,600,000 | ' | ' |
Canopius Bermuda | ' | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' | ' |
Unamortized reserve for risk premium | 17,000,000 | ' | 17,000,000 | ' | 0 |
Tower | ' | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' | ' |
Loss and loss adjustment expenses ratio | 142.70% | 77.30% | 102.70% | 71.10% | ' |
Prior years unfavorable/(favorable) development | 325,600,000 | ' | 326,749,000 | 78,254,000 | ' |
Unfavorable/(favorable) development during the period | ' | ' | 777,769,000 | 566,091,000 | ' |
Tower | Specialty Insurance and Reinsurance | ' | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | ' | 171,900,000 | 38,400,000 | ' |
Tower | Commercial Insurance | ' | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | ' | 163,600,000 | 35,600,000 | ' |
Tower | Personal Insurance | ' | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | ' | -8,800,000 | 4,300,000 | ' |
Tower | Workers' Compensation | ' | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' | ' |
Unfavorable/(favorable) development during the period | ' | ' | ' | 39,000,000 | ' |
Tower | Commercial Automobile Liability | ' | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' | ' |
Unfavorable/(favorable) development during the period | ' | ' | ' | 22,000,000 | ' |
Tower | Terminated Programs | ' | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' | ' |
Unfavorable/(favorable) development during the period | ' | ' | ' | $51,000,000 | ' |
Shareholders_Equity_Additional
Shareholders' Equity - Additional Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 1 Months Ended | ||||||
Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 | Dec. 31, 2012 | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 | Aug. 06, 2013 | Mar. 13, 2013 | |
Restricted Stock | Restricted Stock | Restricted Stock | Restricted Stock | Subsequent Event | Canopius Bermuda | ||||||
Dividend Declared | |||||||||||
Stockholders Equity Note [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Conversion ratio | 1.133 | 1.133 | 1.133 | 1.133 | ' | ' | ' | ' | ' | ' | ' |
Common shares, outstanding | 57,429,099 | ' | 57,429,099 | ' | 43,513,678 | ' | ' | ' | ' | ' | 14,025,737 |
Employee stock option exercises | 2,674 | 0 | 2,674 | 0 | ' | ' | ' | ' | ' | ' | ' |
Number of option, grants | ' | ' | ' | ' | ' | 2,333 | 0 | 242,626 | 363,894 | ' | ' |
Common stock purchased from employees to pay expected amount of tax liability | ' | ' | ' | ' | ' | 891 | 561 | 341,598 | 110,304 | ' | ' |
Number of shares, forfeitures | ' | ' | ' | ' | ' | 7,167 | 5,022 | 14,015 | 9,874 | ' | ' |
Treasury stock held | 8,058 | ' | 8,058 | ' | 9,534,333 | ' | ' | ' | ' | ' | ' |
Stock repurchase program authorized amount | ' | ' | $50,000,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Stock repurchase program, expiration date | ' | ' | 30-Jun-13 | ' | ' | ' | ' | ' | ' | ' | ' |
Repurchase of common stock, shares | ' | ' | 0 | ' | ' | ' | ' | ' | ' | ' | ' |
Share repurchase program authorization date | 7-May-13 | ' | 7-May-13 | ' | ' | ' | ' | ' | ' | ' | ' |
Dividends declared and paid | $9,500,000 | $7,300,000 | $16,676,000 | $14,680,000 | ' | ' | ' | ' | ' | ' | ' |
Dividends payable, amount per share | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0.17 | ' |
Dividend payable date | ' | ' | ' | ' | ' | ' | ' | ' | ' | 20-Sep-13 | ' |
Dividend record date | ' | ' | ' | ' | ' | ' | ' | ' | ' | 9-Sep-13 | ' |
Historical dividend per share | ' | ' | $0.19 | ' | ' | ' | ' | ' | ' | ' | ' |
Summary_of_Changes_in_Accumula
Summary of Changes in Accumulated Other Comprehensive Income, by Component (Detail) (USD $) | 6 Months Ended |
In Thousands, unless otherwise specified | Jun. 30, 2013 |
Components of Net Unrealized Investment Gains Losses Included in Accumulated Other Comprehensive Income Loss [Line Items] | ' |
Beginning Balance | $87,412 |
Other comprehensive income before reclassifications, net of tax | -71,210 |
Amounts reclassified from accumulated other comprehensive income, net of tax | -2,594 |
Net current period other comprehensive income | -73,804 |
Ending Balance | 13,608 |
Beginning Balance | -5,860 |
Other comprehensive income before reclassifications, net of tax | 1,406 |
Amounts reclassified from accumulated other comprehensive income, net of tax | 1,084 |
Net current period other comprehensive income | 2,490 |
Ending Balance | -3,370 |
Beginning Balance | 1,204 |
Other comprehensive income before reclassifications, net of tax | -2,382 |
Amounts reclassified from accumulated other comprehensive income, net of tax | ' |
Net current period other comprehensive income | -2,382 |
Ending Balance | -1,178 |
Beginning Balance | 82,756 |
Other comprehensive income before reclassifications, net of tax | -72,186 |
Amounts reclassified from accumulated other comprehensive income, net of tax | -1,510 |
Net current period other comprehensive income | -73,696 |
Ending Balance | $9,060 |
Reclassified_from_Accumulated_
Reclassified from Accumulated Other Comprehensive Income to Net Income (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ' | ' | ' | ' |
Unrealized gains (losses) on available for sale securities, before income tax | ($1,938) | $19 | $4,529 | $3,347 |
Unrealized gains (losses) on available for sale securities, net income tax | ' | ' | -2,594 | ' |
Gains (losses) on cash flow hedges interest rate swaps, net of income taxes | ' | ' | -1,084 | ' |
Other Net Unrealized Investment Gains and Losses | ' | ' | ' | ' |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ' | ' | ' | ' |
Unrealized gains (losses) on available for sale securities, before income tax | ' | ' | -2,594 | ' |
Income Tax Expense | ' | ' | ' | ' |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ' | ' | ' | ' |
Unrealized gains (losses) on available for sale securities, Income tax expense | ' | ' | ' | ' |
Interest Rate Swaps | ' | ' | ' | ' |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ' | ' | ' | ' |
Gains (losses) on cash flow hedges interest rate swaps, net of income taxes | ' | ' | 1,084 | ' |
Interest Rate Swaps | Income Tax Expense | ' | ' | ' | ' |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ' | ' | ' | ' |
Gains (losses) on cash flow hedges interest rate swaps, income tax expense | ' | ' | ' | ' |
Interest Rate Swaps | Interest Expense | ' | ' | ' | ' |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ' | ' | ' | ' |
Gains (losses) on cash flow hedges interest rate swaps, interest expense | ' | ' | $1,084 | ' |
Borrowings_Detail
Borrowings (Detail) (USD $) | Jun. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Debt Instrument [Line Items] | ' | ' |
Credit facility | $70,000 | $70,000 |
Subordinated debentures | 235,058 | 235,058 |
Total | 451,224 | 449,731 |
Credit facility | 70,000 | 70,000 |
Subordinated debentures | 240,010 | 232,678 |
Total | 468,253 | 454,741 |
Convertible Senior Notes | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Convertible senior notes | 146,166 | 144,673 |
Convertible senior notes | $158,243 | $152,063 |
Debt_Additional_Information_De
Debt - Additional Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | 1 Months Ended | 6 Months Ended | 1 Months Ended | 1 Months Ended | |||||||||||||
Jun. 30, 2013 | Mar. 31, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 | Apr. 03, 2013 | Dec. 31, 2012 | Sep. 30, 2010 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2012 | Oct. 11, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Oct. 31, 2010 | Oct. 31, 2010 | Jun. 30, 2013 | Dec. 31, 2012 | |
Convertible Senior Notes | Convertible Senior Notes | Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges | Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges | Subsequent Event | Scenario, Forecast | Scenario, Forecast | Scenario, Forecast | Interest Rate Swaps | Interest Rate Swaps | Other liability | Other liability | ||||||||
Minimum | CastlePoint Reinsurance Company, Ltd. | Tower Reinsurance, Ltd. | Cash Flow Hedging | Interest Rate Swaps | Interest Rate Swaps | ||||||||||||||
Minimum | Minimum | ||||||||||||||||||
Debt Instrument [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest expense | $7,635,000 | ' | $7,902,000 | $15,443,000 | $16,513,000 | ' | ' | ' | $5,900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Subordinated debentures, carrying value | 235,058,000 | ' | ' | 235,058,000 | ' | ' | 235,058,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Notional amount, interest rate swap contracts | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 190,000,000 | ' | ' |
Interest rate swap contracts, terms | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '5 years | ' | ' | ' |
Interest rate range on swaps, minimum | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5.10% | ' | ' | ' |
Interest rate range on swaps, maximum | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5.90% | ' | ' | ' |
Interest rate swap contracts liabilities, fair value | 6,830,000 | ' | ' | 6,830,000 | ' | ' | 9,016,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 6,800,000 | 9,000,000 |
Gain (loss) on Swaps designated as cash flow hedges reclassified from AOCI to interest expense | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,100,000 | 800,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Collateral on deposit with the counterparty | 6,900,000 | ' | ' | 6,900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility agreement, borrowing capacity | ' | ' | ' | ' | ' | 220,000,000 | ' | ' | ' | ' | ' | 70,000,000 | ' | ' | ' | ' | ' | ' | ' |
Outstanding credit facility amount | 70,000,000 | ' | ' | 70,000,000 | ' | ' | 70,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted average interest rate | 1.94% | ' | ' | 1.94% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility agreement, maturity date | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 30-May-14 | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, Consolidated Net Worth | ' | ' | ' | 553,400,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, percentage of Consolidated Net Worth | 90.00% | ' | ' | 90.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, covenant increase as a percentage of any new capital | ' | ' | ' | 90.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, additional covenant increase as a percentage of net income above base | ' | ' | ' | 50.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, net income amount base for additional covenant increase | ' | ' | ' | 20,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, Debt to capitalization ratio limit | ' | ' | ' | 46.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, risk based capital ratio | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 175.00% | ' | ' | ' | ' | ' | ' |
Credit facility covenant, consolidated statutory surplus | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 10.00% | ' | ' | ' | ' | ' | ' |
Credit facility covenant, percentage of required capital | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 150.00% | 110.00% | ' | ' | ' | ' |
Credit facility covenant, minimum statutory surplus | 419,000,000 | ' | ' | 419,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility covenant, combined surplus | ' | ' | ' | 85.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Convertible senior notes principal amount | ' | ' | ' | ' | ' | ' | ' | 150,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest rate on convertible senior note, percentage | ' | ' | ' | ' | ' | ' | ' | 5.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Maturity date of convertible senior notes | ' | ' | ' | ' | ' | ' | ' | 15-Sep-14 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Frequency of interest payment, term | ' | ' | ' | ' | ' | ' | ' | 'Interest on the Notes is payable semi-annually in arrears on March 15 and September 15 of each year, commencing March 15, 2011. | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
First interest payment date | ' | ' | ' | ' | ' | ' | ' | 15-Mar-11 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Earliest conversion date for notes | ' | ' | ' | ' | ' | ' | ' | 15-Mar-14 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Conversion rate of shares of common stock per principal amount of notes | ' | ' | ' | ' | ' | ' | ' | ' | 42.369 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Principal amount of Notes | ' | ' | ' | ' | ' | ' | ' | ' | 1,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Initial conversion price | ' | ' | ' | ' | ' | ' | ' | ' | $23.60 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt conversion term | ' | ' | ' | ' | ' | ' | ' | ' | 'The adjusted conversion rate at June 30, 2013 is 42.3690 shares of common stock per $1,000 principal amount of the Notes (equivalent to a conversion price of $23.60 per share), subject to further adjustment upon the occurrence of certain events, including the following: if Tower issues shares of common stock as a dividend or distribution on shares of the common stock , or if Tower effects a share split or share combination; if Tower issues to all or substantially all holders of common stock any rights, options or warrants entitling them, for a period of not more than 45 calendar days after the announcement date of such issuance, to subscribe for or purchase shares of the common stock at a price per share that is less than the average of the last reported sales price of the common stock for the ten consecutive trading day period ending on the date of announcement of such issuance; if Tower distributes shares of its capital stock, other indebtedness, other assets or property of Tower or rights, options or warrants to acquire capital stock or other securities of Tower, to all or substantially all holders of capital stock; if any cash dividend or distribution is made to all or substantially all holders of the common stock, other than a regular quarterly cash dividend that does not exceed $0.110 per share; if Tower makes a payment in respect of a tender offer or exchange offer for common stock, and the cash and value of any other consideration included in the payment per share of common stock exceeds the last reported sale price of the common stock on the trading day next succeeding the last day on which the tenders or exchange may be made. | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Effective interest rate on convertible senior note | ' | ' | ' | ' | ' | ' | ' | ' | 7.20% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Transaction costs associated with equity component | ' | ' | ' | ' | ' | ' | ' | ' | 400,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Proceeds from issuance of note hedge | ' | 2,400,000 | ' | 2,380,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Payments for warrants | ' | 1,000,000 | ' | 1,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Tax adjustment recorded in paid-in-capital | ' | $800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amounts_Recorded_for_Notes_Det
Amounts Recorded for Notes (Detail) (Convertible Senior Notes, USD $) | Jun. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Convertible Senior Notes | ' | ' |
Liability component | ' | ' |
Outstanding principal | $150,000 | $150,000 |
Unamortized OID | -3,834 | -5,327 |
Liability component | 146,166 | 144,673 |
Equity component, net of tax | $7,469 | $7,469 |
Stock_Based_Compensation_Addit
Stock Based Compensation - Additional Information (Detail) | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2013 | Mar. 13, 2013 |
2008 LTEP | 2013 LTIP | Canopius Group Limited | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' | ' | ' |
Maximum Share based awards authorized | ' | ' | 2,325,446 | 2,150,000 | ' |
Shares available for future grants | ' | ' | 30,376 | 2,147,531 | ' |
Number of shares, vested | ' | ' | ' | ' | 525,548 |
Conversion ratio | 1.133 | 1.133 | ' | ' | ' |
Analysis_of_Restricted_Stock_A
Analysis of Restricted Stock Activity (Detail) (Restricted Stock, USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 | |
Restricted Stock | ' | ' | ' | ' |
Number of Shares | ' | ' | ' | ' |
Number of Shares, Beginning Balance | ' | ' | 1,015,902 | 1,120,091 |
Number of Shares, Granted | 2,333 | 0 | 242,626 | 363,894 |
Number of Shares, Vested | ' | ' | -953,242 | -439,734 |
Number of Shares, Forfeitures | -7,167 | -5,022 | -14,015 | -9,874 |
Number of Shares, Ending Balance | 291,271 | 1,034,377 | 291,271 | 1,034,377 |
Weighted Average Grant Date Fair Value | ' | ' | ' | ' |
Weighted Average Grant Date Fair Value, Beginning Balance | ' | ' | $20.19 | $20.69 |
Weighted Average Grant Date Fair Value, Granted | ' | ' | $18.09 | $20.37 |
Weighted Average Grant Date Fair Value, Vested | ' | ' | $20.43 | $21.07 |
Weighted Average Grant Date Fair Value, Forfeitures | ' | ' | $19.26 | $20.83 |
Weighted Average Grant Date Fair Value, Ending Balance | $17.68 | $20.38 | $17.68 | $20.38 |
Analysis_of_Stock_Option_Activ
Analysis of Stock Option Activity (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 | |
Number of Shares | ' | ' | ' | ' |
Number of Shares Outstanding, Beginning Balance | ' | ' | 969,307 | 969,315 |
Number of Shares, Exercised | -2,674 | 0 | -2,674 | 0 |
Number of Shares, Forfeitures and expirations | ' | ' | -7,657 | ' |
Number of Shares Outstanding, Ending Balance | 958,976 | 969,315 | 958,976 | 969,315 |
Number of Shares Exercisable, Ending Balance | 958,976 | 969,315 | 958,976 | 969,315 |
Average Exercise Price | ' | ' | ' | ' |
Average Exercise Price Outstanding, Beginning Balance | ' | ' | $17.78 | $17.78 |
Average Exercise Price, Exercised | ' | ' | $16.48 | ' |
Average Exercise Price, Forfeitures and expirations | ' | ' | $17.72 | ' |
Average Exercise Price Outstanding, Ending Balance | $17.78 | $17.78 | $17.78 | $17.78 |
Average Exercise Price Exercisable, Ending Balance | $17.78 | $17.78 | $17.78 | $17.78 |
Analysis_of_Stock_Based_Compen
Analysis of Stock Based Compensation Expense (Detail) (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' |
Weighted average years over which expense will be recognized | '3 years 7 months 6 days | '2 years 6 months |
Restricted Stock | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' |
Expense, net of tax | 8,204 | 896 |
Value of shares vested | 21,042 | 8,576 |
Value of unvested shares | 5,974 | 19,257 |
Unrecognized compensation expense | 5,974 | 12,791 |
Employee Stock Option | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' |
Intrinsic value of outstanding options | 3,471 | 1,632 |
Intrinsic value of vested outstanding options | 3,471 | 1,632 |
Income_Taxes_Additional_Inform
Income Taxes - Additional Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 | |
Income Taxes [Line Items] | ' | ' | ' | ' |
Income (loss) before income taxes | ($508,471,000) | ($25,291,000) | ($508,425,000) | $6,110,000 |
Net deferred tax asset | 134,500,000 | ' | 134,500,000 | ' |
Prior years unfavorable/(favorable) development | 326,700,000 | ' | 326,916,000 | 72,001,000 |
Goodwill impairment charge | 214,049,000 | ' | 214,049,000 | ' |
Effective tax rate | 0.40% | ' | 0.70% | ' |
Tower | ' | ' | ' | ' |
Income Taxes [Line Items] | ' | ' | ' | ' |
Net deferred tax asset | 141,500,000 | ' | 141,500,000 | ' |
Prior years unfavorable/(favorable) development | 325,600,000 | ' | 326,749,000 | 78,254,000 |
U.S. | Tower | ' | ' | ' | ' |
Income Taxes [Line Items] | ' | ' | ' | ' |
Income (loss) before income taxes | -493,800,000 | -61,300,000 | -509,300,000 | ' |
Prior years unfavorable/(favorable) development | 149,700,000 | ' | ' | ' |
Goodwill impairment charge | 185,900,000 | ' | ' | ' |
U.S. | Tower | Net Operating Loss Carryforwards | ' | ' | ' | ' |
Income Taxes [Line Items] | ' | ' | ' | ' |
Deferred tax inventory | 111,000,000 | ' | 111,000,000 | ' |
Income Tax Expense (Benefit) | ' | ' | ' | ' |
Income Taxes [Line Items] | ' | ' | ' | ' |
Deferred tax assets, valuation allowance | 113,900,000 | ' | 113,900,000 | ' |
Other Comprehensive Income (Loss) | ' | ' | ' | ' |
Income Taxes [Line Items] | ' | ' | ' | ' |
Deferred tax assets, valuation allowance | 25,800,000 | ' | 25,800,000 | ' |
Non Life Insurance Premiums | ' | ' | ' | ' |
Income Taxes [Line Items] | ' | ' | ' | ' |
Percentage of excise tax rate | ' | ' | 4.00% | ' |
Life Insurance and Reinsurance Premiums | ' | ' | ' | ' |
Income Taxes [Line Items] | ' | ' | ' | ' |
Percentage of excise tax rate | ' | ' | 1.00% | ' |
Federal | ' | ' | ' | ' |
Income Taxes [Line Items] | ' | ' | ' | ' |
Excise tax | ' | ' | $6,300,000 | ' |
Earnings_Loss_per_Share_Additi
Earnings (Loss) per Share - Additional Information (Detail) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 | |
Earnings Per Share Disclosure [Line Items] | ' | ' | ' | ' |
Conversion ratio | 1.133 | 1.133 | 1.133 | 1.133 |
Options and other common stock equivalents excluded from computation of diluted earnings per share | 958,980 | 969,310 | 958,980 | 190,500 |
Computation_of_Earnings_Per_Sh
Computation of Earnings Per Share (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 |
Numerator | ' | ' | ' | ' |
Net income (loss) attributable to Tower Group International, Ltd. | ($507,342) | ($16,809) | ($494,425) | $2,356 |
Less: Allocation of income for unvested participating restricted stock | ' | ' | ' | ' |
Less: Dividends on unvested participating restricted stock | -48 | -173 | -215 | -347 |
Net income available to common shareholders - Basic | -507,390 | -16,982 | -494,640 | 2,009 |
Reallocation of income for unvested participating restricted stock | ' | ' | ' | ' |
Net income available to common shareholders - Diluted | ($507,390) | ($16,982) | ($494,640) | $2,009 |
Denominator | ' | ' | ' | ' |
Basic earning per share denominator | 57,135 | 43,289 | 51,487 | 43,340 |
Effect of dilutive securities | ' | ' | ' | ' |
Diluted earnings per share denominator | 57,135 | 43,289 | 51,487 | 43,410 |
Common stock: | ' | ' | ' | ' |
Distributed earnings | $0.17 | $0.17 | $0.34 | $0.34 |
Undistributed earnings | ($9.05) | ($0.56) | ($9.95) | ($0.29) |
Total | ($8.88) | ($0.39) | ($9.61) | $0.05 |
Earnings (loss) per share attributable to Tower Group International, Ltd. - Diluted | ($8.88) | ($0.39) | ($9.61) | $0.05 |
Statutory_Financial_Informatio1
Statutory Financial Information - Additional Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | 6 Months Ended | 6 Months Ended | |||
Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2012 | Dec. 31, 2012 | Jun. 30, 2013 | Oct. 31, 2013 | Jun. 30, 2013 | |
Tower Reinsurance, Ltd. | Tower Reinsurance, Ltd. | Tower Reinsurance, Ltd. | |||||
New Reinsurance Program | |||||||
Agreement | |||||||
Statutory Accounting Practices [Line Items] | ' | ' | ' | ' | ' | ' | ' |
Adverse loss reserve development from loss portfolio transaction | $326,700,000 | $326,916,000 | $72,001,000 | ' | $175,000,000 | ' | ' |
Reinsurance capital reserve | ' | ' | ' | ' | 8,300,000 | ' | ' |
Amount required to be collateralized against adverse loss reserve development | 657,275,000 | 657,275,000 | ' | 98,581,000 | 175,000,000 | ' | ' |
Unencumbered liquid assets | ' | ' | ' | ' | $96,000,000 | $79,000,000 | ' |
Number of reinsurance treaties commuted | ' | ' | ' | ' | ' | ' | 2 |
Business_Segments_Results_Deta
Business Segments Results (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 |
Revenues | ' | ' | ' | ' |
Premiums earned | $418,364 | $460,153 | $840,250 | $880,311 |
Ceding commission revenue | 11,933 | 10,080 | 26,084 | 15,243 |
Policy billing fees | 3,321 | 3,000 | 6,471 | 6,134 |
Total revenues | 460,518 | 506,392 | 937,001 | 972,615 |
Expenses | ' | ' | ' | ' |
Loss and loss adjustment expenses | 559,892 | 349,775 | 835,624 | 617,268 |
Total expenses | 762,778 | 531,683 | 1,239,343 | 966,505 |
Reciprocal Exchanges | ' | ' | ' | ' |
Revenues | ' | ' | ' | ' |
Total revenues | 49,100 | 49,200 | 96,400 | 99,400 |
Expenses | ' | ' | ' | ' |
Total expenses | 48,300 | 48,800 | 106,900 | 96,000 |
Commercial Insurance | ' | ' | ' | ' |
Expenses | ' | ' | ' | ' |
Loss and loss adjustment expenses | 249,906 | 155,395 | 373,293 | 272,239 |
Underwriting expenses | 66,614 | 63,832 | 129,383 | 128,245 |
Total expenses | 316,520 | 219,227 | 502,676 | 400,484 |
Underwriting profit (loss) | -152,567 | -24,776 | -159,294 | -18,708 |
Specialty Insurance and Reinsurance | ' | ' | ' | ' |
Expenses | ' | ' | ' | ' |
Loss and loss adjustment expenses | 248,466 | 125,814 | 321,442 | 210,408 |
Underwriting expenses | 56,772 | 50,122 | 106,915 | 88,851 |
Total expenses | 305,238 | 175,936 | 428,357 | 299,259 |
Underwriting profit (loss) | -179,499 | -27,453 | -169,607 | -38,743 |
Personal Insurance | ' | ' | ' | ' |
Expenses | ' | ' | ' | ' |
Loss and loss adjustment expenses | 61,520 | 68,566 | 140,889 | 134,621 |
Underwriting expenses | 63,709 | 56,164 | 121,696 | 107,617 |
Total expenses | 125,229 | 124,730 | 262,585 | 242,238 |
Underwriting profit (loss) | 14,035 | 5,569 | 3,426 | 17,158 |
Personal Insurance | Tower | ' | ' | ' | ' |
Expenses | ' | ' | ' | ' |
Underwriting profit (loss) | 14,139 | 9,376 | 16,156 | 21,213 |
Personal Insurance | Reciprocal Exchanges | ' | ' | ' | ' |
Expenses | ' | ' | ' | ' |
Underwriting profit (loss) | -104 | -3,807 | -12,730 | -4,055 |
Operating Segments | ' | ' | ' | ' |
Revenues | ' | ' | ' | ' |
Total revenues | 428,956 | 473,233 | 868,143 | 901,688 |
Operating Segments | Commercial Insurance | ' | ' | ' | ' |
Revenues | ' | ' | ' | ' |
Premiums earned | 170,832 | 193,793 | 348,827 | 381,651 |
Ceding commission revenue | -8,301 | -732 | -8,237 | -2,778 |
Policy billing fees | 1,422 | 1,390 | 2,792 | 2,903 |
Total revenues | 163,953 | 194,451 | 343,382 | 381,776 |
Operating Segments | Specialty Insurance and Reinsurance | ' | ' | ' | ' |
Revenues | ' | ' | ' | ' |
Premiums earned | 122,211 | 143,857 | 251,999 | 253,834 |
Ceding commission revenue | 3,528 | 4,626 | 6,751 | 6,682 |
Total revenues | 125,739 | 148,483 | 258,750 | 260,516 |
Operating Segments | Personal Insurance | ' | ' | ' | ' |
Revenues | ' | ' | ' | ' |
Premiums earned | 125,321 | 122,503 | 239,424 | 244,826 |
Ceding commission revenue | 12,044 | 6,186 | 22,908 | 11,339 |
Policy billing fees | 1,899 | 1,610 | 3,679 | 3,231 |
Total revenues | $139,264 | $130,299 | $266,011 | $259,396 |
Reconciliation_of_Revenue_by_S
Reconciliation of Revenue by Segment to Consolidated Revenues (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Net investment income | $28,402 | $31,781 | $58,719 | $65,724 |
Net realized gains (losses) on investments, including other-than-temporary impairments | -2,034 | 19 | 4,817 | 3,347 |
Corporate and other | 5,194 | 1,359 | 5,322 | 1,856 |
Revenues | 460,518 | 506,392 | 937,001 | 972,615 |
Operating Segments | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 428,956 | 473,233 | 868,143 | 901,688 |
Operating Segments | Commercial Insurance | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 163,953 | 194,451 | 343,382 | 381,776 |
Operating Segments | Specialty Insurance and Reinsurance | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 125,739 | 148,483 | 258,750 | 260,516 |
Operating Segments | Personal Insurance | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | $139,264 | $130,299 | $266,011 | $259,396 |
Reconciliation_of_Results_of_I
Reconciliation of Results of Individual Segments to Consolidated Income Before Income Taxes (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2012 | Jun. 30, 2013 | Jun. 30, 2012 |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ' | ' | ' | ' |
Net investment income | $28,402 | $31,781 | $58,719 | $65,724 |
Net realized gains on investments, including other-than-temporary impairments | -2,034 | 19 | 4,817 | 3,347 |
Corporate and other | -2,297 | -1,809 | -5,239 | -4,173 |
Acquisition-related transaction costs | -665 | -720 | -19,721 | -1,982 |
Interest expense | -7,635 | -7,902 | -15,443 | -16,513 |
Goodwill impairment | -214,049 | ' | -214,049 | ' |
Equity income in unconsolidated affiliate | 7,838 | ' | 7,966 | ' |
Income (loss) before income taxes | -508,471 | -25,291 | -508,425 | 6,110 |
Commercial Insurance | ' | ' | ' | ' |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ' | ' | ' | ' |
Underwriting profit (loss) | -152,567 | -24,776 | -159,294 | -18,708 |
Goodwill impairment | ' | ' | -214,049 | ' |
Specialty Insurance and Reinsurance | ' | ' | ' | ' |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ' | ' | ' | ' |
Underwriting profit (loss) | -179,499 | -27,453 | -169,607 | -38,743 |
Personal Insurance | ' | ' | ' | ' |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ' | ' | ' | ' |
Underwriting profit (loss) | $14,035 | $5,569 | $3,426 | $17,158 |
Contingencies_Additional_Infor
Contingencies - Additional Information (Detail) (Subsequent Event, USD $) | 1 Months Ended |
In Millions, unless otherwise specified | Oct. 18, 2013 |
Subsequent Event | ' |
Loss Contingencies [Line Items] | ' |
Contingencies, damages sought | $150 |
Subsequent_Events_Additional_I
Subsequent Events - Additional Information (Detail) (USD $) | Apr. 03, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Oct. 11, 2013 | Aug. 19, 2013 | Oct. 01, 2013 | Oct. 01, 2013 | Oct. 01, 2013 |
In Millions, unless otherwise specified | Specialty Insurance and Reinsurance | Specialty Insurance and Reinsurance | Commercial Insurance | Commercial Insurance | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | |
Tower Insurance Company of New York | Tower Insurance Company of New York | Tower Insurance Company of New York | ||||||||
Arch | Hannover | Southport Re | ||||||||
Subsequent Event [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Gain on agreement termination | ' | ' | ' | ' | ' | ' | $5 | ' | ' | ' |
Credit facility agreement, borrowing capacity | 220 | ' | ' | ' | ' | 70 | ' | ' | ' | ' |
Credit facility agreement, maturity date | ' | ' | ' | ' | ' | 30-May-14 | ' | ' | ' | ' |
Quota share reinsurance cede, percentage | ' | ' | ' | ' | ' | ' | ' | 17.50% | 14.00% | 30.00% |
Net written premiums | ' | $103.70 | $306.60 | $169.10 | $343.60 | ' | ' | ' | ' | ' |