Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Apr. 30, 2014 | Jun. 30, 2013 | |
Document Information [Line Items] | ' | ' | ' |
Document Type | '10-K | ' | ' |
Amendment Flag | 'false | ' | ' |
Document Period End Date | 31-Dec-13 | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Trading Symbol | 'TWGP | ' | ' |
Entity Registrant Name | 'Tower Group International, Ltd. | ' | ' |
Entity Central Index Key | '0001289592 | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Entity Well-known Seasoned Issuer | 'No | ' | ' |
Entity Current Reporting Status | 'No | ' | ' |
Entity Voluntary Filers | 'No | ' | ' |
Entity Filer Category | 'Large Accelerated Filer | ' | ' |
Entity Common Stock, Shares Outstanding | ' | 57,305,726 | ' |
Entity Public Float | ' | ' | $1,107,799,000 |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | |
In Thousands, unless otherwise specified | |||
Available-for-sale investments, at fair value: | ' | ' | |
Fixed-maturity securities | $1,642,695 | $2,344,711 | |
Total investments | 1,851,377 | 2,553,505 | |
Cash and cash equivalents | 293,898 | 83,800 | |
Investment income receivable | 17,493 | 25,332 | |
Investment in unconsolidated affiliate | ' | 71,894 | |
Premiums receivable | 309,499 | 412,045 | |
Reinsurance recoverable on paid losses | 68,963 | 17,609 | |
Reinsurance recoverable on unpaid losses | 570,860 | 459,457 | |
Prepaid reinsurance premiums | 186,476 | 63,923 | |
Deferred acquisition costs, net | 95,096 | 181,198 | |
Intangible assets | 79,936 | 106,768 | |
Goodwill | 0 | 241,458 | |
Funds held by reinsured companies | 98,816 | 137,545 | |
Other assets | 383,131 | 357,981 | |
Total assets | 3,955,545 | 4,712,515 | |
Liabilities | ' | ' | |
Loss and loss adjustment expenses | 2,081,285 | 1,895,679 | |
Unearned premium | 763,112 | 921,271 | |
Reinsurance balances payable | 89,820 | 41,312 | |
Funds held under reinsurance agreements | 222,159 | 98,581 | |
Other liabilities | 286,171 | 296,960 | |
Deferred income taxes | 29,508 | 24,763 | |
Debt | 382,770 | 449,731 | |
Total liabilities | 3,854,825 | 3,728,297 | |
Contingencies (Note 17) | ' | ' | |
Shareholders' equity | ' | ' | |
Common stock ($0.01 par value; 150,000,000 shares authorized, 57,437,157 and 53,048,011 shares issued, and 57,381,686 and 43,513,678 shares outstanding) | 574 | 530 | |
Treasury stock (55,471 and 9,534,333 shares) | -39 | -181,435 | |
Paid-in-capital | 815,119 | 780,036 | |
Accumulated other comprehensive income | -19,507 | 82,756 | |
Retained earnings (accumulated deficit) | -700,596 | 268,171 | |
Tower Group International, Ltd. shareholders' equity | 95,551 | 950,058 | |
Noncontrolling interests | 5,169 | 34,160 | |
Total shareholders' equity | 100,720 | 984,218 | |
Total liabilities and shareholders' equity | 3,955,545 | 4,712,515 | |
Tower | ' | ' | |
Available-for-sale investments, at fair value: | ' | ' | |
Fixed-maturity securities | 1,390,146 | 2,064,148 | |
Equity securities | 104,107 | 140,695 | |
Short-term investments | 5,897 | 4,750 | |
Other invested assets | 96,155 | 57,786 | |
Reinsurance recoverable on paid losses | 66,974 | 16,927 | |
Deferred acquisition costs, net | 85,485 | 169,834 | |
Intangible assets | 73,599 | 99,914 | |
Liabilities | ' | ' | |
Loss and loss adjustment expenses | ' | 1,759,888 | |
Reciprocal Exchanges | ' | ' | |
Available-for-sale investments, at fair value: | ' | ' | |
Fixed-maturity securities | 252,549 | 280,563 | |
Equity securities | 2,523 | 5,563 | |
Cash and cash equivalents | 5,684 | 9,782 | |
Investment income receivable | 2,325 | 2,610 | |
Premiums receivable | 42,348 | 44,285 | |
Reinsurance recoverable on paid losses | 1,989 | 682 | |
Reinsurance recoverable on unpaid losses | 15,392 | 52,389 | |
Prepaid reinsurance premiums | 22,226 | 17,803 | |
Deferred acquisition costs, net | 9,611 | 11,364 | |
Intangible assets | 6,337 | 6,854 | [1] |
Other assets | 1,395 | 1,559 | |
Liabilities | ' | ' | |
Loss and loss adjustment expenses | 107,315 | 135,791 | |
Unearned premium | 106,067 | 103,216 | |
Reinsurance balances payable | 4,872 | 6,979 | |
Funds held under reinsurance agreements | 22 | 500 | |
Other liabilities | 17,234 | 21,346 | |
Deferred income taxes | $19,181 | $19,719 | |
[1] | In 2012, Tower transferred a licensed insurance subsidiary shell to the Reciprocal Exchanges, as discussed in Note 2-Accounting Policies and Procedures. This resulted in classifying $2.6 million insurance licenses out of Tower and into the Reciprocal Exchange. |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | |
In Thousands, except Share data, unless otherwise specified | |||
Fixed-maturity securities, amortized cost | $1,613,634 | $2,190,186 | |
Cash and cash equivalents | 293,898 | 83,800 | |
Investment income receivable | 17,493 | 25,332 | |
Premiums receivable | 309,499 | 412,045 | |
Reinsurance recoverable on paid losses | 68,963 | 17,609 | |
Reinsurance recoverable on unpaid losses | 570,860 | 459,457 | |
Prepaid reinsurance premiums | 186,476 | 63,923 | |
Deferred acquisition costs, net | 95,096 | 181,198 | |
Intangible assets | 79,936 | 106,768 | |
Other assets | 383,131 | 357,981 | |
Loss and loss adjustment expenses | 2,081,285 | 1,895,679 | |
Unearned premium | 763,112 | 921,271 | |
Reinsurance balances payable | 89,820 | 41,312 | |
Funds held under reinsurance agreements | 222,159 | 98,581 | |
Other liabilities | 286,171 | 296,960 | |
Deferred income taxes | 29,508 | 24,763 | |
Common stock, par value | $0.01 | $0.01 | |
Common stock, shares authorized | 150,000,000 | 150,000,000 | |
Common stock, shares issued | 57,437,157 | 53,048,011 | |
Common stock, shares outstanding | 57,381,686 | 43,513,678 | |
Treasury stock, shares | 55,471 | 9,534,333 | |
Tower | ' | ' | |
Fixed-maturity securities, amortized cost | 1,364,157 | 1,926,236 | |
Equity securities, cost | 94,957 | 144,204 | |
Short-term investments, cost | 5,925 | 4,749 | |
Reinsurance recoverable on paid losses | 66,974 | 16,927 | |
Deferred acquisition costs, net | 85,485 | 169,834 | |
Intangible assets | 73,599 | 99,914 | |
Loss and loss adjustment expenses | ' | 1,759,888 | |
Reciprocal Exchanges | ' | ' | |
Fixed-maturity securities, amortized cost | 249,477 | 263,950 | |
Equity securities, cost | 2,751 | 5,144 | |
Cash and cash equivalents | 5,684 | 9,782 | |
Investment income receivable | 2,325 | 2,610 | |
Premiums receivable | 42,348 | 44,285 | |
Reinsurance recoverable on paid losses | 1,989 | 682 | |
Reinsurance recoverable on unpaid losses | 15,392 | 52,389 | |
Prepaid reinsurance premiums | 22,226 | 17,803 | |
Deferred acquisition costs, net | 9,611 | 11,364 | |
Intangible assets | 6,337 | 6,854 | [1] |
Other assets | 1,395 | 1,559 | |
Loss and loss adjustment expenses | 107,315 | 135,791 | |
Unearned premium | 106,067 | 103,216 | |
Reinsurance balances payable | 4,872 | 6,979 | |
Funds held under reinsurance agreements | 22 | 500 | |
Other liabilities | 17,234 | 21,346 | |
Deferred income taxes | $19,181 | $19,719 | |
[1] | In 2012, Tower transferred a licensed insurance subsidiary shell to the Reciprocal Exchanges, as discussed in Note 2-Accounting Policies and Procedures. This resulted in classifying $2.6 million insurance licenses out of Tower and into the Reciprocal Exchange. |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 12 Months Ended | ||||
In Thousands, except Per Share data, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | ||
Revenues | ' | ' | ' | ||
Net premiums earned | $1,512,915 | $1,721,864 | $1,593,850 | ||
Ceding commission revenue | 81,382 | 32,335 | 33,968 | ||
Insurance services revenue | 1,150 | 3,420 | 1,570 | ||
Policy billing fees | 12,299 | 12,615 | 10,534 | ||
Net investment income | 109,208 | 127,165 | 126,474 | ||
Net realized investment gains (losses): | ' | ' | ' | ||
Other-than-temporary impairments | -14,396 | -9,919 | -3,509 | ||
Portion of loss recognized in accumulated other comprehensive income (loss) | 981 | 286 | 264 | ||
Other net realized investment gains | 38,463 | 35,109 | 12,639 | ||
Total net realized investment gains (losses) | 25,048 | 25,476 | 9,394 | ||
Total revenues | 1,742,002 | 1,922,875 | 1,775,790 | ||
Expenses | ' | ' | ' | ||
Loss and loss adjustment expenses | 1,519,834 | 1,263,758 | 1,076,986 | ||
Commission expense | 365,031 | 359,307 | 309,826 | ||
Other operating expenses | 369,893 | 317,497 | 284,847 | ||
Acquisition-related transaction costs | 21,322 | 9,229 | 360 | ||
Interest expense | 33,594 | 32,630 | 34,290 | ||
Total expenses | 2,309,674 | 1,982,421 | 1,706,309 | ||
Other income (expense) | ' | ' | ' | ||
Equity in income (loss) of unconsolidated affiliate | 6,962 | -1,470 | ' | ||
Goodwill and fixed asset impairment | -397,211 | ' | ' | ||
Other | 5,000 | ' | ' | ||
Income (loss) before income taxes | -952,921 | -61,016 | 69,481 | ||
Income tax expense (benefit) | 8,431 | -29,099 | 14,051 | ||
Net income (loss) | -961,352 | -31,917 | 55,430 | ||
Less: Net income (loss) attributable to Noncontrolling interests | -18,736 | 2,317 | 10,995 | ||
Net income (loss) attributable to Tower Group International, Ltd. | ($942,616) | ($34,234) | $44,435 | ||
Earnings (loss) per share attributable to Tower Group International, Ltd. shareholders: | ' | ' | ' | ||
Basic | ($17.37) | [1] | ($0.81) | [1] | $0.96 |
Diluted | ($17.37) | [1] | ($0.81) | [1] | $0.96 |
Weighted average common shares outstanding: | ' | ' | ' | ||
Basic | 54,297 | 42,902 | 45,226 | ||
Diluted | 54,297 | 42,902 | 45,337 | ||
Dividends declared and paid per common share | $0.50 | $0.66 | $0.61 | ||
[1] | Since the weighted-average shares for the quarters are calculated independently of the weighted-average shares for the year, quarterly earnings (loss) per share may not total to annual earnings per share. Earnings (loss) per share has been calculated using weighted-average shares that have been adjusted for the 1.1330 share conversion ratio resulting from the Canopius Merger Transaction. |
Consolidated_Statements_of_Com
Consolidated Statements of Comprehensive Income (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Net income (loss) | ($961,352) | ($31,917) | $55,430 |
Other comprehensive income (loss) before tax | ' | ' | ' |
Gross unrealized investment holding gains (losses) arising during periods | -89,416 | 62,326 | 50,851 |
Less: Reclassification adjustment for investment (gains) losses included in net income | -25,048 | -25,476 | -9,394 |
Portion of other-than-temporary impairment losses recognized in other comprehensive income | -981 | -286 | -264 |
Cumulative translation adjustment | -1,204 | 1,852 | ' |
Deferred gain (loss) on cash flow hedge | 1,881 | -2,422 | -10,541 |
Other comprehensive income (loss) before tax | -114,768 | 35,994 | 30,652 |
Income tax benefit (expense) related to items of other comprehensive income (loss): | ' | ' | ' |
Unrealized investment holding gains (losses) arising during periods | ' | -22,546 | -9,430 |
Reclassification adjustment for (gains) losses included in net income | ' | 8,917 | 1,742 |
Portion of other-than-temporary impairment losses recognized in other comprehensive income | ' | 100 | 49 |
Cumulative translation adjustment | ' | -648 | ' |
Deferred gain (loss) on cash flow hedge | ' | 571 | 1,955 |
Other comprehensive income (loss), net of income tax | -114,768 | 22,388 | 24,968 |
Comprehensive income (loss) | -1,076,120 | -9,529 | 80,398 |
Less: Comprehensive income (loss) attributable to Noncontrolling interests | -31,241 | 5,001 | 21,189 |
Comprehensive income (loss) attributable to Tower Group International, Ltd. | ($1,044,879) | ($14,530) | $59,209 |
Consolidated_Statements_of_Sha
Consolidated Statements of Shareholders' Equity (USD $) | Total | Common Stock | Treasury Stock | Paid-in Capital | Accumulated Other Comprehensive Income (loss) | Retained Earnings | Noncontrolling Interests |
In Thousands | |||||||
Balance at beginning of period at Dec. 31, 2010 | $1,039,150 | $518 | ($91,779) | $763,003 | $48,279 | $314,939 | $4,190 |
Balance at beginning of period (in shares) at Dec. 31, 2010 | ' | 51,826 | ' | ' | ' | ' | ' |
Dividends declared | -27,894 | ' | ' | ' | ' | -27,894 | ' |
Stock based compensation (in shares) | ' | 800 | ' | ' | ' | ' | ' |
Stock based compensation | 8,831 | 8 | -1,834 | 10,657 | ' | ' | ' |
Deferred taxes on stock option activity | -783 | ' | ' | -783 | ' | ' | ' |
Repurchase of common stock | -64,572 | ' | -64,572 | ' | ' | ' | ' |
Net income (loss) | 55,430 | ' | ' | ' | ' | 44,435 | 10,995 |
Other comprehensive income (loss) | 24,968 | ' | ' | ' | 14,774 | ' | 10,194 |
Noncontrolling interest in acquired consolidated partnership | 2,001 | ' | ' | ' | ' | ' | 2,001 |
Balance at end of period at Dec. 31, 2011 | 1,037,131 | 526 | -158,185 | 772,877 | 63,053 | 331,480 | 27,380 |
Balance at end of period (in shares) at Dec. 31, 2011 | ' | 52,626 | ' | ' | ' | ' | ' |
Dividends declared | -29,075 | ' | ' | ' | ' | -29,075 | ' |
Stock based compensation (in shares) | ' | 422 | ' | ' | ' | ' | ' |
Stock based compensation | 6,678 | 4 | -2,263 | 8,937 | ' | ' | ' |
Repurchase of common stock | -20,987 | ' | -20,987 | ' | ' | ' | ' |
Net income (loss) | -31,917 | ' | ' | ' | ' | -34,234 | 2,317 |
Transfer of assets to Reciprocal Exchange | ' | ' | ' | -1,778 | ' | ' | 1,778 |
Other comprehensive income (loss) | 22,388 | ' | ' | ' | 19,703 | ' | 2,685 |
Balance at end of period at Dec. 31, 2012 | 984,218 | 530 | -181,435 | 780,036 | 82,756 | 268,171 | 34,160 |
Balance at end of period (in shares) at Dec. 31, 2012 | ' | 53,048 | ' | ' | ' | ' | ' |
Dividends declared | -26,151 | ' | ' | ' | ' | -26,151 | ' |
Stock based compensation (in shares) | ' | 245 | ' | ' | ' | ' | ' |
Stock based compensation | 8,635 | 3 | -5,892 | 14,524 | ' | ' | ' |
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 Canopius Merger Transaction | ' | -99 | 187,288 | -187,189 | ' | ' | ' |
Termination of convertible senior notes hedge and warrants | 541 | ' | ' | 541 | ' | ' | ' |
Net income (loss) | -961,352 | ' | ' | ' | ' | -942,616 | -18,736 |
Other comprehensive income (loss) | -114,768 | ' | ' | ' | -102,263 | ' | -12,505 |
Increase in noncontrolling interest in consolidated partnership | 2,250 | ' | ' | ' | ' | ' | 2,250 |
Balance at end of period at Dec. 31, 2013 | $100,720 | $574 | ($39) | $815,119 | ($19,507) | ($700,596) | $5,169 |
Balance at end of period (in shares) at Dec. 31, 2013 | ' | 57,437 | ' | ' | ' | ' | ' |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Cash flows provided by (used in) operating activities: | ' | ' | ' |
Net income (loss) | ($961,352) | ($31,917) | $55,430 |
Adjustments to reconcile net income to net cash provided by (used in) operations: | ' | ' | ' |
Gain on investment in acquired unconsolidated affiliate | -6,962 | -1,064 | ' |
Net realized investment (gains) losses | -25,048 | -25,476 | -9,394 |
Depreciation and amortization | 29,704 | 33,609 | 30,940 |
Goodwill and fixed asset impairment | 397,211 | ' | ' |
Intangible asset impairment | 21,917 | 0 | 0 |
Amortization of bond premium or discount | 10,136 | 11,447 | 9,239 |
Amortization of debt issuance costs | -4,290 | -1,667 | -1,712 |
Amortization of restricted stock | 13,195 | 8,247 | 10,292 |
Deferred income taxes | 4,745 | -14,935 | 5,847 |
Changes in operating assets and liabilities: | ' | ' | ' |
Investment income receivable | 7,839 | 1,450 | -2,912 |
Premiums receivable | 111,527 | 4,387 | -15,832 |
Reinsurance recoverable | 305,970 | -161,382 | -20,934 |
Prepaid reinsurance premiums | 29,878 | -9,886 | 23,590 |
Deferred acquisition costs, net | 91,920 | -12,340 | -4,735 |
Funds held by reinsured companies | 737,548 | -67,790 | -66,176 |
Other assets | 94,528 | -43,048 | 15,371 |
Increase (decrease) in liabilities: | ' | ' | ' |
Loss and loss adjustment expenses | -445,007 | 263,566 | 21,692 |
Unearned premium | -337,103 | 28,095 | 21,150 |
Reinsurance balances payable | 41,910 | 27,116 | -14,243 |
Funds held under reinsurance agreements | -437,136 | 1,855 | 3,573 |
Other liabilities | -31,173 | 99,066 | 21,568 |
Net cash flows provided by (used in) operations | -350,043 | 109,333 | 82,754 |
Cash flows provided by (used in) investing activities: | ' | ' | ' |
Net cash (used in) acquired from acquisitions | 133,294 | ' | 2,274 |
Purchase of fixed assets | -30,880 | -44,951 | -53,568 |
Sale of (investment in) unconsolidated affiliate | 69,743 | -71,512 | ' |
Purchase - fixed-maturity securities | -1,273,710 | -1,855,590 | -2,019,603 |
Purchase - equity securities | -1,258,780 | -1,525,206 | -819,180 |
Short-term investments, net | 25,844 | -4,750 | 1,560 |
Purchase of other invested assets | -39,039 | -13,440 | -42,346 |
Sale of fixed-maturity securities | 1,730,078 | 1,813,628 | 2,032,027 |
Maturity of fixed-maturity securities | 150,975 | 205,534 | ' |
Sale - equity securities | 1,291,343 | 1,442,225 | 793,886 |
Change in restricted cash | -97,562 | -46,592 | -6,997 |
Net cash flows provided by (used in) investing activities | 701,306 | -100,654 | -111,947 |
Cash flows provided by (used in) financing activities: | ' | ' | ' |
(Payments under) proceeds from capital lease financing | -7,603 | ' | 39,839 |
Increase in deposit assets | -35,151 | ' | ' |
Proceeds from credit facility borrowings | ' | 20,000 | 67,000 |
Repayment of credit facility borrowings | -70,000 | ' | -17,000 |
Noncontrolling interests investment in consolidated partnership | 2,250 | ' | ' |
Proceeds from convertible senior notes hedge termination | 2,380 | ' | ' |
Payments for warrants termination | -1,000 | ' | ' |
Issuance of common stock under stock-based compensation programs | 2 | ' | ' |
Proceeds from share-based payment arrangements | ' | 345 | 534 |
Treasury stock acquired-net employee share-based compensation | -5,892 | -2,263 | -1,834 |
Repurchase of Common Stock | ' | -20,987 | -64,572 |
Dividends paid | -26,151 | -29,075 | -27,894 |
Net cash flows provided by (used in) financing activities | -141,165 | -31,980 | -3,927 |
Increase (decrease) in cash and cash equivalents | 210,098 | -23,301 | -33,120 |
Cash and cash equivalents, beginning of period | 83,800 | 107,101 | 140,221 |
Cash and cash equivalents, end of period | 293,898 | 83,800 | 107,101 |
Supplemental disclosures of cash flow information: | ' | ' | ' |
Cash paid for income taxes | ' | ' | 3,000 |
Cash paid for interest | $18,494 | $20,917 | $25,880 |
Nature_of_Business
Nature of Business | 12 Months Ended |
Dec. 31, 2013 | |
Nature of Business | ' |
Note 1—Nature of Business | |
Tower Group International, Ltd. (the “TGIL”, the Company” or “Tower”) offers a range of commercial, assumed reinsurance 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 “Canopius Merger Transaction”). The Company’s Common Shares (as defined below) 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 Canopius Merger Transaction. See “Note 3 – Canopius Merger Transaction” for further discussion of the Canopius Merger Transaction and the Company’s succession to TGI as registrant. As stated above, the registrant is deemed to be the successor to Tower Group, Inc. pursuant to Rule 12g-3(a) under the Exchange Act and, following the consummation of the merger described above by the registrant and Tower Group, Inc., the consolidated financial statements of Tower Group, Inc. for the periods through March 13, 2013, closing date of the merger, became the registrant’s consolidated statements for the same periods. Accordingly, as used herein, unless the context requires otherwise, references to “Tower”, the “Company”, “we”, “us”, or “our” (i) with respect to any period, event or occurrence prior to March 13, 2013, are to Tower Group, Inc. and (ii) with respect to any subsequent period, event or occurrence, are to Tower Group International, Ltd., and, in each case include the Company’s insurance subsidiaries, managing general agencies and management companies. | |
Significant Business Developments and Risks and Uncertainties | |
Proposed Merger with ACP Re | |
On January 3, 2014, Tower entered into an Agreement and Plan of Merger (“ACP Re Merger Agreement”) with ACP Re Ltd. (“ACP Re”), and a wholly-owned subsidiary of ACP Re (“Merger Sub”), pursuant to which, subject to the satisfaction or waiver of the conditions therein, Merger Sub would merge with and into Tower, with Tower as the surviving corporation in the merger and a wholly owned subsidiary of ACP Re. The transaction would close in the summer of 2014, subject to the satisfaction or waiver of the closing conditions contained in the ACP Re Merger Agreement. ACP Re is a Bermuda based reinsurance company. The controlling shareholder of ACP Re is a trust established by the founder of AmTrust Financial Services, Inc. (“AmTrust”), National General Holdings Corporation (“NGHC”) and Maiden Holdings, Ltd. | |
Notwithstanding any other statement in this Form 10-K or any other document, many of the conditions for closing the ACP Re Merger Agreement remain outstanding and there can be no assurance that they will be satisfied or that the transaction will be consummated or when it may close. | |
Pursuant to the terms of the ACP Re Merger Agreement, at the effective time of the merger, each outstanding share of Tower’s common stock, par value $0.01 per share (the “Common Shares”), following the settlement of all outstanding equity awards, will be converted into the right to receive $3.00 in cash, with an aggregate value of approximately $172.1 million. | |
Each of the parties has made representations and warranties in the ACP Re Merger Agreement. Tower has agreed to certain covenants and agreements, including, among others, (i) to conduct its business in the ordinary course of business, consistent with past practice, during the period between the execution of the ACP Re Merger Agreement and the closing of the merger, (ii) not to solicit alternate transactions, subject to a customary “fiduciary out” provision which allows Tower under certain circumstances to provide information to and participate in discussions with third parties with respect to unsolicited alternative acquisition proposals that Tower’s Board of Directors has determined, in its good faith judgment, is appropriate in furtherance of the best interests of Tower, and (iii) to call and hold a special shareholders’ meeting and recommend adoption of the ACP Re Merger Agreement. | |
Concurrently with the execution of the ACP Re Merger Agreement, several subsidiaries of Tower have entered into two Cut-Through Reinsurance Agreements, pursuant to which a subsidiary of AmTrust and a subsidiary of NGHC will provide 100% quota share reinsurance and a cut-through endorsement to cover all eligible new and renewal commercial and personal lines business, respectively, and at their option, losses incurred on or after January 1, 2014 on not less than 60% of the in-force business. Tower received confirmation on January 16, 2014 from AmTrust and NGHC that they would exercise such option to reinsure on a cut-through basis losses incurred on or after January 1, 2014 under in-force policies with respect to (1) in the case of AmTrust, approximately 65.7% of Tower’s unearned premium reserves as of December 31, 2013 with respect to its ongoing commercial lines business, and (2) in the case of NGHC, 100% of Tower’s unearned premium reserves as of December 31, 2013 with respect to its personal lines segment business. Tower will receive a 20% ceding commission from AmTrust or NGHC on all Tower unearned premiums that are subject to the Cut-Through Reinsurance Agreements and a 22% ceding commission on 2014 ceded premiums. | |
Concurrently with the execution of the ACP Re Merger Agreement, the controlling shareholder of ACP Re has provided to Tower a guarantee for the payment of the merger consideration, effective upon the closing of the merger. | |
The ACP Re Merger Agreement was unanimously approved by the respective Boards of Directors of ACP Re and Tower, and is conditioned, among other things, on: (i) the approval of Tower’s shareholders, (ii) receipt of governmental approvals, including antitrust and insurance regulatory approvals (on January 30, 2014, the Company was granted early termination of the Hart-Scott-Rodino waiting period which requires persons contemplating certain mergers or acquisitions to give the Federal Trade Commission and the Assistant Attorney General advanced notice and to wait designated periods before consummation of such plans), (iii) the absence of any law, order or injunction prohibiting the merger, (iv) the accuracy of each party’s representations and warranties (subject to customary materiality qualifiers), and (v) each party’s compliance with its covenants and agreements contained in the ACP Re Merger Agreement. In addition, ACP Re’s obligation to consummate the merger is subject to the non-occurrence of any material adverse effect on Tower, as well as the absence of any insolvency-related event affecting Tower. The transaction is also conditioned on holders of not more than 15% of Tower’s common stock dissenting to the merger. | |
There is no financing condition to consummation of the transactions contemplated by the ACP Re Merger Agreement. | |
The ACP Re Merger Agreement provides certain termination rights for each of Tower and ACP Re, and further provides that upon termination of the ACP Re Merger Agreement, under certain circumstances, Tower will be obligated to reimburse ACP Re for certain of its transaction expenses, subject to a cap of $2 million, and to pay ACP Re a termination fee of $8.18 million, net of any transaction expenses it has reimbursed. | |
Michael H. Lee, the former Chairman, President and Chief Executive Officer of Tower, who beneficially owns approximately 4.2% of the issued and outstanding common stock of Tower as of January 3, 2014, has entered into a support agreement pursuant to which he has agreed to vote his shares in favor of the merger. | |
Loss reserve increase, goodwill and fixed asset impairment and deferred tax valuation allowance | |
Loss and loss adjustment expenses for the twelve months ended December 31, 2013 recorded in the statement of operations included an increase of $533.0 million, excluding the Reciprocal Exchanges relating to reserve increases associated with losses from prior accident years. This unfavorable loss development arose primarily from accident years 2008-2012 within the workers’ compensation, commercial multi-peril liability (“CMP”), other liability and commercial auto liability lines of business partially offset by a modest amount of favorable development from more recent years within the short tail property lines of business. The Company performed comprehensive updates to its internal reserve study in response to continued observance in the second, third quarters and fourth of 2013 of higher than expected reported loss development. In conjunction with its comprehensive internal reviews, the Company also retained a consulting actuary to perform an independent reserve study in the fourth quarter of 2013 covering lines of business comprising over 98% 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. | |
The 2013 reserve increase 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 in the second quarter of 2013, it was determined that $214.0 million of goodwill, which represents all of the goodwill allocated to the Commercial Insurance reporting unit, was impaired. In the third quarter of 2013, management in its judgment concluded that the remaining $55.5 million of goodwill, all of which was allocated to the Personal Insurance reporting unit, was impaired. In addition, $1.9 million of additional goodwill resulting from the acquisition of marine and energy business in July of 2013 was fully impaired as of September 30, 2013. Additionally, in 2013, the Company impaired $125.8 million of fixed assets. At December 31, 2013, there was no goodwill remaining on the balance sheet. See “Note 7 – Goodwill, Intangible and Fixed Asset Impairments” for additional detail on the goodwill and fixed asset impairments. | |
As a result of the reserve increase and goodwill and fixed assets impairment charges, the Company’s U.S. based operations have a pre-tax loss for 2013, which results 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, has provided a full valuation allowance against its deferred tax asset at December 31, 2013. | |
Reinsurance Agreements | |
In the third quarter of 2013, Tower 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 consisted of one reinsurance agreement while the arrangement with Southport Re consisted of several 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 ceded 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 of June 30, 2013 and policies written or renewed from July 1, 2013 to December 31, 2013. | |
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 ceded 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 of June 30, 2013 and policies written or renewed from July 1, 2013 to December 31, 2013. | |
The third arrangement with Southport Re consisted of two separate 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 “Southport Quota Share”). The Southport Quota Share 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 and has been accounted for using deposit accounting treatment. Deposit assets of $28.7 million as of December 31, 2013 related to the Southport Quota Share are reflected in Other assets in the consolidated balance sheet. 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 (the “TICNY/Southport Re ADC”). 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 “TRL/Southport Re ADC”, or, collectively, the “Southport Re ADCs”). | |
The reinsurance agreements with Arch and Hannover Re resulted in ceded premiums earned, ceding commission revenue and ceded loss and loss adjustment expenses of $76.8 million, $22.3 million, and $41.1 million, respectively, for the year ended December 31, 2013. | |
As a result of the announced merger agreement with ACP Re, it was decided that the Southport treaties should be commuted. As a result of a negotiation between the Company and Southport, all of these treaties were commuted effective as of February 19, 2014, with the result of the commutation being that all premiums paid to Southport by the Company were returned to the Company, and all liabilities assumed by Southport were cancelled, and such liabilities became the obligation of the Company. In 2014, the company will record a gain of approximately $6.4 million resulting from the terminations. | |
A.M. Best, Fitch and Demotech Downgrade the Company’s Financial Strength and Issuer Credit Ratings | |
On December 20, 2013, A.M. Best lowered the financial strength ratings of each of Tower’s insurance subsidiaries from “B++” (Good) to “B” (Fair) (the seventh highest of fifteen rating levels), as well as the issuer credit ratings of each of Tower’s insurance subsidiaries from “bbb” to “bb”. Previously, on October 8, 2013, A.M. Best had downgraded the financial strength rating of each of Tower’s insurance subsidiaries to “B++” (Good) and their respective issuer credit ratings to “bbb” from “a-”. In addition, on December 20, 2013 A.M. Best downgraded the issuer credit rating of TGI as well as the debt rating on its $147.7 million 5.00% senior convertible notes due 2014 (the “Notes”) to “b-” from “bb”. On the same date, A.M. Best also downgraded the financial strength rating of CastlePoint Reinsurance Company, Ltd. (Bermuda) to “B” (Fair) from “B++” (Good) and its issuer credit rating to “bb” from “bbb” and downgraded the issuer credit rating of Tower Group International, Ltd. to “b-” from “bb”. TGI and each of its insurance subsidiaries currently are and will continue to be under review with negative implications pending further discussions between A.M. Best and management. In downgrading Tower’s ratings, A.M. Best stated that its actions “consider the magnitude of the charges taken and the material adverse impact on Tower’s risk-adjusted capitalization, financial leverage, liquidity and coverage ratios,” “consider the reduced financial flexibility [of the Company] given [its] delay in earnings, the decline in shareholder confidence and the corresponding decline in share price” and “reflect the potential for further adverse reserve development, increased competitive challenges and due to the ratings downgrade, potential actions taken by third party reinsurers and lenders.” Following the announcement of the ACP Re merger, on January 10, 2014 A.M. Best maintained the under review status of Tower’s financial strength and issuer credit ratings and revised the implications from “negative” to “developing” for all of these ratings. A.M. Best stated that, “[t]he under review status with developing implications reflects the potential benefits to be garnered from the transaction as well as the potential downside from any additional adverse reserve development and/or any unforeseen events that might transpire up until the close of the transaction…” | |
On January 2, 2014, Fitch downgraded Tower’s issuer default rating from “B” to “CC” and the insurer strength ratings of its insurance subsidiaries from “BB” to “B”. On October 7, 2013, Fitch downgraded Tower’s issuer default rating to “B” (the sixth highest of 11 such ratings) from “BBB” and the insurer strength ratings of its insurance subsidiaries to “B” (the fifth highest of Fitch Ratings’ nine such ratings) from “A-”. In downgrading such ratings, Fitch stated that it “is concerned that Tower’s competitive position has been materially damaged, negatively impacting the Company’s financial flexibility and ability to write new business” and that “the magnitude of the second quarter charges was large enough to cause several key ratios to fall well outside of previously established ratings downgrade triggers, which resulted in the multi-notch downgrade.” On January 6, 2014, Fitch revised Tower’s rating watch status to “evolving” from “negative” following the ACP Re merger announcement, and stated that “[t]he Evolving Watch reflects that the ratings could go up if the merger closes; however, ratings could be lowered if the merger does not occur and [the Company] is unsuccessful in addressing upcoming debt maturity or if additional reserve deficiencies develop.” | |
On December 24, 2013, Demotech, Inc. (“Demotech”) announced the withdrawal of its Financial Stability Ratings® (FSRs) assigned to the following insurance subsidiaries: Kodiak Insurance Company, Massachusetts Homeland Insurance Company, Tower Insurance Company of New York and York Insurance Company of Maine. Concurrently, Demotech advised that the FSRs assigned to Adirondack Insurance Exchange, Mountain Valley Indemnity Company, New Jersey Skylands Insurance Association and New Jersey Skylands Insurance Company remain under review. | |
Previously, on October 7, 2013, Demotech had 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 2013, to result in a significant decrease in the amount of premiums the insurance subsidiaries are able to write. Direct written premiums were $1,606.2 million for the twelve months ended December 31, 2013. Business written through certain program underwriting agents requires an A.M. Best rating of A- or greater. | |
Tower’s products include the following lines of business: commercial multiple-peril packages, other liability, workers’ compensation, commercial automobile, fire and allied lines, inland marine, personal package, homeowners, personal automobile and assumed reinsurance. These products are sold, primarily, through retail agencies, wholesale agencies, program underwriting agents, and reinsurance brokerage units. With the exception of the personal automobile insurance written through retail agencies and wholesale agencies, which represents $98.1 million of written premiums (excluding the Reciprocal Exchanges) for the year ended December 31, 2013, management believes the Company will be unable to continue writing the majority of its business following the second A.M. Best rating downgrade on December 20, 2013. The total effect of these ratings actions on the Company’s financial position, results of operations or liquidity is not determinable at this stage. | |
In January 2014, Tower’s Board of Directors approved Tower’s merger with ACP Re. In light of the adverse ratings actions, concurrent with entering into its merger agreement with ACP Re, Tower entered into cut-through reinsurance treaties with affiliates of ACP Re. As a result of this merger, and the execution of the cut-through reinsurance treaties, Tower believes its insurance subsidiaries will retain significant portions of their business. (See “Note 9 - Reinsurance” for a discussion of the cut-through reinsurance treaties). | |
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”). | |
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 Reinsurance Company (“CastlePoint Re”), one of its Bermuda based insurance subsidiaries. The 2013 obligations that CastlePoint Re assumes from the U.S. based insurance subsidiaries are then retroceded to TRL, Tower’s other Bermuda based insurance subsidiary. 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. CastlePoint Re is required to collateralize $648.9 million of its assumed reserves in a reinsurance trust for the benefit of TICNY, the lead pool company of the U.S. insurance companies. On February 5, 2014, the BMA approved the transfer of $167.3 million in unencumbered liquid assets from TRL to CastlePoint Re, allowing CastlePoint Re to increase the funding in the reinsurance trust for the benefit of TICNY. The New York State Department of Financial Services (the “NYDFS”) has confirmed this will be acceptable for the purpose of admitted surplus and capital on TICNY’s 2013 statutory basis financial statements. For the 2013 statutory basis financial statements, CastlePoint Re reported $581.7 million in its reinsurance trust. | |
Based on RBC calculations as of December 31, 2013, six of Tower’s ten U.S. based insurance subsidiaries have capital and surplus below Company Action Level and do not meet the minimum capital and surplus requirements of their respective state regulators. As a result, management has discussed the ACP Re Merger Agreement and the Cut- Through Reinsurance Agreement and provided its 2014 RBC forecasts to the regulators to document the Company’s business plan to bring two of these U.S based insurance subsidiaries’ capital and surplus levels above Company Action Level. | |
As a result of the recognition of the ceding commission relating to the Cut-Through Reinsurance Agreements executed with AmTrust and NGHC in January 2014, the U.S. based insurance subsidiaries’ capital and surplus will increase significantly from December 31, 2013 to January 1, 2014, as the U.S. based subsidiaries will transfer a significant portion of their commercial lines unearned premium to a subsidiary of AmTrust and all of their personal lines unearned premiums to a subsidiary of NGHC. Accordingly, as of January 1, 2014, the effect of the Cut-Through Reinsurance Agreements increased the surplus of two of the U.S. based insurance subsidiaries such that their capital and surplus levels exceeded Company Action Level. | |
In 2013, the NYDFS issued orders for seven of Tower’s insurance subsidiaries, subjecting them to heightened regulatory oversight, which includes providing the NYDFS with increased information with respect to the insurance subsidiaries’ business, operations and financial condition. In addition, the NYDFS has placed limitations on payments and transactions outside the ordinary course of business and material changes in the insurance subsidiaries’ management and related matters. Tower’s management and Board of Directors have held discussions with the NYDFS, and Tower has been complying with the orders and oversight. | |
On April 21, 2014, the NYDFS issued additional orders for two of Tower’s insurance subsidiaries instructing them to provide plans to address weaknesses in such insurance subsidiaries’ risk based capital levels as shown in their statutory annual financial statements, and imposing further enhanced reporting and prior approval requirements and limitations on writings of new business. On the same date, the NYDFS issued a letter pertaining to one of Tower’s insurance subsidiaries requiring the submission of a plan to address weaknesses in risk based capital levels. | |
The Massachusetts Division of Insurance (“MDOI”) and Tower management have agreed to certain restrictions on the operations of Tower’s two Massachusetts domiciled insurance subsidiaries. Tower management has agreed to cause these subsidiaries to provide the MDOI 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. | |
The Maine Bureau of Insurance entered a Corrective Order imposing certain conditions on Maine domestic insurers York Insurance Company of Maine (“YICM”) and North East Insurance Company (“NEIC”). The Corrective Order imposes increased reporting obligations on YICM and NEIC with respect to business operations and financial condition and imposes restrictions on payments or other transfers of assets from YICM and NEIC outside the ordinary course of business. | |
On April 11, 2014, the New Jersey Department of Banking and Insurance imposed an enhanced reporting requirement on the intercompany transactions involving Tower’s two New Jersey domiciled insurance subsidiaries and Tower’s New Jersey managed insurer. Such companies are now required to submit for prior approval any transactions with affiliates, even transactions that would otherwise not be reportable under the applicable holding company act. | |
As of December 31, 2013, TRL and CastlePoint Re had capital and surplus that did not meet the minimum solvency requirements of the BMA. Management has discussed the ACP Re Merger Agreement and provided 2014 solvency forecasts to the BMA. | |
The BMA has issued directives for TRL and CastlePoint Re, subjecting them to heightened regulatory oversight and requiring BMA approval before certain transactions can be executed. Tower has been complying with the directives issued by the BMA. | |
Liquidity | |
TGI was 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 and is the obligor under the $150 million Convertible Senior Notes (“Notes”) due September 15, 2014. The indebtedness of TGI is guaranteed by TGIL, and for purposes of the credit facility was also guaranteed by several of TGIL’s non-insurance subsidiaries. | |
On December 13, 2013, TGI paid in full the $70.0 million outstanding on the bank credit facility and the bank credit facility has been terminated. The $70.0 million was provided, primarily, from the sale of Tower’s 10.7% ownership in Canopius Group Limited (“Canopius Group”) on December 13, 2013. | |
The Company’s plan to repay the Notes is related to the closing of the ACP Re Merger Agreement. In the event that the ACP Re Merger Agreement does not close, the Company would evaluate a combination of using proceeds from the sale of assets held at TGI, including but not limited to, renewal rights on its commercial and personal lines of business and certain of its insurance companies to pay down the principal of the Notes. The Company can provide no assurance that it will be successful in finalizing the liquidation of the assets held at TGI or selling certain of its operating assets to satisfy repayment of the Notes. | |
As of December 31, 2013, there were $235.1 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, which matures in May 2033. The Company has the ability to defer interest payments on its subordinated debentures for up to twenty quarters. If an event of default occurs and is continuing, the entire principal and the interest accrued on the affected subordinated indenture may be declared to be due and payable immediately. | |
The merger with ACP Re is expected to close in the summer of 2014, and there are contractual termination rights available to each of Tower and ACP Re under various circumstances. There can be no assurance that the merger will close, or that it will close under the same terms and conditions contained in the ACP Re Merger Agreement, or as to when it may close. | |
Going Concern | |
There can be no guarantee that the Company will be able to remedy current statutory capital deficiencies in certain of its insurance subsidiaries, maintain adequate levels of statutory capital in the future, or generate sufficient liquidity to repay the Notes due in 2014. Consequently, there is substantial doubt about the Company’s ability to continue as a going concern. Should the Company be unable to successfully execute the merger with ACP Re or generate sufficient funds to repay the Notes and remedy the capital deficiencies, these conditions would have a material adverse effect on its business, results of operations and financial position. | |
Resignation of Tower’s Chairman of the Board, President and Chief Executive Officer and Appointment of new Chairman of the Board and new President and Chief Executive Officer | |
On February 6, 2014, Tower and Michael H. Lee entered into a Separation and Release Agreement in connection with the resignation of Mr. Lee from his positions as Chairman of the Board of Directors, President and Chief Executive Officer, effective as of February 6, 2014. Mr. Lee’s employment with the Company was terminated effective as of February 6, 2014. In connection with his resignation, Mr. Lee received on March 31. 2014 a severance payment of approximately $3.3 million calculated pursuant to terms of his employment agreement. | |
Jan R. Van Gorder, who is the lead independent director of the Board and a member of the Board’s Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee, was appointed on February 9, 2014 to succeed Mr. Lee as Chairman of the Board. William W. Fox, Jr., who had served as a member of the Board and of the Board’s Audit Committee and Corporate Governance and Nominating Committee until his resignation from the Board on December 31, 2013, succeeded Mr. Lee as President and Chief Executive Officer of Tower, effective as of February 14, 2014. | |
Expense Control Initiative | |
On November 22, 2013, the Company announced the implementation of an expense control initiative to streamline its operations and focus resources on its most profitable lines of business. As part of this initiative, the Company has implemented a workforce reduction affecting approximately 10% of the total employee population of approximately 1,400. The areas that are most significantly impacted are commercial lines underwriting as well as operations. This workforce reduction is expected to result in annualized cost savings of approximately $21.0 million. The Company currently recognized pre-tax charges of $5.5 million in the fourth quarter of 2013 for severance and other one-time termination benefits and other associated costs. | |
Other | |
Tower received a document request from the U.S. Securities and Exchange Commission (the “SEC”) dated January 13, 2014, as part of an informal inquiry (the “SEC Request”). The SEC Request asks for documents related to Tower’s financial statements, accounting policies, and analysis. Tower is cooperating with the SEC’s inquiry and has provided the requested information. | |
The Company and certain of its current and former senior officers have been named as defendants in several class action lawsuits instituted against them by certain shareholders. In addition, the Company and certain of its current and former directors, along with certain other parties, have been named as defendants in a putative class action lawsuit instituted against them by another purported shareholder. See “Note 17 – Contingences” for additional detail on such litigation. |
Accounting_Policies_and_Basis_
Accounting Policies and Basis of Presentation | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Accounting Policies and Basis of Presentation | ' | ||||||||
Note 2—Accounting Policies and Basis of Presentation | |||||||||
Basis of Presentation | |||||||||
The accompanying consolidated financial statements included in this report have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany transactions have been eliminated in consolidation. | |||||||||
The Canopius 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 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 Canopius Merger Transaction. The 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. | |||||||||
In 2013, the Company changed the presentation of its business results by allocating its assumed reinsurance previously reported in the Commercial Insurance segment to a new Assumed 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 reflected the way management organized the Company for operating decisions and assessing profitability in the second quarter of 2013, subsequent to the Canopius Merger Transaction and the significant business developments and risks and uncertainties that occurred in 2013. | |||||||||
Following the changes in presentation the Company now operates in three business segments: Commercial Insurance, Assumed Reinsurance and Personal Insurance: | |||||||||
• | Commercial Insurance (“Commercial”) segment offers a range of standard commercial lines property and casualty insurance products to businesses distributed through a network of retail and wholesale agents and through program underwriting agents, on both an admitted and non-admitted basis; | ||||||||
• | Assumed Reinsurance (“Assumed Reinsurance”) segment offers international assumed reinsurance and certain U.S. based 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 21 – Segment Information” for further information on the composition of the Company’s operating and reportable segments. | |||||||||
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. | |||||||||
Intercompany transactions | |||||||||
In the first quarter 2012, Tower transferred a licensed insurance subsidiary shell to the Reciprocal Exchanges and received cash for its statutory book value. At the date of the transfer, Tower’s GAAP carrying basis in this subsidiary exceeded the statutory book value and the transfer resulted in a loss to Tower of $1.8 million. Since this was a non-recurring transaction between entities under common control, assets are transferred at historical book value. Any difference in the consideration paid and the book value of the assets transferred is treated as an adjustment to equity. This transaction had no effect on consolidated shareholders’ equity. | |||||||||
Reclassifications and Adjustments | |||||||||
Since the Company accounted for the Canopius Merger Transaction as a reverse acquisition and recapitalization, it has retroactively restated Common Stock, Treasury Stock and Paid-in-Capital accounts and earnings per share for periods prior to the Canopius Merger Transaction to reflect the historical capitalization of TGI, adjusted for the 1.1330 conversion ratio as discussed in “Note 3 – Canopius Merger Transaction”. Certain other reclassifications have also been made to prior years’ financial information to conform to the current year presentation, including the changes in segment presentation discussed in “Note 1 – Nature of Business.” | |||||||||
The table below reflects the previously reported and revised shareholders’ equity accounts resulting from the Canopius Merger Transaction: | |||||||||
($ in thousands, except share amounts) | As previously | Revised | |||||||
Reported | Amount | ||||||||
As of December 31, 2012 | |||||||||
Common stock | $ | 469 | $ | 530 | |||||
Treasury stock | (181,435 | ) | (181,435 | ) | |||||
Paid-in-capital | 780,097 | 780,036 | |||||||
As of December 31, 2011 | |||||||||
Common stock | 465 | 526 | |||||||
Treasury stock | (158,185 | ) | (158,185 | ) | |||||
Paid-in-capital | 772,938 | 772,877 | |||||||
For the year ended December 31, 2012 | |||||||||
Earnings (Loss) per Share: | |||||||||
Basic | $ | (0.73 | ) | $ | (0.81 | ) | |||
Diluted | (0.73 | ) | (0.81 | ) | |||||
Weighted average common shares outstanding | |||||||||
Basic | 38,795 | 42,902 | |||||||
Diluted | 38,975 | 42,902 | |||||||
For the year ended December 31, 2011 | |||||||||
Earnings (Loss) per Share: | |||||||||
Basic | $ | 1.48 | $ | 0.96 | |||||
Diluted | 1.48 | 0.96 | |||||||
Weighted average common shares outstanding | |||||||||
Basic | 40,833 | 45,226 | |||||||
Diluted | 40,931 | 45,337 | |||||||
Revision to the 2012 Consolidated Balance Sheet and 2012 and 2011 Consolidated Statements of Cash Flows | |||||||||
Management is revising the Company’s 2012 consolidated balance sheet and 2012 and 2011 consolidated statements of cash flows to properly reflect the changes in restricted cash as change in cash flows from investing activities. In its Amendment No. 2 to Form 10-K for the year ended December 31, 2012, the Company previously recorded $9.1 million and $7.0 million of restricted cash within the “cash and cash equivalents” caption on the consolidated balance sheet as of December 31, 2012 and 2011, respectively. These amounts should have been recorded within “other assets,” and management has properly corrected those amounts out of the “cash and cash equivalent” balances in the 2012 and 2011 financial statements contained herein. In addition, in the 2012 consolidated balance sheet, management also corrected the classification of $9.4 million of “receivable for securities” that was originally reported within “cash and cash equivalents” to “other assets.” Also, in the 2012 consolidated balance sheet, management previously reported $0.9 million of receivables from reinsurance within “reinsurance balances payable.” The Company has properly reflected the $0.9 million as a receivable reported within “other assets.” These adjustments had no impact on shareholders’ equity or net income (loss). Management has concluded these corrections were not material to the 2012 consolidated balance sheet. | |||||||||
In addition, as a result of the immaterial adjustments to the “cash and cash equivalents” balances discussed above, the Company also revised its statement of cash flows. Cash flows used in investing activities increased from $89.1 million as originally reported to $100.5 million for the year ended December 31, 2012, and cash and cash equivalents as of December 31, 2012 decreased from $102.3 million to $83.8 million. Cash flows used in investing activities increased from $104.5 million as originally reported to $111.9 million for the year ended December 31, 2011, and cash and cash equivalents as of December 31, 2011 decreased from $114.1 million to $107.1 million. Management concluded these corrections were not material to the 2012 or 2011 consolidated statements of cash flows. | |||||||||
Accounting Policies | |||||||||
Net Premiums Earned | |||||||||
The insurance policies issued or reinsured by the Company are short-duration contracts. Accordingly, premium revenue, including direct business and reinsurance assumed, net of business ceded to reinsurers, is recognized on a pro-rata basis over the terms of the underlying policies. Unearned premiums represent premium applicable to the unexpired risk of in-force insurance contracts at each balance sheet date. Prepaid reinsurance premiums represent the unexpired portion of reinsurance premiums on risks ceded and are earned consistent with premiums. Mandatory reinstatement premiums are recognized and earned at the time a loss event occurs. | |||||||||
Ceding Commission Revenue | |||||||||
Commissions on reinsurance premiums ceded are earned in a manner consistent with the recognition of the costs to acquire the underlying policies, generally on a pro-rata basis over the terms of the policies reinsured. Certain reinsurance agreements contain provisions whereby the ceding commission rates vary based on the loss experience of the policies covered by the agreements. The Company records ceding commission revenue based on its current estimate of losses on the reinsured policies subject to variable commission rates. The Company records adjustments to the ceding commission revenue in the period that changes in the estimated losses are determined. | |||||||||
Insurance Services Revenue | |||||||||
Direct commission revenue from the Company’s managing general underwriting services is recognized and earned as insurance policies are placed with the issuing companies of its managing general agencies. Fees relating to the provision of reinsurance intermediary services are earned when the Company’s insurance subsidiaries or the issuing companies of its managing general agencies cede premiums to reinsurers. Management fees earned by the management companies for services provided to the Reciprocal Exchanges are eliminated in consolidation. | |||||||||
Policy Billing Fees | |||||||||
Policy billing fees are earned on a pro-rata basis over the terms of the underlying policies. These fees include installment and other fees related to billing and collections. | |||||||||
Loss and Loss Adjustment Expenses (“LAE”) | |||||||||
The liability for loss and LAE represents management’s best estimate of the ultimate cost and expense of all reported and unreported losses that are unpaid as of the balance sheet date. The liability for loss and LAE is recorded net of a tabular reserve discount for workers’ compensation and excess workers’ compensation claims in the amount of $5.5 million (net of reinsurance basis) and $8.4 million at December 31, 2013 and 2012, respectively. The 2013 discount relates to $244.7 million of total net reserves for workers’ compensation. The projection of future claims payments and reporting is based on an analysis of the Company’s historical experience, supplemented by analyses of industry loss data. Management believes that the liability for loss and LAE is an adequate reasonable provision to cover the ultimate cost of losses and claims to date; however, because of the uncertainty from various sources, including changes in reporting patterns, claims settlement patterns, judicial decisions, legislation, and economic conditions, actual loss experience may not conform to the assumptions used in determining the estimated amounts for such liability at the balance sheet date. As adjustments to these estimates become necessary, such adjustments are reflected in expense for the period in which the estimates are changed. | |||||||||
Tower estimates reserves separately for losses, allocated loss adjustment expenses, and unallocated loss adjustment expenses. Allocated loss adjustment expenses (“ALAE”) refers to costs of attorneys as well as miscellaneous costs such as investigators, witness fees and court costs attributable to specific claims that generally are in various stages of litigation. Unallocated loss adjustment expenses (“ULAE”) refers to costs for administering claims that are not related to attorney fees and miscellaneous costs associated with litigated claims. Tower estimates the ALAE liability separately for claims that are defended by in-house attorneys, claims that are handled by other attorneys that are not employees, and miscellaneous ALAE costs such as witness fees and court costs. Similarly, Tower estimates the ULAE liability separately for claims which are handled internally by our employees and for claims which are handled by third party administrators. | |||||||||
For claims that are defended by in-house attorneys, we attribute to each of these claims a fixed fee for defense work. We allocate to each of these litigated claims 50% of the fixed fee when litigation on a particular claim begins and 50% of the fee when the litigation is closed. The fee is adjusted periodically to reimburse our in-house legal department for all their costs. | |||||||||
We determine ULAE reserves by applying a paid-to-paid ratio to the case and IBNR reserves by line of business. The paid-to-paid ratio is based on ratios of ULAE payments to loss and ALAE payments for last three calendar years. | |||||||||
Reinsurance | |||||||||
The Company uses reinsurance to limit its exposure to certain risks. Management has evaluated its reinsurance arrangements and determined that significant insurance risk is transferred to the reinsurers. Reinsurance agreements have been determined to be short-duration prospective and retrospective contracts. For prospective contracts, the costs of reinsurance are recognized over the life of the contracts in a manner consistent with the earning of premiums on the underlying policies subject to the reinsurance contract. For retroactive reinsurance agreements, when incurred losses and loss reserves exceed consideration paid for the retroactive reinsurance agreement, a gain results. The gain is deferred and amortized over the estimated remaining settlement period. | |||||||||
Reinsurance recoverable represents management’s best estimate of paid and unpaid loss and LAE recoverable from reinsurers. Ceded losses recoverable are estimated using techniques and assumptions consistent with those used in estimating the liability for loss and LAE. These techniques and assumptions are continually reviewed and updated with any resulting adjustments recorded in current earnings. Loss and LAE incurred as presented in the consolidated statement of income and comprehensive net income are net of reinsurance recoveries. | |||||||||
Management estimates uncollectible amounts receivable from reinsurers based on an assessment of a number of factors. The Company recorded no allowance for uncollectible reinsurance at December 31, 2013 or 2012. The Company did not write-off balances from reinsurers during the three year period ended December 31, 2013. | |||||||||
Deposit Assets | |||||||||
Deposit assets arise from ceded reinsurance contracts purchased that do not transfer significant underwriting or timing risk. Under deposit accounting, consideration received or paid, excluding non-refundable fees, is recorded as a deposit asset or liability in the balance sheet as opposed to recording premiums and losses in the statement of operations. At December 31, 2013, deposit assets of $28.7 million are included in Other Assets. | |||||||||
Cash and Cash Equivalents | |||||||||
Cash consists of cash in banks, generally in operating accounts. The Company maintains its cash balances at several financial institutions. Management monitors balances and believes they do not represent a significant credit risk to the Company. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are presented at cost, which approximates fair value. Cash restricted as to use is included in Other Assets. | |||||||||
Restricted Cash | |||||||||
Restricted cash balances relate primarily to “Funds at Lloyd’s” collateral balances for its assumed reinsurance programs. The Company also has restricted cash collateralizing its interest rate swap contracts. Restricted cash balances are reported in “Other Assets” on the accompanying consolidated balance sheets. As of December 31, 2013 and 2012, these assets were approximately $134.1 million and $44.2 million, respectively. Certain amounts in prior years have been reclassified to conform to the current year presentation. These reclassifications had no effect on net income or equity. | |||||||||
Investments | |||||||||
The Company’s fixed-maturity and equity securities are classified as available-for-sale and carried at fair value. The Company may sell its available-for-sale securities in response to changes in interest rates, risk/reward characteristics, liquidity needs or other factors. | |||||||||
Fair value for fixed-maturity securities and equity securities is primarily based on quoted market prices or a matrix pricing using observable inputs, with limited exceptions as discussed in “Note 6 – Fair Value Measurements”. Changes in unrealized gains and losses, net of tax effects, are reported as a separate component of other comprehensive income while cumulative unrealized gains and losses are reported net of tax effects within accumulated other comprehensive income in shareholders’ equity. Realized gains and losses are determined on the specific identification method. Investment income is recorded when earned and includes the amortization of premium and discount on investments. | |||||||||
The Company, along with its outside portfolio managers, regularly reviews its fixed-maturity and equity security portfolios to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of investments. In evaluating potential impairment, management considers, among other criteria: (i) the overall financial condition of the issuer, (ii) the current fair value compared to amortized cost or cost, as appropriate; (iii) the length of time the security’s fair value has been below amortized cost or cost; (iv) specific credit issues related to the issuer such as changes in credit rating, reduction or elimination of dividends or non-payment of scheduled interest payments; (v) whether management intends to sell the security and, if not, whether it is not more likely than not that the Company will be required to sell the security before recovery of its cost or amortized cost basis; (vi) specific cash flow estimations for fixed-maturity securities and (vii) current economic conditions. If an other-than-temporary-impairment (“OTTI”) loss is determined for a fixed-maturity security (and management does not intend to sell the security or it is not more likely than not that the Company will be required to sell the security), the credit portion is recorded in the statement of income as net realized losses on investments and the non-credit portion is recorded in accumulated other comprehensive income. The credit portion results in a permanent reduction of the cost basis of the underlying investment. OTTI losses on fixed-maturity securities management has the intent to sell or it is more likely than not that the Company will be required to sell and on equity securities are reported in realized losses for the entire impairment. | |||||||||
The Company’s other invested assets consist of investments in limited partnerships accounted for using the equity method of accounting, real estate and certain securities for which the Company has elected the fair value option. In accounting for the partnerships, management uses the financial information provided by the general partners, which is on a three-month lag. As of December 31, 2013, the Company had future funding commitments of $45.3 million to these limited partnerships. For securities in which the Company has elected the fair value option, interest and dividends are reported in net investment income with the remaining change in overall fair value reported in other net realized investment gains (losses). | |||||||||
Fair Value | |||||||||
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) followed by similar but not identical assets or liabilities (Level 2) 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 Company primarily uses outside pricing services to assist in determining fair values. For investments in active markets, the Company uses the quoted market prices provided by the outside pricing services to determine fair value. In circumstances where quoted market prices are unavailable, the pricing services utilize fair value estimates based upon other observable inputs including matrix pricing, benchmark interest rates, market comparables and other relevant inputs. | |||||||||
As management is responsible for the recorded fair values, the Company has processes in place to validate the market prices obtained from the outside pricing sources including, but not limited to, periodic evaluation of model pricing methodologies and analytical reviews of certain prices. The Company also periodically performs back-testing of selected sales activity to determine whether there are any significant differences between the market price used to value the security prior to sale and the actual sale price. | |||||||||
Premiums Receivable | |||||||||
Premiums receivable represent amounts due from insureds and reinsureds for insurance coverage and are presented net of an allowance for doubtful accounts of $17.6 million and $16.5 million at December 31, 2013 and 2012, respectively. The allowance for uncollectible amounts is based on an analysis of amounts receivable giving consideration to historical loss experience and current economic conditions and reflects an amount that, in management’s judgment, is adequate. Uncollectible premiums receivable of $12.1 million, $4.8 million and $3.0 million were written off in 2013, 2012 and 2011, respectively. | |||||||||
Deferred Acquisition Costs | |||||||||
Acquisition costs represent the costs of writing business that vary with, and are primarily related to, the successful production of insurance business (principally commissions, premium taxes and certain underwriting costs). Policy acquisition costs are deferred and recognized as expense as related premiums are earned. Deferred acquisition costs (“DAC”) presented in the balance sheet are net of deferred ceding commission revenue. | |||||||||
The value of business acquired (“VOBA”) is an intangible asset relating to the estimated fair value of the unexpired insurance policies acquired in a business combination. VOBA is determined at the time of a business combination and is reported on the consolidated balance sheet with DAC and is amortized in proportion to the timing of the estimated underwriting profit associated with the in force policies acquired. The Company fully amortized the VOBA in the year ended December 31, 2011 and, accordingly, does not have any VOBA recorded on its balance sheet as of December 31, 2013 or 2012. The Company considers anticipated investment income in determining the recoverability of these costs and believes they are fully recoverable. See “Note 8 – Deferred Acquisition Costs” for additional information regarding deferred acquisition costs. | |||||||||
Goodwill | |||||||||
In business combinations, including the acquisition of a group of assets, the Company allocates the purchase price to the net tangible and intangible assets acquired based on their relative fair values. Any portion of the purchase price in excess of this amount results in goodwill. Identifiable intangible assets with a finite useful life are amortized over the period that the asset is expected to contribute directly or indirectly to the future cash flows of the Company and are tested for impairment when impairment indicators are present. Intangible assets with an indefinite life and goodwill are not amortized and are subject to annual impairment testing at the reporting unit level or more frequently if circumstances indicate that the value of goodwill may be impaired. | |||||||||
To estimate the fair value of its reporting units, the Company may utilize a combination of widely accepted valuation techniques including a stock price and market capitalization analysis, discounted cash flow calculations and peer company price to earnings multiples analysis. The stock price and market capitalization analysis takes into consideration the quoted market price of the Company’s outstanding common stock and includes a control premium, derived from historical insurance industry acquisition activity, in determining the estimated fair value of the consolidated entity before allocating that fair value to individual reporting units. The discounted cash flow analysis utilizes long term assumptions for revenue growth, capital growth, earnings projections including those used in the Company’s strategic plan, and an appropriate discount rate. The peer company price to earnings multiples analysis takes into consideration the price earnings multiples of peer companies for each reporting unit and estimated income from the Company’s strategic plan. | |||||||||
The second and third quarter reserve increases were viewed by the Company as events or circumstances that required the Company to perform a detailed quantitative analysis of whether its recorded goodwill was impaired. After performing the quantitative analysis in the second quarter of 2013, it was determined that $214.0 million of goodwill, which represents all of the goodwill allocated to the Commercial Insurance reporting unit, was impaired. In the third quarter of 2013, management in its judgment impaired the remaining $55.5 million of goodwill, all of which was allocated to the Personal Insurance reporting unit. See “Note 7 – Goodwill, Intangible and Fixed Asset Impairments” for additional detail on the Goodwill impairment. | |||||||||
Intangible Assets | |||||||||
Identifiable intangible assets with a finite useful life are amortized over the period in which the asset is expected to contribute directly or indirectly to our future cash flows. Identifiable intangible assets with finite useful lives are amortized over their useful lives and tested for recoverability whenever events or changes in circumstances indicate that a carrying amount may not be recoverable. Identifiable intangible assets with indefinite useful lives are not amortized. Rather, they are tested for recoverability at least annually or whenever events or changes in circumstances indicate that a carrying amount may not be recoverable. Management performed its impairment analysis on its intangible assets with a finite useful life in 2013 and concluded impairment charges of $21.9 million were required to reduce its customer relationship intangible assets. These charges are reported in Other Operating Expenses in the consolidated statements of operations. No impairment losses were recognized on intangible assets with a finite useful life in 2012 or 2011. | |||||||||
The Company completed its annual indefinite lived intangible asset assessment as of December 31, 2013. An impairment loss is recognized if the carrying value of an intangible asset is not recoverable and its carrying amount exceeds its fair value. Any amount of intangible assets determined to be impaired will be recorded as an expense in the period in which the impairment determination is made. No impairment losses were recognized on indefinite lived intangible assets in 2013, 2012 or 2011. | |||||||||
Other Assets | |||||||||
Tower’s other assets balances are comprised primarily of fixed assets, restricted cash, deposit assets, receivables for securities sold, receivables for the participation in involuntary pools and current tax receivables. | |||||||||
Fixed Assets | |||||||||
Furniture, leasehold improvements, computer equipment, and software, including internally developed software, are reported at cost less accumulated depreciation and amortization. We periodically evaluate our long-lived assets to be held and used. Our judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions and legal factors. Any adverse changes in these factors could cause an impairment in our assets. For long-lived assets to be held and used, if an impairment indicator exists, we compare the expected future undiscounted cash flows against the carrying amount of that asset. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset, we record an impairment loss for the carrying amount in excess of the estimated fair value, if any, of the asset. Gross fixed assets and accumulated depreciation were $194.0 million and $54.7 million, as of December 31, 2013, and 2012, respectively. As a result of the reserve increases, rating downgrades and the expected significant declines in net written premiums and the orders and restrictions placed by various insurance departments, management tested fixed assets for recoverability in 2013 and recorded a non-cash charge to earnings of $125.8 million in 2013. Gross fixed assets and accumulated depreciation (after the effects of the impairment) were $20.7 million and $1.0 million as of December 31, 2013. | |||||||||
Other liabilities | |||||||||
Tower’s other liabilities balances are comprised primarily of accrued operating expenses, payables for securities purchased, accrued boards, bureaus and tax expenses, and capital lease obligations. | |||||||||
Variable Interest Entities | |||||||||
The Company consolidates the Reciprocal Exchanges as it has determined that these are variable interest entities and that the Company is the primary beneficiary. See “Note 4 – Variable Interest Entities” for more details. | |||||||||
Investment in unconsolidated affiliate | |||||||||
Although the Company owned less than 20% of the outstanding common stock of Canopius Group at December 31, 2012, it recorded its investment in Canopius Group under the equity method of accounting as it was able to significantly influence the operating and financial policies and decisions of Canopius Group. In the twelve months ended December 31, 2013 and December 31, 2012, the change in the value of the Company’s investment in Canopius was a gain of $6.9 million and a loss of $1.5 million, respectively. Changes in the value were recognized in Equity in income (loss) of unconsolidated affiliate in the consolidated statement of operations. On December 13, 2013, Tower sold its 10.7% ownership in Canopius Group. | |||||||||
Income Taxes | |||||||||
Pursuant to a written tax agreement (the “Tax Sharing Agreement”), each of the Tower’s subsidiaries is required to make payments to Tower for federal income tax imposed on its taxable income in a manner consistent with filing a separate federal income tax return (but subject to certain limitations that are applied to the Tower consolidated group as a whole). The Reciprocal Exchanges are not subject to the Tax Sharing Agreement but file separate tax returns annually. | |||||||||
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that all or some portion of the deferred tax asset will not be realized. | |||||||||
Management in its judgment concluded that a full valuation allowance was required for the net deferred tax assets after its consideration of the cumulative three-year pre-tax loss in its U.S. taxed subsidiaries resulting from certain 2013 events and the 2012 pre-tax loss of $61.0 million. In 2013, Tower had $325.6 million of prior year adverse reserve development, of which $149.7 million was recorded in 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, 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 subsequently recorded the full valuation allowance. | |||||||||
Treasury Stock | |||||||||
The Company accounts for the treasury stock at the repurchase price as a reduction to shareholders’ equity as it does not currently intend to retire the treasury stock held at December 31, 2013. | |||||||||
Stock-based Compensation | |||||||||
The Company accounts for restricted stock shares and options awarded at fair value at the date awarded and compensation expense is recorded over the requisite service period that has not been rendered. The Company amortizes awards with graded vesting on a straight-line basis over the requisite service period. | |||||||||
Assessments | |||||||||
Insurance related assessments are accrued in the period in which they have been incurred. The Company is subject to a variety of assessments. Among such assessments are state guaranty funds and workers’ compensation second injury funds. State guaranty fund assessments are used by state insurance oversight boards to cover losses of policyholders of insolvent insurance companies and for the operating expenses of such agencies. The Company uses estimates derived from state regulators and/or NAIC Tax and Assessments Guidelines. | |||||||||
Earnings (loss) per Share | |||||||||
The Company measures earnings (loss) per share at two levels: basic earnings (loss) per share and diluted earnings (loss) per share. Basic earnings per share is calculated by dividing net income (loss) attributable to Tower common shareholders by the weighted average number of common shares outstanding during the year. Undistributed net earnings (loss) (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 shareholders. 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 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. | |||||||||
Foreign currency | |||||||||
The Company’s functional currency is the U.S. dollar. | |||||||||
Statutory Accounting Principles | |||||||||
The Company’s insurance subsidiaries are required to prepare statutory basis financial statements in accordance with practices prescribed or permitted by the state or country in which they are domiciled. See “Note 18 – Statutory Financial Information and Accounting Policies” for more details. | |||||||||
Concentration and Credit Risk | |||||||||
Financial instruments that potentially subject the Company to concentration and credit risk are primarily cash and cash equivalents, investments, interest rate swaps, premiums receivable and reinsurance recoverables. Investments are diversified through many industries and geographic regions through the use of money managers who employ different investment strategies. The Company limits the amount of credit exposure with any one financial institution and believes that no significant concentration of credit risk exists with respect to cash and investments. The interest rate swap contracts contain credit support annex agreements with collateral posting provisions which reduces counterparty non-performance risk. The premiums receivable balances are generally diversified due to the number of entities comprising the Company’s distribution network and its customer base, which is largely concentrated in the Northeast, Florida, Texas and California. To reduce credit risk, the Company performs ongoing evaluations of its distribution network’s and customers’ financial condition. The Company also has receivables from its reinsurers. Reinsurance contracts do not relieve the Company from its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company periodically evaluates the financial condition of its reinsurers and, in certain cases, requires collateral from its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. As of December 31, 2013, the largest uncollateralized reinsurance recoverable balance from any one reinsurer was $56.4 million representing 6.8% of the Company’s total reinsurance recoverable balance. Management’s policy is to review all outstanding receivables at period end as well as the bad debt write-offs experienced in the past and establish an allowance for doubtful accounts, if deemed necessary. | |||||||||
Our largest agent accounted for 9.7%, 7.5% and 10%, respectively, of the insurance subsidiaries’ premiums receivable balances at December 31, 2013, 2012 and 2011. Our largest agent accounted for 9%, 7% and 7% of the insurance subsidiaries’ direct premiums written in 2013, 2012 and 2011, respectively. | |||||||||
Accounting Pronouncements | |||||||||
Accounting guidance adopted in 2013 | |||||||||
In July 2012, the Financial Accounting Standards Board (FASB) issued an accounting standard that allows a company, as a first step in an impairment review, to assess qualitatively whether it is more likely than not that an indefinite-lived intangible asset is impaired. We are not required to calculate the fair value of an indefinite-lived intangible asset and perform a quantitative impairment test unless we determine, based on the results of the qualitative assessment, that it is more likely than not the asset is impaired. The standard became effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. We adopted the standard on its required effective date of January 1, 2013. (See Note 7 for a discussion of Goodwill, Intangible and Fixed Asset Impairments in 2013). | |||||||||
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 March 2013, the FASB issued an accounting standard addressing whether consolidation guidance or foreign currency guidance applies to the release of the cumulative translation adjustment into net income when a parent sells all or a part of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or net assets that are a business (other than a sale of in-substance real estate) within a foreign entity. The guidance also resolves the diversity in practice for the cumulative translation adjustment treatment in business combinations achieved in stages involving foreign entities. | |||||||||
Under this standard, the entire amount of the cumulative translation adjustment associated with the foreign entity should be released into earnings when there has been: (i) a sale of a subsidiary or group of net assets within a foreign entity and the sale represents a complete or substantially complete liquidation of the foreign entity in which the subsidiary or the net assets had resided; (ii) a loss of a controlling financial interest in an investment in a foreign entity; or (iii) a change in accounting method from applying the equity method to an investment in a foreign entity to consolidating the foreign entity. The standard is effective for fiscal years and interim periods beginning after December 15, 2013, and will be applied prospectively. We plan to adopt the standard on its required effective date of January 1, 2014 and do not expect the adoption of the standard to have a material effect on our consolidated financial condition, results of operations or cash flows. | |||||||||
In July 2013, the FASB clarified the applicable guidance for the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward as long as it is available, at the reporting date under the tax law of the applicable jurisdiction, to settle any additional income taxes that would result from the disallowance of a tax position (with certain exceptions). The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. This ASC update is effective for annual and interim periods beginning after December 15, 2013, with early adoption permitted, and is to be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company does not expect the adoption of this standard to have a material impact on its financial position or results of operations. | |||||||||
In July 2013, the FASB issued an accounting standard that permits the Federal Funds Effective Swap Rate (or Overnight Index Swap Rate) to be used as a U.S. benchmark interest rate for hedge accounting purposes in addition to U.S. Treasury rates and LIBOR. The standard also removes the prohibition on the use of differing benchmark rates when entering into similar hedging relationships. The standard became effective on a prospective basis for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013 to the extent the Federal Funds Effective Swap Rate is used as a U.S. benchmark interest rate for hedge accounting purposes. The Company will consider this guidance if and when it enters into any new hedging relationships. |
Canopius_Merger_Transaction
Canopius Merger Transaction | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Canopius Merger Transaction | ' | ||||||||
Note 3—Canopius Merger Transaction | |||||||||
On August 20, 2012, TGI closed on its previously announced $74.9 million acquisition of a 10.7% stake in Canopius Group. 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 Canopius 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 of $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 Canopius 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 were 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 Canopius 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 were 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 Canopius 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 Canopius Merger Transaction were held by third party investors. TGIL, succeeding to the attributes of TGI as registrant, including TGI’s SEC file number, TGIL’s 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 Canopius Merger Transaction. | |||||||||
The Canopius Merger Transaction was 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 provided the Company with an international platform through which it accesses the U.S., Bermuda and the Lloyd’s of London (“Lloyd’s”) markets. | |||||||||
On December 13, 2013, Tower closed a sale to an investment fund managed by Bregal Capital LLP (“Bregal”) of all of the shares of the capital stock of Canopius Group owned by Tower. The initial purchase price for the Canopius shares is $69.7 million (£42.5 million), which has been paid in full to Tower. In addition, if a legally binding contract for the sale or other transfer of shares representing a majority of the voting power of Canopius Group is entered into within six months after the date of Tower’s stock purchase agreement with Bregal, a further cash payment would be made by Bregal to Tower. This additional cash payment would be equivalent to the excess, if any, of (1) one-third of the difference between the amount in British pound sterling paid for the shares previously owned by Tower in such sale and £40.6 million (plus Tower’s share of expenses of such sale), minus (2) £1.95 million (the “Additional Payment”). On December 18, 2013, NKSJ Holdings announced that it had entered into an agreement, through its insurance subsidiary Sompo Japan Insurance, Inc. to purchase 100% of the shares of Canopius Group. This Additional Payment meets the definition of a derivative as of December 31, 2013. Management in its judgment concluded that the initial fair value of this derivative is $7.2 million and has included it in other assets on the balance sheet. In addition, $2.1 million has been recorded in realized gains on the income statement, reflecting the increase in fair value of the derivative from its inception date of December 13, 2013 to the reporting date of December 31, 2013. | |||||||||
With proceeds from the sale, Tower has paid in full the $70.0 million outstanding on its credit facility led by Bank of America, N.A., and the credit facility has been terminated. | |||||||||
Accounting for the Canopius Merger Transaction | |||||||||
The Company has accounted for the Canopius 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 Canopius Merger Transaction was primarily based on the fact that immediately following the close of the Canopius 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 Canopius 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 Canopius 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 Canopius 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 Canopius Merger Transaction, TGI entered into a commutation agreement whereby 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 Canopius Merger Transaction on March 13, 2013. | |||||||||
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 | 463,745 | ||||||||
Prepaid reinsurance | 152,431 | ||||||||
Funds held by reinsured companies | 698,819 | ||||||||
Other assets | 80,201 | ||||||||
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 year ended December 31, 2013, the Company recognized approximately $20.3 million of such costs, all of which have been classified within “acquisition-related transaction costs” on the consolidated statement of operations. Such costs included $11.6 million in compensation expense (of which accelerated vesting of restricted stock was $10.3 million) and $8.7 million in legal and accounting fees. | |||||||||
The resulting goodwill recognized in connection with the Canopius Merger Transaction was mainly derived from the synergies and economies of scale expected to result from the combined operations of the Company. This goodwill was fully impaired in the second quarter of 2013. See “Note 7 – Goodwill, Intangible and Fixed Asset Impairments” for the allocation of the Canopius Merger Transaction goodwill by segment and discussion on the non-cash impairment charge. | |||||||||
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. The risk premium was fully amortized in the third quarter of 2013 in connection with the September 30, 2013 commutation and novation of the Syndicate 4444 YOA 2012 and YOA 2011 and prior years assumed reinsurance and retrocession agreements. | |||||||||
The September 30, 2013 commutation of the Syndicate 4444 YOA 2012 and YOA 2011 and prior years retrocession agreements with CRL and the novation of the assumed reinsurance with Canopius Group on these same contracts provided the Company access to $30.3 million of assets that were previously restricted as “Funds at Lloyd’s” assets. No commutation gain or loss was recognized on these transactions. | |||||||||
Since the effective date of the Canopius Merger Transaction on March 13, 2013 through December 31, 2013, the operations of the acquired business accounted for approximately $53.5 million and $(11.8) million of the Company’s consolidated revenues and net income (loss), respectively. | |||||||||
The following unaudited pro forma financial information presents the consolidated revenues and net income (loss) of the Company for years ended December 31, 2013 and 2012, as if the Canopius Merger Transaction had been completed as of January 1, 2012. | |||||||||
These pro forma amounts exclude any pro forma impacts to the Company’s effective federal income tax rates. | |||||||||
Year Ended | |||||||||
December 31, | |||||||||
($ in thousands) | 2013 | 2012 | |||||||
Revenues | $ | 1,745,146 | $ | 1,933,942 | |||||
Net Income (Loss) | (922,959 | ) | (19,567 | ) |
Variable_Interest_Entities_VIE
Variable Interest Entities ("VIEs") | 12 Months Ended |
Dec. 31, 2013 | |
Variable Interest Entities ("VIEs") | ' |
Note 4—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 year ended December 31, 2013, the Reciprocal Exchanges recognized total revenues, total expenses and net loss of $190.2 million, $211.0 million and $(20.4) million, respectively. For the year ended December 31, 2012, the Reciprocal Exchanges recognized total revenues, total expenses and net income of $204.7 million, $202.4 million and $2.3 million, respectively. |
Investments
Investments | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||
Investments | ' | ||||||||||||||||||||||||
Note 5—Investments | |||||||||||||||||||||||||
The cost or amortized cost and fair value of the Company’s investments in fixed maturity and equity securities, gross unrealized gains and losses, and other-than-temporary impairment losses as of December 31, 2013 and December 31, 2012 are summarized as follows: | |||||||||||||||||||||||||
($ in thousands) | Cost or | Gross | Gross | Fair Value | Unrealized | ||||||||||||||||||||
Amortized | Unrealized | Unrealized | OTTI | ||||||||||||||||||||||
Cost | Gains | Losses | Losses (1) | ||||||||||||||||||||||
December 31, 2013 | |||||||||||||||||||||||||
U.S. Treasury securities | $ | 370,959 | $ | 729 | $ | (7,726 | ) | $ | 363,962 | $ | - | ||||||||||||||
U.S. Agency securities | 110,362 | 1,420 | (561 | ) | 111,221 | - | |||||||||||||||||||
Municipal bonds | 277,382 | 7,981 | (6,257 | ) | 279,106 | - | |||||||||||||||||||
Corporate and other bonds | |||||||||||||||||||||||||
Finance | 148,132 | 9,797 | (1,028 | ) | 156,901 | - | |||||||||||||||||||
Industrial | 316,474 | 8,286 | (3,008 | ) | 321,752 | - | |||||||||||||||||||
Utilities | 47,838 | 1,341 | (1,890 | ) | 47,289 | (17 | ) | ||||||||||||||||||
Commercial mortgage-backed securities | 189,808 | 16,852 | (1,754 | ) | 204,906 | (634 | ) | ||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency backed securities | 63,668 | 891 | (1,218 | ) | 63,341 | - | |||||||||||||||||||
Non-agency backed securities | 30,228 | 4,659 | (31 | ) | 34,856 | (13 | ) | ||||||||||||||||||
Asset-backed securities | 58,783 | 681 | (103 | ) | 59,361 | - | |||||||||||||||||||
Total fixed-maturity securities | 1,613,634 | 52,637 | (23,576 | ) | 1,642,695 | (664 | ) | ||||||||||||||||||
Preferred stocks, principally financial sector | 21,330 | 54 | (2,536 | ) | 18,848 | - | |||||||||||||||||||
Common stocks, principally financial and industrial sectors | 76,378 | 11,432 | (28 | ) | 87,782 | - | |||||||||||||||||||
Short-term investments | 5,925 | - | (28 | ) | 5,897 | - | |||||||||||||||||||
Total, December 31, 2013 | $ | 1,717,267 | $ | 64,123 | $ | (26,168 | ) | $ | 1,755,222 | $ | (664 | ) | |||||||||||||
Tower | $ | 1,465,039 | $ | 56,480 | $ | (21,369 | ) | $ | 1,500,150 | $ | (664 | ) | |||||||||||||
Reciprocal Exchanges | 252,228 | 7,643 | (4,799 | ) | 255,072 | - | |||||||||||||||||||
Total, December 31, 2013 | $ | 1,717,267 | $ | 64,123 | $ | (26,168 | ) | $ | 1,755,222 | $ | (664 | ) | |||||||||||||
December 31, 2012 | |||||||||||||||||||||||||
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 | $ | 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 | $ | 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). | ||||||||||||||||||||||||
As of December 31, 2013 and 2012, U.S. Treasury Notes and other securities with carrying values of $398.4 million and $351.1 million, respectively, were on deposit with various states to comply with the insurance laws in which the Company is licensed. | |||||||||||||||||||||||||
In addition, the Company had $248.9 million and $481.5 million of investments as of December 31, 2013 and 2012, respectively, held by counterparties as collateral or in trusts to support letters of credit issued on Tower’s behalf, reinsurance liabilities on certain assumed reinsurance treaties and obligations under certain leases. | |||||||||||||||||||||||||
Major categories of net investment income are summarized as follows: | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||||||||||||||
Income | |||||||||||||||||||||||||
Fixed-maturity securities | $ | 75,731 | $ | 96,056 | $ | 105,533 | |||||||||||||||||||
Equity securities | 22,912 | 28,989 | 24,576 | ||||||||||||||||||||||
Cash and cash equivalents | 244 | 1,112 | 695 | ||||||||||||||||||||||
Other invested assets | 16,138 | 6,680 | 274 | ||||||||||||||||||||||
Other | 736 | 387 | 643 | ||||||||||||||||||||||
Total | 115,761 | 133,224 | 131,721 | ||||||||||||||||||||||
Expenses | |||||||||||||||||||||||||
Investment expenses | (6,553 | ) | (6,059 | ) | (5,247 | ) | |||||||||||||||||||
Net investment income | $ | 109,208 | $ | 127,165 | $ | 126,474 | |||||||||||||||||||
Tower | 106,309 | 121,907 | 120,083 | ||||||||||||||||||||||
Reciprocal Exchanges | 9,578 | 12,575 | 12,846 | ||||||||||||||||||||||
Elimination of interest on Reciprocal Exchange surplus notes | (6,679 | ) | (7,317 | ) | (6,455 | ) | |||||||||||||||||||
Net investment income | $ | 109,208 | $ | 127,165 | $ | 126,474 | |||||||||||||||||||
Proceeds from the sale of fixed-maturity securities were $1.7 billion, $1.8 billion and $2.0 billion for the years ended December 31, 2013, 2012 and 2011, respectively. Proceeds from the sale of equity securities were $1.3 billion, $1.4 billion and $793.9 million for the years ended December 31, 2013, 2012 and 2011, respectively. | |||||||||||||||||||||||||
Gross realized gains, losses and impairment write-downs on investments are summarized as follows: | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||||||||||||||
Fixed-maturity securities | |||||||||||||||||||||||||
Gross realized gains | $ | 51,598 | $ | 59,319 | $ | 44,550 | |||||||||||||||||||
Gross realized losses | (9,760 | ) | (2,780 | ) | (11,101 | ) | |||||||||||||||||||
41,838 | 56,539 | 33,449 | |||||||||||||||||||||||
Equity securities | |||||||||||||||||||||||||
Gross realized gains | 18,004 | 13,090 | 8,328 | ||||||||||||||||||||||
Gross realized losses | (28,649 | ) | (31,404 | ) | (29,138 | ) | |||||||||||||||||||
(10,645 | ) | (18,314 | ) | (20,810 | ) | ||||||||||||||||||||
Other (1) | |||||||||||||||||||||||||
Gross realized gains | 12,946 | 3,432 | - | ||||||||||||||||||||||
Gross realized losses | (5,676 | ) | (6,548 | ) | - | ||||||||||||||||||||
7,270 | (3,116 | ) | - | ||||||||||||||||||||||
Net realized gains on investments | 38,463 | 35,109 | 12,639 | ||||||||||||||||||||||
Other-than-temporary impairment losses: | |||||||||||||||||||||||||
Fixed-maturity securities | (6,682 | ) | (1,320 | ) | (580 | ) | |||||||||||||||||||
Equity securities | (6,733 | ) | (8,313 | ) | (2,665 | ) | |||||||||||||||||||
Total other-than-temporary impairment losses recognized in earnings | (13,415 | ) | (9,633 | ) | (3,245 | ) | |||||||||||||||||||
Total net realized investment gains (losses) | $ | 25,048 | $ | 25,476 | $ | 9,394 | |||||||||||||||||||
Tower | $ | 22,894 | $ | 12,245 | $ | 6,980 | |||||||||||||||||||
Reciprocal Exchanges | 2,154 | 13,231 | 2,414 | ||||||||||||||||||||||
Total net realized investment gains (losses) | $ | 25,048 | $ | 25,476 | $ | 9,394 | |||||||||||||||||||
(1) | Other gross realized gains and losses consists primarily of foreign exchange and “debt and equity securities sold, not yet purchased,” which are reported in Other liabilities. The Company recorded a $4.3 million gain from translation of foreign currency transactions to the functional currency. | ||||||||||||||||||||||||
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 certain 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 amount of fixed-maturity and equity securities that were OTTI for the years ended December 31, 2013, 2012 and 2011. This resulted in recording impairment write-downs included in net realized investment gains (losses), and reduced the unrealized loss in other comprehensive net income: | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||||||||||||||
U.S. Treasury securities | $ | (801 | ) | $ | - | $ | - | ||||||||||||||||||
U.S. Agency securities | (572 | ) | - | - | |||||||||||||||||||||
Municipal bonds | (367 | ) | (113 | ) | - | ||||||||||||||||||||
Corporate and other bonds | (4,271 | ) | (1,029 | ) | - | ||||||||||||||||||||
Commercial mortgage-backed securities | (1,176 | ) | (430 | ) | (219 | ) | |||||||||||||||||||
Residential mortgage-backed securities | (423 | ) | (34 | ) | (235 | ) | |||||||||||||||||||
Asset-backed securities | (53 | ) | - | (391 | ) | ||||||||||||||||||||
Equities | (6,733 | ) | (8,313 | ) | (2,664 | ) | |||||||||||||||||||
Other-than-temporary-impairments | (14,396 | ) | (9,919 | ) | (3,509 | ) | |||||||||||||||||||
Portion of loss recognized in accumulated other comprehensive income (loss) | 981 | 286 | 264 | ||||||||||||||||||||||
Impairment losses recognized in earnings | $ | (13,415 | ) | $ | (9,633 | ) | $ | (3,245 | ) | ||||||||||||||||
Tower | $ | (13,414 | ) | $ | (9,919 | ) | $ | (3,245 | ) | ||||||||||||||||
Reciprocal Exchanges | (1 | ) | 286 | - | |||||||||||||||||||||
Impairment losses recognized in earnings | $ | (13,415 | ) | $ | (9,633 | ) | $ | (3,245 | ) | ||||||||||||||||
The following table provides a rollforward of the cumulative amount of credit related OTTI for securities still held showing the amounts that have been included in earnings on a pretax basis for the years ended 2013 and 2012 (none of such OTTI was included within the Reciprocal Exchanges): | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||||||||||||||
Balance, January 1, | $ | 4,492 | $ | 12,666 | $ | 18,075 | |||||||||||||||||||
Additional credit losses recognized during the period, related to securities for which: | |||||||||||||||||||||||||
No OTTI has been previously recognized | 6,252 | 1,259 | 44 | ||||||||||||||||||||||
OTTI has been previously recognized | 430 | 61 | 537 | ||||||||||||||||||||||
Reductions due to: | |||||||||||||||||||||||||
Securities sold during the period (realized) | (3,357 | ) | (9,494 | ) | (5,990 | ) | |||||||||||||||||||
Balance, December 31, | $ | 7,817 | $ | 4,492 | $ | 12,666 | |||||||||||||||||||
Unrealized Losses | |||||||||||||||||||||||||
There are 511 securities at December 31, 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 interest rate environment or 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. The structured securities that had significant unrealized losses resulted primarily from declines in both residential and commercial real estate prices. 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 December 31, 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 $23.6 million as of December 31, 2013, consisting primarily of municipal bonds, corporate and other bonds and U.S. Treasury securities of $19.9 million. The total fixed-maturity portfolio of gross unrealized losses included 490 securities which were, in aggregate, approximately 3.0% below amortized cost. Of the 490 fixed maturity investments identified, 68 have been in an unrealized loss position for more than 12 months. The total unrealized loss on these investments at December 31, 2013 was $4.2 million. Management does not consider these investments to be other-than-temporarily impaired. | |||||||||||||||||||||||||
For common stocks, there were 20 securities in a loss position at December 31, 2013 totaling $2.6 million. Management evaluated the financial condition of the common stock issuers, the severity and duration of the impairment, and our ability and intent to hold to recovery and determined these securities are not OTTI. The evaluation consisted of a detailed review, including but not limited to some or all of the following factors for each security: the current S&P rating, analysts’ reports, past earnings trends and analysts’ earnings expectations for the next 12 months, liquidity, near-term financing risk, and whether the company was currently paying dividends on its equity securities. Management does not consider these investments to be other-than-temporarily impaired. | |||||||||||||||||||||||||
The following table presents information regarding invested assets that were in an unrealized loss position at December 31, 2013 and December 31, 2012 by amount of time in a continuous unrealized loss position: | |||||||||||||||||||||||||
Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||||
($ in thousands) | Fair | Unrealized | Fair | Unrealized | Aggregate | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Fair Value | Losses | ||||||||||||||||||||
December 31, 2013 | |||||||||||||||||||||||||
U.S. Treasury securities | $ | 273,217 | $ | (7,726 | ) | $ | - | $ | - | $ | 273,217 | $ | (7,726 | ) | |||||||||||
U.S. Agency securities | 51,808 | (561 | ) | - | - | 51,808 | (561 | ) | |||||||||||||||||
Municipal bonds | 109,345 | (5,056 | ) | 4,268 | (1,201 | ) | 113,613 | (6,257 | ) | ||||||||||||||||
Corporate and other bonds | |||||||||||||||||||||||||
Finance | 37,811 | (1,005 | ) | 335 | (23 | ) | 38,146 | (1,028 | ) | ||||||||||||||||
Industrial | 124,869 | (2,550 | ) | 10,023 | (458 | ) | 134,892 | (3,008 | ) | ||||||||||||||||
Utilities | 27,698 | (805 | ) | 7,292 | (1,085 | ) | 34,990 | (1,890 | ) | ||||||||||||||||
Commercial mortgage-backed securities | 26,469 | (597 | ) | 20,397 | (1,157 | ) | 46,866 | (1,754 | ) | ||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency backed | 37,660 | (925 | ) | 5,166 | (293 | ) | 42,826 | (1,218 | ) | ||||||||||||||||
Non-agency backed | 1,027 | (19 | ) | 182 | (12 | ) | 1,209 | (31 | ) | ||||||||||||||||
Asset-backed securities | 32,461 | (103 | ) | - | - | 32,461 | (103 | ) | |||||||||||||||||
Total fixed-maturity securities | 722,365 | (19,347 | ) | 47,663 | (4,229 | ) | 770,028 | (23,576 | ) | ||||||||||||||||
Preferred stocks | 10,538 | (2,285 | ) | 6,154 | (251 | ) | 16,692 | (2,536 | ) | ||||||||||||||||
Common stocks | 7,125 | (28 | ) | - | - | 7,125 | (28 | ) | |||||||||||||||||
Short-term investments | 3,897 | (28 | ) | - | - | 3,897 | (28 | ) | |||||||||||||||||
Total, December 31, 2013 | $ | 743,925 | $ | (21,688 | ) | $ | 53,817 | $ | (4,480 | ) | $ | 797,742 | $ | (26,168 | ) | ||||||||||
Tower | $ | 663,127 | $ | (19,335 | ) | $ | 23,096 | $ | (2,034 | ) | $ | 686,223 | $ | (21,369 | ) | ||||||||||
Reciprocal Exchanges | 80,798 | (2,353 | ) | 30,721 | (2,446 | ) | 111,519 | (4,799 | ) | ||||||||||||||||
Total, December 31, 2013 | $ | 743,925 | $ | (21,688 | ) | $ | 53,817 | $ | (4,480 | ) | $ | 797,742 | $ | (26,168 | ) | ||||||||||
December 31, 2012 | |||||||||||||||||||||||||
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 | (667 | ) | 4,188 | (201 | ) | 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 | (2 | ) | 4,232 | (12 | ) | 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 | $ | 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 | $ | 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. | |||||||||||||||||||||||||
Fixed-Maturity Investment—Time to Maturity | |||||||||||||||||||||||||
The following table shows the composition of the fixed-maturity portfolio by remaining time to maturity at December 31, 2013 and 2012. For securities that are redeemable at the option of the issuer and have a market price that is greater than par value, the maturity used for the table below is the earliest redemption date. For securities that are redeemable at the option of the issuer and have a market price that is less than par value, the maturity used for the table below is the final maturity date. | |||||||||||||||||||||||||
Tower | Reciprocal Exchanges | Total | |||||||||||||||||||||||
($ in thousands) | Amortized | Fair Value | Amortized | Fair | Amortized | Fair Value | |||||||||||||||||||
Cost | Cost | Value | Cost | ||||||||||||||||||||||
December 31, 2013 | |||||||||||||||||||||||||
Remaining Time to Maturity | |||||||||||||||||||||||||
Less than one year | $ | 33,305 | $ | 33,727 | $ | 7,866 | $ | 8,021 | $ | 41,171 | $ | 41,748 | |||||||||||||
One to five years | 507,388 | 513,841 | 39,469 | 41,381 | 546,857 | 555,222 | |||||||||||||||||||
Five to ten years | 459,070 | 459,251 | 82,003 | 81,515 | 541,073 | 540,766 | |||||||||||||||||||
More than 10 years | 100,977 | 102,801 | 41,069 | 39,693 | 142,046 | 142,494 | |||||||||||||||||||
Mortgage and asset-backed securities | 263,417 | 280,526 | 79,070 | 81,939 | 342,487 | 362,465 | |||||||||||||||||||
Total | $ | 1,364,157 | $ | 1,390,146 | $ | 249,477 | $ | 252,549 | $ | 1,613,634 | $ | 1,642,695 | |||||||||||||
December 31, 2012 | |||||||||||||||||||||||||
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 | $ | 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 December 31, 2013 and 2012: | |||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||||||||||
Limited partnerships, equity method | $ | 46,521 | $ | 23,864 | |||||||||||||||||||||
Real estate, amortized cost | 6,054 | 7,422 | |||||||||||||||||||||||
Securities reported under the fair value option: | 43,580 | 25,000 | |||||||||||||||||||||||
Other | - | 1,500 | |||||||||||||||||||||||
Total | $ | 96,155 | $ | 57,786 | |||||||||||||||||||||
Securities reported under the fair value option include eight 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 significant inputs used to determine fair value of these limited partnerships are considered Level 3 pursuant to the fair value hierarchy. See “Note 6 – Fair Value Measurements” below. As of December 31, 2013, the Company and its insurance companies had future funding commitments of $45.3 million including but not limited to the limited partnerships. |
Fair_Value_Measurements
Fair Value Measurements | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||
Fair Value Measurements | ' | ||||||||||||||||||||||||
Note 6—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. Generally included in this valuation methodology are investments in certain mortgage-backed and asset-backed securities and securities the Company is reporting under the fair value option. | |||||||||||||||||||||||||
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. | |||||||||||||||||||||||||
The Additional Payment derivative’s fair value was calculated as discussed in “Note 3 – Canopius Merger Transaction.” The significant unobservable inputs included the estimated sales price Bregal could sell Canopius Group to a third party and the probability of such a sale closing. In December 2013, Bregal executed a stock purchase agreement with a third party. | |||||||||||||||||||||||||
As of December 31, 2013 and 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 | |||||||||||||||||||||
December 31, 2013 | |||||||||||||||||||||||||
Fixed-maturity securities | |||||||||||||||||||||||||
U.S. Treasury securities | $ | - | $ | 363,962 | $ | - | $ | 363,962 | |||||||||||||||||
U.S. Agency securities | - | 111,221 | - | 111,221 | |||||||||||||||||||||
Municipal bonds | - | 279,106 | - | 279,106 | |||||||||||||||||||||
Corporate and other bonds | - | 522,516 | 3,426 | 525,942 | |||||||||||||||||||||
Commercial mortgage-backed securities | - | 204,906 | - | 204,906 | |||||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency | - | 63,341 | - | 63,341 | |||||||||||||||||||||
Non-agency | - | 34,856 | - | 34,856 | |||||||||||||||||||||
Asset-backed securities | - | 59,361 | - | 59,361 | |||||||||||||||||||||
Total fixed-maturities | - | 1,639,269 | 3,426 | 1,642,695 | |||||||||||||||||||||
Equity securities | 106,630 | - | - | 106,630 | |||||||||||||||||||||
Short-term investments | - | 5,897 | - | 5,897 | |||||||||||||||||||||
Total investments at fair value | 106,630 | 1,645,166 | 3,426 | 1,755,222 | |||||||||||||||||||||
Other invested assets (1) | - | - | 43,580 | 43,580 | |||||||||||||||||||||
Other Assets | |||||||||||||||||||||||||
Additional Payment derivative | - | - | 9,343 | 9,343 | |||||||||||||||||||||
Other liabilities | |||||||||||||||||||||||||
Interest rate swap contracts | - | (6,066 | ) | - | (6,066 | ) | |||||||||||||||||||
Debt and equity securities sold, not yet purchased | - | (11,099 | ) | - | (11,099 | ) | |||||||||||||||||||
Total, December 31, 2013 | $ | 106,630 | $ | 1,628,001 | $ | 56,349 | $ | 1,790,980 | |||||||||||||||||
Tower | $ | 104,107 | $ | 1,375,452 | $ | 56,349 | $ | 1,535,908 | |||||||||||||||||
Reciprocal Exchanges | 2,523 | 252,549 | - | 255,072 | |||||||||||||||||||||
Total, December 31, 2013 | $ | 106,630 | $ | 1,628,001 | $ | 56,349 | $ | 1,790,980 | |||||||||||||||||
December 31, 2012 | |||||||||||||||||||||||||
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 | 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 | $ | 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 | $ | 146,258 | $ | 2,323,344 | $ | 25,000 | $ | 2,494,602 | |||||||||||||||||
(1) $43.6 million of the $96.2 million Other invested assets reported on the consolidated balance sheet at December 31, 2013 is reported at fair value. The remaining $52.6 million of Other invested assets is reported under the equity method of accounting. | |||||||||||||||||||||||||
(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 December 31, 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, we used the quoted market prices provided by the outside pricing services to determine fair value. In circumstances where quoted market prices were unavailable, we 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. | |||||||||||||||||||||||||
Our 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. We also periodically perform 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 December 31, 2013 classified as Level 1 or Level 2 in the above table is 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, there were no transfers of investments between Level 1 and Level 2 and one investment transfer between Level 2 and Level 3. In 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 by 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 by using quoted prices for similar securities in active markets. These instruments resulted in net realized gains of $.6 million for the year ended December 31, 2013. | |||||||||||||||||||||||||
The Company holds seven 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. Two of the seven securities, START VII CLO and HONDIUS CRAFT CLO, are credit linked notes which will mature in 2015 and 2017, respectively, 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 third security, Aeolus CHIAT SAC, 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 four 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 of the four preferred equity interest investments closed in the latter part of June 2013 (and the fourth investment closed on July 1, 2013). These four preferred equity interest investments are carried at fair value with changes recorded in the statement of operations. | |||||||||||||||||||||||||
At December 31, 2013, management transferred a private convertible bond with a fair value of $3.4 million from Level 2 to Level 3. During the fourth quarter, management used a liquidation pricing methodology to determine the convertible bond’s fair value as of December 31, 2013 and the change in pricing methodology for this security resulted in the Company recording an OTTI loss of $3.6 million, which was reported through realized losses. | |||||||||||||||||||||||||
Management is responsible for the determination of the value of the investments carried at fair value and the supporting methodologies and assumptions. Management has reviewed the pricing techniques and methodologies of the independent pricing sources and believes that their policies adequately consider market activity, either based on specific transactions for the issue valued or based on modeling of securities with similar credit quality, duration, yield and structure that were recently traded. Management monitors security-specific valuation trends and discusses material changes or the absence of expected changes with the portfolio managers to understand the underlying factors and inputs and to validate the reasonableness of pricing. Management also back-tests the prices on numerous sales of securities during the year to validate the previous pricing provided as well as utilizes other pricing sources to validate the pricing provided by our primary provider of the majority of the non-U.S. Treasury securities and non-agency securities included in Level 2. | |||||||||||||||||||||||||
The following table summarizes changes in Level 3 assets measured at fair value for the years ended December 31, 2013, 2012 and 2011 for Tower (the Reciprocal Exchanges do not have any Level 3 assets): | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
2013 | 2012 (1) | 2011(1) | |||||||||||||||||||||||
($ in thousands) | Other | Fixed | Additional | Total | |||||||||||||||||||||
Invested | Maturity | Payment | |||||||||||||||||||||||
Assets | Securities (2) | Derivative | |||||||||||||||||||||||
Beginning balance, January 1 | $ | 25,000 | - | - | 25,000 | $ | 25,000 | $ | 2,058 | ||||||||||||||||
Total gains (losses)-realized / unrealized | |||||||||||||||||||||||||
Included in net income | (670 | ) | - | 2,081 | (670 | ) | - | (1,067 | ) | ||||||||||||||||
Included in other comprehensive income (loss) | - | - | - | - | - | - | |||||||||||||||||||
Purchases | 19,250 | - | 7,262 | 28,593 | - | 25,000 | |||||||||||||||||||
Issuances | - | - | - | - | - | - | |||||||||||||||||||
Settlements | - | - | - | - | - | - | |||||||||||||||||||
Net transfers into (out of) Level 3 | - | 3,426 | - | 3,426 | - | (991 | ) | ||||||||||||||||||
Ending balance, December 31, | $ | 43,580 | 3,426 | 9,343 | 56,349 | $ | 25,000 | $ | 25,000 | ||||||||||||||||
(1) All activity for years ended December 31, 2012 and 2011 is comprised of other invested assets | |||||||||||||||||||||||||
(2) Comprised of corporate and other bonds |
Goodwill_Intangible_and_Fixed_
Goodwill, Intangible and Fixed Assets Impairments | 12 Months Ended | ||||||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||||||
Goodwill, Intangible and Fixed Assets Impairments | ' | ||||||||||||||||||||||||||||
Note 7—Goodwill, Intangible and Fixed Assets Impairments | |||||||||||||||||||||||||||||
Goodwill | |||||||||||||||||||||||||||||
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 Canopius Merger Transaction (See “Note 3 – Canopius 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 Canopius Merger Transaction to the Commercial Insurance reporting unit. | |||||||||||||||||||||||||||||
2013 Reorganizations | |||||||||||||||||||||||||||||
In the second quarter of 2013, the Company changed the way it presented its results by segment. Following the reorganization, based on information 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 Assumed Reinsurance and (iii) Personal Insurance. (Each of the reporting units corresponds with the Company’s reporting segments). | |||||||||||||||||||||||||||||
In the third quarter of 2013, the Company re-evaluated the way it presents its results by segment, as described in “Note 1 – Nature of Business”. Following the third quarter 2013 reorganization, based on the information 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) Assumed Reinsurance and (iii) Personal Insurance. (Each of the reporting units corresponds with the Company’s reporting segments). | |||||||||||||||||||||||||||||
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 1 of 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. | |||||||||||||||||||||||||||||
The process of evaluating goodwill for impairment requires judgments and assumptions to be made to determine the fair value of each reporting unit, including discounted cash flow calculations, assumptions that market participants would make in valuing each reporting unit and the level of the Company’s own share price. Fair value estimates utilize both the market approach and income approach. Management considered valuation techniques such as peer company price-to-earnings and price-to-book multiples and an in-depth analysis of projected future cash flows and relevant discount rates, which considered market participant inputs. Other significant assumptions include levels of surplus available for distribution, future business growth and earnings projections for each reporting unit. Estimates of fair value are subject to assumptions that are sensitive to change and represent the Company’s reasonable expectation regarding future developments. Management also considers the implied control premium derived from its market capitalization and the implied fair value of the enterprise. | |||||||||||||||||||||||||||||
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 in its judgment concluded a quarterly impairment test was required as a result of the reorganization and significant prior years’ loss reserves incurred (see “Note 10 – Loss and Loss Adjustment Expense”). In the third quarter of 2013, as a result of the additional significant prior years’ loss reserves incurred, management in its judgment concluded a quarterly impairment test was required again as of September 30, 2013 in the preparation of the September 30, 2013 consolidated financial statements. | |||||||||||||||||||||||||||||
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 18 – 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. As of June 30, 2013, the Company reported $55.5 million of goodwill, all of which related to the Personal Insurance reporting unit. | |||||||||||||||||||||||||||||
In conducting the goodwill impairment analysis for the quarter ended September 30, 2013, the Company estimated the Personal Insurance fair values using Tower’s current market capitalization, adjusted for a control premium. Historically, the Company also utilized various market multiple approaches for Personal Insurance reporting unit. However, based upon the significant 2013 events, including A.M. Best’s downgrade to “B” for the insurance subsidiaries, management in its judgment concluded the market capitalization, adjusted for a control premium, was most indicative of a price a market participant would pay for the reporting unit. | |||||||||||||||||||||||||||||
Step 1 of the impairment test as of September 30, 2013 indicated the Personal Insurance unit’s carrying value exceeded its fair value. | |||||||||||||||||||||||||||||
Accordingly, the Company performed a Step 2 impairment test on the Personal Insurance reporting unit. Based on the results, the Company recorded a non-cash goodwill impairment charge of $55.5 million to write-down all of the goodwill in the Personal Insurance reporting unit as of September 30, 2013. As of December 31, 2013, the Company had no goodwill reported on its consolidated balance sheet. | |||||||||||||||||||||||||||||
Marine and Energy Acquisition goodwill | |||||||||||||||||||||||||||||
In the third quarter of 2013, the Company accounted for the Marine and Energy Acquisition as a business combination and recorded $1.9 million of goodwill in the Commercial Insurance reporting unit. As of September 30, 2013, in response to the significant business developments discussed in “Note 1 – Nature of Business,” management in its judgment concluded this goodwill was fully impaired. | |||||||||||||||||||||||||||||
The following table reflects the changes to goodwill during the years ended December 31, 2013 and 2012 and is presented using the reporting units prior to the reorganizations. | |||||||||||||||||||||||||||||
($ in thousands) | Commercial | Personal | Total | ||||||||||||||||||||||||||
Insurance | Insurance | ||||||||||||||||||||||||||||
Balance, January 1, 2012 | $ | 185,918 | $ | 55,540 | $ | 241,458 | |||||||||||||||||||||||
Adjustments | - | - | - | ||||||||||||||||||||||||||
Balance, December 31, 2012 | 185,918 | 55,540 | 241,458 | ||||||||||||||||||||||||||
Goodwill from Canopius Merger Transaction | 28,131 | - | 28,131 | ||||||||||||||||||||||||||
Goodwill from Marine and Energy acquisition | 1,853 | - | 1,853 | ||||||||||||||||||||||||||
Goodwill impairment | (215,902 | ) | (55,540 | ) | (271,442 | ) | |||||||||||||||||||||||
Total, December 31, 2013 | $ | - | $ | - | $ | - | |||||||||||||||||||||||
Intangible Assets | |||||||||||||||||||||||||||||
Intangible assets consist of finite 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. | |||||||||||||||||||||||||||||
The components of intangible assets and their useful lives, accumulated amortization, and net carrying value as of December 31, 2013 and 2012 are as follows: | |||||||||||||||||||||||||||||
December 31, 2013 | December 31, 2012 | ||||||||||||||||||||||||||||
($ in thousands) | Useful | Gross | Accumulated | Net | Gross | Accumulated | Net | ||||||||||||||||||||||
Life | Carrying | Amortization/ | Carrying | Carrying | Amortization/ | Carrying | |||||||||||||||||||||||
(in-yrs) | Amount | Impairment | Amount | Amount | Impairment | Amount | |||||||||||||||||||||||
Insurance licenses | - | $ | 19,003 | $ | - | $ | 19,003 | $ | 19,003 | $ | - | $ | 19,003 | ||||||||||||||||
Management contracts | - | 54,600 | - | 54,600 | 54,600 | - | 54,600 | ||||||||||||||||||||||
Customer relationships | 25-Oct | 57,890 | (53,030 | ) | 4,860 | 57,890 | (26,754 | ) | 31,136 | ||||||||||||||||||||
Trademarks | 5 | 5,290 | (3,817 | ) | 1,473 | 5,290 | (3,261 | ) | 2,029 | ||||||||||||||||||||
Total | $ | 136,783 | $ | (56,847 | ) | $ | 79,936 | $ | 136,783 | $ | (30,015 | ) | $ | 106,768 | |||||||||||||||
Tower | $ | 128,283 | $ | (54,684 | ) | $ | 73,599 | $ | 128,283 | $ | (28,369 | ) | $ | 99,914 | |||||||||||||||
Reciprocal Exchanges | 8,500 | (2,163 | ) | 6,337 | 8,500 | (1,646 | ) | 6,854 | |||||||||||||||||||||
Total | $ | 136,783 | $ | (56,847 | ) | $ | 79,936 | $ | 136,783 | $ | (30,015 | ) | $ | 106,768 | |||||||||||||||
The activity in the components of intangible assets for the years ended December 31, 2013 and 2012 consisted of intangible assets acquired from business combinations and amortization expense as shown in the table below: | |||||||||||||||||||||||||||||
($ in thousands) | Insurance | Management | Customer | Trademarks | Total | ||||||||||||||||||||||||
Licenses | Contracts | Relationships | |||||||||||||||||||||||||||
Balance, January 1, 2012 | $ | 19,003 | $ | 54,600 | $ | 38,463 | $ | 2,854 | $ | 114,920 | |||||||||||||||||||
Additions | - | - | - | - | - | ||||||||||||||||||||||||
Amortization | - | - | (7,327 | ) | (825 | ) | (8,152 | ) | |||||||||||||||||||||
Balance, December 31, 2012 | $ | 19,003 | $ | 54,600 | $ | 31,136 | $ | 2,029 | $ | 106,768 | |||||||||||||||||||
Tower | $ | 16,003 | $ | 54,600 | $ | 28,600 | $ | 711 | $ | 99,914 | |||||||||||||||||||
Reciprocal Exchanges (a) | 3,000 | - | 2,536 | 1,318 | 6,854 | ||||||||||||||||||||||||
Total, December 31, 2012 | $ | 19,003 | $ | 54,600 | $ | 31,136 | $ | 2,029 | $ | 106,768 | |||||||||||||||||||
Additions | - | - | - | - | - | ||||||||||||||||||||||||
Amortization | - | - | (4,359 | ) | (556 | ) | (4,915 | ) | |||||||||||||||||||||
Impairment | - | - | (21,917 | ) | - | (21,917 | ) | ||||||||||||||||||||||
Balance, December 31, 2013 | $ | 19,003 | $ | 54,600 | $ | 4,860 | $ | 1,473 | $ | 79,936 | |||||||||||||||||||
Tower | $ | 16,003 | $ | 54,600 | $ | 2,608 | $ | 388 | $ | 73,599 | |||||||||||||||||||
Reciprocal Exchanges | 3,000 | - | 2,252 | 1,085 | 6,337 | ||||||||||||||||||||||||
Total, December 31, 2013 | $ | 19,003 | $ | 54,600 | $ | 4,860 | $ | 1,473 | $ | 79,936 | |||||||||||||||||||
(a) In 2012, Tower transferred a licensed insurance subsidiary shell to the Reciprocal Exchanges, as discussed in Note 2-Accounting Policies and Procedures. This resulted in classifying $2.6 million insurance licenses out of Tower and into the Reciprocal Exchange. | |||||||||||||||||||||||||||||
Intangible asset impairment testing and amortization | |||||||||||||||||||||||||||||
The Company performs an analysis at least annually to identify potential impairment of intangible assets with both definite and indefinite lives and measures the amount of any impairment loss that may need to be recognized. Intangible asset impairment testing requires an evaluation of the estimated fair value of each identified intangible asset to its carrying value. An impairment charge could be recorded if the estimated fair value is less than the carrying amount of the intangible asset. Management assessed the carrying value of its intangible assets in the second quarter of 2013, and concluded an impairment charge of $3.8 million was required to reduce its customer relationship intangible assets. These charges are reported in Other Operating Expenses in the consolidated statements of operations. In addition, after further reserve increases and A.M. Best rating downgrades in the third quarter of 2013, management in its judgment concluded an impairment charge of another $18.1 million was required to further reduce the customer relationship intangible asset. | |||||||||||||||||||||||||||||
As of December 31, 2013, the Company has $4.9 million of customer relationships and $54.6 million of management contracts recorded as intangible assets. Subsequent intangible asset assessments could result in impairment due to future unfavorable developments, including rating agency downgrades, significant declines in renewal retention rates or increases in expected loss ratios. | |||||||||||||||||||||||||||||
No impairments were identified during the years ended December 31, 2012 and 2011, respectively. | |||||||||||||||||||||||||||||
The Company recorded amortization expense related to intangible assets with definite lives of $4.9 million, $8.2 million and $8.9 million in the years ended December 31, 2013, 2012 and 2011, respectively. The estimated amortization expense associated with these intangible assets for each of the next five years is: | |||||||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | ||||||||||||||||||||||||||
Exchanges | |||||||||||||||||||||||||||||
2014 | $ | 544 | $ | 466 | $ | 1,010 | |||||||||||||||||||||||
2015 | 303 | 405 | 708 | ||||||||||||||||||||||||||
2016 | 191 | 354 | 545 | ||||||||||||||||||||||||||
2017 | 171 | 311 | 482 | ||||||||||||||||||||||||||
2018 | 155 | 276 | 431 | ||||||||||||||||||||||||||
Fixed Assets | |||||||||||||||||||||||||||||
Furniture, leasehold improvements, computer equipment, and software, including internally developed software, are reported at cost less accumulated depreciation and amortization. As of December 31, 2012, gross fixed assets and capital leases were $194.0 million and accumulated depreciation was $54.7 million (for net fixed assets and capital leases of $139.3 million). | |||||||||||||||||||||||||||||
As a result of ratings downgrades and the expected significant declines in net written premiums and other items more fully discussed in Significant Business Developments and Risks and Uncertainties in “Note 1 – Nature of Business”, management tested fixed assets for recoverability in 2013. | |||||||||||||||||||||||||||||
Long-lived tangible assets that an entity will continue to hold and use should be reviewed for impairment, which includes two steps. The first step in the impairment test is to determine whether the long-lived assets are recoverable as measured by comparing net carrying value of the asset or asset group to the undiscounted net cash flows to be generated from the use and eventual disposition of that asset or asset group. In performing this step, management concluded that the sum of the undiscounted cash flows was less than the carrying value of the asset group. Accordingly, the Company performed an impairment analysis in which the implied fair value of the fixed assets was determined to be lower than the carrying value. | |||||||||||||||||||||||||||||
Management determined the fair value of fixed assets by (i) calculating an estimated software charge (i.e. fee for use of software) a market participant would pay the owner of the asset in return for the ability to use the Company’s software and (ii) performing an orderly liquidation value analysis ranging from 0%-15% for furniture, leasehold improvements and computer equipment, and concluded the fixed assets were impaired as of September 30, 2013. The Company recorded a non-cash charge to earnings of $125.8 million in 2013. This charge is recorded within Goodwill and fixed-assets impairment in the statement of operations. As of December 31, 2013, the Company has recorded $19.7 million of fixed assets in Other Assets on the consolidated balance sheet. |
Deferred_Acquisition_Costs_DAC
Deferred Acquisition Costs ("DAC") | 12 Months Ended | ||||||||||||||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||||||||||||||
Deferred Acquisition Costs ("DAC") | ' | ||||||||||||||||||||||||||||||||||||
Note 8—Deferred Acquisition Costs (“DAC”) | |||||||||||||||||||||||||||||||||||||
Acquisition costs incurred and policy-related ceding commission revenue are deferred and amortized to income on property and casualty business for the year ended December 31, 2013, 2012 and 2011 as follows: | |||||||||||||||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | |||||||||||||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | Tower | Reciprocal | Total | Tower | Reciprocal | Total | ||||||||||||||||||||||||||||
Exchanges | Exchanges | Exchanges | |||||||||||||||||||||||||||||||||||
Deferred acquisition costs, net, January 1 | $ | 169,834 | $ | 11,364 | $ | 181,198 | $ | 156,992 | $ | 11,866 | $ | 168,858 | $ | 145,917 | $ | 18,206 | $ | 164,123 | |||||||||||||||||||
Cost incurred and deferred: | |||||||||||||||||||||||||||||||||||||
Commissions and brokerage | 266,987 | 32,425 | 299,412 | 298,701 | 31,266 | 329,967 | 279,699 | 31,837 | 311,536 | ||||||||||||||||||||||||||||
Other underwriting and acquisition costs | 58,846 | 7,627 | 66,473 | 68,238 | 7,467 | 75,705 | 64,416 | 5,896 | 70,312 | ||||||||||||||||||||||||||||
Ceding commission revenue | (101,640 | ) | (18,987 | ) | (120,627 | ) | (25,052 | ) | (15,878 | ) | (40,930 | ) | (20,082 | ) | (11,446 | ) | (31,528 | ) | |||||||||||||||||||
Net costs incurred and deferred | 224,193 | 21,065 | 245,258 | 341,887 | 22,855 | 364,742 | 324,033 | 26,287 | 350,320 | ||||||||||||||||||||||||||||
Amortization | (308,542 | ) | (22,818 | ) | (331,360 | ) | (329,045 | ) | (23,357 | ) | (352,402 | ) | (312,958 | ) | (32,627 | ) | (345,585 | ) | |||||||||||||||||||
Deferred acquisition costs, net, December 31, | $ | 85,485 | $ | 9,611 | $ | 95,096 | $ | 169,834 | $ | 11,364 | $ | 181,198 | $ | 156,992 | $ | 11,866 | $ | 168,858 |
Reinsurance
Reinsurance | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Reinsurance | ' | ||||||||||||||||
Note 9—Reinsurance | |||||||||||||||||
The Company utilizes various excess of loss, quota share and catastrophe reinsurance programs to limit its exposure to a maximum loss on any one risk. In addition, as disclosed in “Note 1 – Nature of the Business,” as a result of the 2013 significant business developments, Tower entered into reinsurance agreements with Arch, Hannover and Southport Re. | |||||||||||||||||
Under the terms of the excess of loss programs in 2013, Tower was at risk for $5.0 million on property, $3.5 million on workers’ compensation and $2.5 million on umbrella. The Company then had reinsurance coverage up to $30 million for property, $60 million for workers’ compensation, and $5 million for umbrella. In addition the Company also had “clash coverage” in effect for 2013 for a limit of $5 million in excess of $5 million which applies to the aggregate liability for liability losses from multiple insureds involved in the same occurrence. | |||||||||||||||||
Tower’s 2013 quota share reinsurance program ceded 40.0% of the homeowners business written by the companies obtained in the OBPL transaction in the north east. This coverage had a $250 million per occurrence cap. Tower also ceded 30% of the homeowners business written by the other Tower companies in the north east. This coverage had a $230 million occurrence cap. On November 1, 2013, Tower placed a 35% quota share on the same homeowners subject business. This coverage has an occurrence limit of 135% of the ceded earned premium and will expire on May 31, 2014. | |||||||||||||||||
On July 1, 2013, Tower ceded 17.5% of its auto liability, other liability and commercial package brokerage business to Arch. This coverage has an occurrence limit of $25 million and a loss ratio cap of 120% of the ceded reinsurance premium. This coverage expired on December 31, 2013, on a run-off basis. On July 1, 2013, Tower also ceded 14.0% of its auto liability, other liability, workers’ compensation and commercial package brokerage business to Hannover. This coverage had occurrence limits of $10 million for PCS events, $5 million for auto liability, other liability and commercial package liability, $2 million for workers’ compensation and a per risk limit of $5 million for commercial package property, and a loss ratio cap of 110%. This coverage expired on December 31, 2013, on a run-off basis. | |||||||||||||||||
Effective July 1, 2013, Tower ceded 30% quota share of its workers’ compensation and employer’s liability business to Southport Re. The agreement covered losses occurring on or after July 1, 2013 for policies in force as of June 30, 2013 and policies written or renewed during the term of the agreement, subject to a maximum liability of $1.5 million per loss occurrence and has been accounted for using deposit accounting treatment. Deposit assets of $28.7 million as of December 31, 2013 are reflected in Other assets in the consolidated balance sheet. Effective July 1, 2013, Tower also purchased from Southport Re an Aggregate Excess of Loss Agreement covering a portion of the losses incurred by Tower on its workers’ compensation and employer’s liability business between January 1, 2011 and May 31, 2013, but paid by on or after June 1, 2013. The coverage was provided in three layers. Each layer provided coverage for varying percentages of losses per underwriting period, not to exceed a specified percentage of the earned premium on the subject business through May 31, 2013, up to caps applicable to each of the layers. The Southport Quota Share and Southport Re ADCs were terminated on February 14, 2014, after determining that such reinsurance agreements were no longer necessary as of result of Tower’s recent rating agency downgrades. In 2014, the company will record a gain of approximately $6.4 million resulting from the terminations. | |||||||||||||||||
The Company also purchases property catastrophe reinsurance on an excess of loss basis above a specified retention to protect itself from an accumulation of losses resulting from a catastrophic event. At the July 1, 2013 renewal of its property catastrophe program, the Company maintained a retention of $75 million per catastrophe, had 100% catastrophe protection for the next $925 million of loss above the $75 million. | |||||||||||||||||
In 2013 Tower purchased an Original Insured Market Loss Warranty basis, whereby the Company can recover up to the limit of the contract for its ultimate net loss arising from the windstorm peril in the Northeast in an event where the insured market loss exceeds a specified threshold. | |||||||||||||||||
On January 3, 2014, concurrently with the execution of the ACP Re Merger Agreement, Tower had entered into two Cut-Through Reinsurance Agreements, pursuant to which a subsidiary of AmTrust and a subsidiary of NGHC agreed to provide 100% quota share reinsurance and a cut-through endorsement to cover all eligible new and renewal commercial and personal lines business, respectively, and at their option, losses incurred on or after January 1, 2014 on not less than 60% of the in-force business. Tower received confirmation on January 16, 2014 from AmTrust and NGHC that they would exercise such option to reinsure on a cut -through basis losses incurred on or after January 1, 2014 under in-force policies with respect to (1) in the case of AmTrust, a significant majority of Tower’s unearned premium reserves as of December 31, 2013 with respect to its ongoing commercial lines business, and (2) in the case of NGHC, 100% of Tower’s unearned premium reserves as of December 31, 2013 with respect to its personal lines segment business. Tower received a 20% ceding commission from AmTrust or NGHC on all Tower premiums that are subject to the Cut-Through Reinsurance Agreements. | |||||||||||||||||
Under the terms of the excess of loss programs in 2012, Tower was at risk of loss for $5.0 million on property, $3.5 million on workers’ compensation and $2.5 million on umbrella. The Company then had reinsurance coverage up to $30 million for property, $60 million for workers’ compensation, and $5 million for umbrella. In addition, the Company also had “clash coverage” in effect for 2012 for a limit of $5 million in excess of $5 million which applies to the aggregate liability for liability losses from multiple insureds involved in the same occurrence. | |||||||||||||||||
Tower’s 2012 quota share reinsurance cedes 35.5% of the homeowners business written by the companies obtained in the OBPL transaction in the north east. This coverage has a $288 million per occurrence cap. | |||||||||||||||||
At the July 1, 2012 renewal of its property catastrophe program, the Company maintained a retention of $75 million per catastrophe, had 100% catastrophe protection for the next $75 million of loss above the $75 million, 70% catastrophe protection for the next $75 million of loss over $150 million and 100% catastrophe protection for the next $700 million of loss in excess of $225 million. | |||||||||||||||||
In 2012 Tower purchased an Original Insured Market Loss Warranty basis, whereby the Company can recover up to the limit of the contract for its ultimate net loss arising from the windstorm peril in the Northeast in an event where the insured market loss exceeds a specified threshold. | |||||||||||||||||
In 2011, Tower was at risk of loss for the first $5.0 million on property, $2.5 million on workers’ compensation and $2.5 million on umbrella. The Company then had reinsurance coverage up to $30 million for property, $50 million for workers’ compensation, and $5 million for umbrella. In addition, the Company also had “clash coverage” in effect for 2012 for a limit of $5 million in excess of $5 million which applies to the aggregate liability for liability losses from multiple insureds involved in the same occurrence. The property catastrophe program renewed on July 1, 2011 had a retention of $75 million per catastrophe, had 60% catastrophe protection for the next $50 million of loss above the $75 million, and 100% percent catastrophe protection for the next $775 million of loss in excess of $125 million. | |||||||||||||||||
The Company maintains funds held liabilities under the liability quota share reinsurance agreements written in 2010 and prior years and is required to credit interest to the reinsurers with annual effective yields ranging from 2.5% to 4.0% on the monthly balance in the funds held liability accounts. The amounts credited for 2012, 2011 and 2010 were $3.9 million, $3.6 million and $2.7 million, respectively, and have been recorded as interest expense. The funds held under reinsurance agreements liability increased from $98.1 million as of December 31, 2012 to $222.1 million as of December 31, 2013 as a result of reinsurance treaties executed in the third and fourth quarters of 2013. | |||||||||||||||||
The Reciprocal Exchanges are not party to the reinsurance agreements discussed above, except for the homeowners quota share treaty whereby in 2013 they ceded 40.0% of homeowners business written. The Reciprocal Exchanges were covered under this treaty in 2012, 2011 and 2010. The Reciprocal Exchanges are also protected under a property catastrophe reinsurance cover placed on an excess of loss basis. In 2012, 2011 and 2010, this coverage was for 100% of $150 million in excess of a $10 million retention and in 2013 it was for $170 million in excess of $10 million. | |||||||||||||||||
Impact of Reinsurance on Premiums | |||||||||||||||||
The table below shows direct, assumed and ceded premiums for the years ended December 31, 2013, 2012 and 2011: | |||||||||||||||||
($ in thousands) | Direct | Assumed | Ceded | Net | |||||||||||||
2013 | |||||||||||||||||
Premiums written | $ | 1,606,249 | $ | 121,411 | $ | 495,045 | $ | 1,232,615 | |||||||||
Change in unearned premiums | 111,252 | 187,520 | 18,472 | 280,300 | |||||||||||||
Premiums earned | $ | 1,717,501 | $ | 308,931 | $ | 513,517 | $ | 1,512,915 | |||||||||
2012 | |||||||||||||||||
Premiums written | $ | 1,755,157 | $ | 215,915 | $ | 231,691 | $ | 1,739,381 | |||||||||
Change in unearned premiums | 3,969 | (31,370 | ) | (9,884 | ) | (17,517 | ) | ||||||||||
Premiums earned | $ | 1,759,126 | $ | 184,545 | $ | 221,807 | $ | 1,721,864 | |||||||||
2011 | |||||||||||||||||
Premiums written | $ | 1,692,282 | $ | 118,642 | $ | 172,333 | $ | 1,638,591 | |||||||||
Change in unearned premiums | (8,262 | ) | (12,890 | ) | 23,589 | (44,741 | ) | ||||||||||
Premiums earned | $ | 1,684,020 | $ | 105,752 | $ | 195,922 | $ | 1,593,850 | |||||||||
Reinsurance Balances | |||||||||||||||||
As of December 31, 2013 and 2012, the Company had $440.4 million and $495.9 million, respectively, of reinsurance recoverables and ceded unearned premiums with reinsurers rated A- or higher by A.M. Best. These represented 53.0% and 91.7%, respectively, of the Company’s total reinsurance recoverables as of those dates. As of December 31, 2013 and 2012, the largest reinsurance recoverable balance with any one reinsurer was approximately 364.2% and 8.6% of the Company’s shareholders’ equity. The largest reinsurance recoverable balance as of December 31, 2013 was due from Southport Re, of which 96.1% was collateralized or in a funds withheld account. | |||||||||||||||||
The Company did not record any modifications of its reinsurance recoverables on paid or unpaid losses in the years ended December 31, 2013, 2012 or 2011. The Company recorded no allowance for credit losses on its reinsurance recoverables on paid or unpaid losses as of December 31, 2013 or 2012. The Company did not consider that any of its undisputed reinsurance recoverables on paid or unpaid losses as of years ended December 31, 2013 and 2012 to be past due. As discussed in “Note 17 – Contingencies”, certain reinsurance agreements are subject to legal proceedings. | |||||||||||||||||
Under certain reinsurance agreements, collateral and letters of credit (“collateral”) are held to secure performance of reinsurers in meeting their obligations. The amount of such collateral was $540.7 million and $189.6 million at December 31, 2013 and 2012, respectively. The collateral we hold does not apply to our entire outstanding reinsurance recoverable. Rather, collateral is provided on an individual basis. For each individual reinsurer, the collateral held may exceed or fall below the total outstanding recoverable from that individual reinsurer. | |||||||||||||||||
Ceding Commission Revenue | |||||||||||||||||
The Company earns ceding commission revenue under certain quota share reinsurance agreements. In addition, the commission revenue earned on prior reinsurance agreements continue to be adjusted based on a sliding scale of commission rates and ultimate treaty year loss ratios on the policies reinsured under each of these agreements. The sliding scale includes minimum and maximum commission rates in relation to specified ultimate loss ratios. The commission rate and ceding commissions earned increase when the estimated ultimate loss ratio decreases, and conversely, the commission rate and ceding commissions earned decrease when the estimated ultimate loss ratio increases. | |||||||||||||||||
The estimated ultimate loss ratios are the Company’s best estimate based on facts and circumstances known at the end of each period that losses are estimated. The estimation process is complex and involves the use of informed estimates, judgments and actuarial methodologies relative to future claims severity and frequency, the length of time for losses to develop to their ultimate level, possible changes in law and other external factors. The same uncertainties associated with estimating loss and loss adjustment expense reserves affect the estimates of ceding commissions earned. The Company monitors and adjusts the ultimate loss ratio on a quarterly basis to determine the effect on the commission rate and ceding commissions earned. The decrease in estimated ceding commission income relating to prior years recorded in 2013, 2012 and 2011 was $9.8 million, $4.2 million and $0.1 million, respectively. |
Loss_and_Loss_Adjustment_Expen
Loss and Loss Adjustment Expense | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||
Loss and Loss Adjustment Expense | ' | ||||||||||||||||||||||||
Note 10—Loss and Loss Adjustment Expense | |||||||||||||||||||||||||
The components of the liability for loss and LAE expenses and related reinsurance recoverables for the years ended December 31, 2013 and 2012 are as follows: | |||||||||||||||||||||||||
Tower | Reciprocal Exchanges | Total | |||||||||||||||||||||||
($ in thousands) | Gross | Reinsurance | Gross | Reinsurance | Gross | Reinsurance | |||||||||||||||||||
Liability | Recoverable | Liability | Recoverable | Liability | Recoverable | ||||||||||||||||||||
December 31, 2013 | |||||||||||||||||||||||||
Case-basis reserves | $ | 936,751 | $ | 290,080 | $ | 63,198 | $ | 5,945 | $ | 999,949 | $ | 296,025 | |||||||||||||
IBNR reserves | 1,037,220 | 267,377 | 44,116 | 7,458 | 1,081,336 | 274,835 | |||||||||||||||||||
Recoverable on paid losses | - | 66,974 | - | 1,989 | - | 68,963 | |||||||||||||||||||
Total, December 31, 2013 | $ | 1,973,971 | $ | 624,431 | $ | 107,314 | $ | 15,392 | $ | 2,081,285 | $ | 639,823 | |||||||||||||
December 31, 2012 | |||||||||||||||||||||||||
Case-basis reserves | $ | 913,411 | $ | 79,911 | $ | 63,465 | $ | 10,160 | $ | 976,876 | $ | 90,071 | |||||||||||||
IBNR reserves | 846,477 | 327,157 | 72,326 | 42,229 | 918,803 | 369,386 | |||||||||||||||||||
Recoverable on paid losses | - | 16,927 | - | 682 | - | 17,609 | |||||||||||||||||||
Total, December 31, 2012 | $ | 1,759,888 | $ | 423,995 | $ | 135,791 | $ | 53,071 | $ | 1,895,679 | $ | 477,066 | |||||||||||||
The following tables provide a reconciliation of the beginning and ending consolidated balances for unpaid losses and LAE for the years ended December 31, 2013, 2012 and 2011: | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | Tower | Reciprocal | Total | |||||||||||||||||||
Exchanges | Exchanges | ||||||||||||||||||||||||
Balance at January 1, | $ | 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 | 166,868 | - | 166,868 | - | - | - | |||||||||||||||||||
Reduction in net reserves for the Southport Re agreements (i) | (306,833 | ) | - | (306,833 | ) | - | - | - | |||||||||||||||||
Incurred related to: | |||||||||||||||||||||||||
Current year | 871,767 | 109,946 | 981,713 | 1,066,411 | 118,099 | 1,184,510 | |||||||||||||||||||
Prior years unfavorable/(favorable) development | 533,038 | 5,083 | 538,121 | 88,129 | (8,881 | ) | 79,248 | ||||||||||||||||||
Total incurred | 1,404,805 | 115,029 | 1,519,834 | 1,154,540 | 109,218 | 1,263,758 | |||||||||||||||||||
Paid related to: | |||||||||||||||||||||||||
Current year | 502,791 | 73,771 | 576,562 | 431,437 | 98,682 | 530,119 | |||||||||||||||||||
Prior years | 696,365 | 32,739 | 729,104 | 585,154 | 52,155 | 637,309 | |||||||||||||||||||
Total paid | 1,199,156 | 106,510 | 1,305,666 | 1,016,591 | 150,837 | 1,167,428 | |||||||||||||||||||
Net balance at end of period | 1,418,504 | 91,921 | 1,510,425 | 1,352,820 | 83,402 | 1,436,222 | |||||||||||||||||||
Add reinsurance recoverables on unpaid losses | 555,468 | 15,392 | 570,860 | 407,068 | 52,389 | 459,457 | |||||||||||||||||||
Balance at December 31, | $ | 1,973,972 | $ | 107,313 | $ | 2,081,285 | $ | 1,759,888 | $ | 135,791 | $ | 1,895,679 | |||||||||||||
(i) In the third quarter of 2013, Tower executed the Southport Re ADCs (see “Note 1 - Nature of the Business” for further description). The Southport Re ADCs resulted in a direct reduction to net loss reserves. A deferred gain of $12.5 million was recorded on the Southport Re ADCs and is reported in Other Liabilities. In addition, Tower executed the Southport Re Quota Share in the third quarter of 2013. This treaty is accounted for using deposit accounting and reduced the net reserves by $7.2 million. | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
2011 | |||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | ||||||||||||||||||||||
Exchanges | |||||||||||||||||||||||||
Balance at January 1, | $ | 1,439,106 | $ | 171,315 | $ | 1,610,421 | |||||||||||||||||||
Less reinsurance recoverables on unpaid losses | (265,592 | ) | (11,384 | ) | (276,976 | ) | |||||||||||||||||||
1,173,514 | 159,931 | 1,333,445 | |||||||||||||||||||||||
Net reserves, at fair value, of acquired entities | - | - | - | ||||||||||||||||||||||
Incurred related to: | |||||||||||||||||||||||||
Current year | 933,791 | 142,254 | 1,076,045 | ||||||||||||||||||||||
Prior years unfavorable/(favorable) development | 38,776 | (37,835 | ) | 941 | |||||||||||||||||||||
Total incurred | 972,567 | 104,419 | 1,076,986 | ||||||||||||||||||||||
Paid related to: | |||||||||||||||||||||||||
Current year | 337,268 | 59,078 | 396,346 | ||||||||||||||||||||||
Prior years | 593,942 | 80,251 | 674,193 | ||||||||||||||||||||||
Total paid | 931,210 | 139,329 | 1,070,539 | ||||||||||||||||||||||
Net balance at end of period | 1,214,871 | 125,021 | 1,339,892 | ||||||||||||||||||||||
Add reinsurance recoverables on unpaid losses | 280,968 | 11,253 | 292,221 | ||||||||||||||||||||||
Balance at December 31, | $ | 1,495,839 | $ | 136,274 | $ | 1,632,113 | |||||||||||||||||||
Incurred losses and LAE for the year ended December 31, 2013 attributable to insured events of prior years increased by $538.1 million. Excluding the Reciprocal Exchanges the incurred losses and LAE increased by $533.0 million. | |||||||||||||||||||||||||
The consolidated net loss ratio, which includes the Reciprocal Exchanges, was 100.5% and 73.4% for the years ended December 31, 2013 and 2012, respectively. Excluding the Reciprocal Exchanges, the net loss ratio was 103.9% and 74.1% for the years ended December 31, 2013 and 2012, respectively. The Reciprocal Exchanges’ net loss ratio was 71.3% and 66.7% for the years ended December 31, 2013 and 2012, respectively. | |||||||||||||||||||||||||
Excluding the Reciprocal Exchanges, there was a reserve increase of $533.0 million for the year ended December 31, 2013 comprised of favorable development of $1.4 million in Personal Insurance, favorable development of $5.4 million in Assumed Reinsurance segment and adverse development of $539.8 million in Commercial Insurance. | |||||||||||||||||||||||||
Prior year development is based upon numerous estimates by line of business and accident year. No additional premiums or return premiums have been accrued as a result of the prior year effects, although we recorded changes in ceding commissions on reinsurance treaties of $9.8 million for which the ceding commissions depend in part on loss experience. 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. | |||||||||||||||||||||||||
Incurred losses and LAE for the years ended December 31, 2013 and 2012 included reductions in loss and loss expense reserves pertaining to the amortization of the reserve risk premium on loss reserves recorded in connection with the Company’s acquisitions in prior years. Excluding the Reciprocal Exchanges these reductions in loss reserves were $19.1 million and $7.2 million, respectively, for 2013 and 2012. The Reciprocal Exchanges had reductions in loss reserves of nil for 2013 and $2.5 million for 2012. | |||||||||||||||||||||||||
Loss and loss adjustment expense reserves. The reserving process for loss and LAE reserves provides management’s best estimate at a particular point in time of the ultimate unpaid cost of all losses and LAE incurred, including settlement and administration of losses, and is based on facts and circumstances then known and including losses that have been incurred but not yet reported. The process includes using actuarial methodologies to assist in establishing these estimates, judgments relative to estimates of future claims severity and frequency, the length of time before losses will develop to their ultimate level and the possible changes in the law and other external factors that are often beyond our control. There are various actuarial methods that are appropriate for the different lines of business, and our actuaries’ use of a particular method or weighting of methods depends in part on the maturity of each accident year by line of business, the limits of liability covered under the policies, the presence or absence of large claims in the experience, and other considerations. In general, the various actuarial methods can be grouped into three categories: loss ratio projection, loss development methods, and the Bornhuetter-Ferguson (“B-F”) method. For the most recent accident year, and especially for liability lines of business, the actuarial method given the most weight is usually the loss ratio method, since the percentage of ultimate claims reported to date is expected to be low and the immature reported claims experience is not a reliable indicator of ultimate losses for that accident year. For property lines of business for the most recent accident year, the B-F method is usually given the most weight, because experience typically shows that there is a small percentage of claims reported in the subsequent period due to normal lags in reporting and processing of claims in these lines of business that can be relatively reliably estimated as a percentage of premiums, which is reflected in the B-F method. For each line of business, the actuarial reserving method usually given the most weight shifts from the loss ratio projection to the B-F method to the incurred loss projection as each accident year matures. | |||||||||||||||||||||||||
This process helps management set carried loss reserves based upon the actuaries’ best estimates, using estimates made by segment, product or line of business, territory, and accident year. The actuaries also separately estimate loss reserves from LAE reserves and within LAE reserves estimates are made for defense and cost containment expenses or Allocated Loss Adjustment Expenses (“ALAE”) and for other claims adjusting expenses or Unallocated Loss Adjustment Expenses (“ULAE”). The amount of loss and LAE reserves for reported claims is a matter of judgment based primarily upon a case-by-case evaluation of coverage, liability, injury severity, and any other information considered pertinent to estimating the exposure presented by the claim. The amounts of loss and LAE reserves for unreported claims are determined using historical information by line of business as adjusted to current conditions. Due to the inherent uncertainty associated with the reserving process, the ultimate liability may differ, perhaps substantially, from the original estimate. Such estimates are regularly reviewed and updated, and any resulting adjustments are included in the current year’s results. Reserves are closely monitored and are recomputed periodically using the most recent information on reported claims and a variety of statistical techniques. Specifically, on at least a quarterly basis, we review, by line of business, existing reserves, new claims, changes to existing case reserves and paid losses with respect to the current and prior years. See “Business—Loss and Loss Adjustment Expense Reserves” for additional information regarding our loss and LAE reserves. | |||||||||||||||||||||||||
We segregate our data for estimating loss reserves. The property lines include Fire and Allied Lines, Homeowners-property, Commercial Multi-peril Property and Automobile Physical Damage. The casualty lines include Homeowners-liability, Commercial Multi-peril Liability, Other Liability, Workers’ Compensation, Commercial Automobile Liability, and Personal Automobile Liability. Commercial Insurance segment reserves are estimated separately from Personal Insurance segment reserves. For the Commercial Insurance segment we analyze reserves by line of business and, where appropriate, by program. Within the Personal Insurance segment, we estimate loss and loss expenses reserves separately for the Reciprocal Exchanges, which we manage, and for our owned companies. We utilize line of business breakdowns and, where appropriate, analyze results separately by state. | |||||||||||||||||||||||||
Two key assumptions that materially impact the estimate of loss reserves are the loss ratio estimate for the current accident year and the loss development factor selections for all accident years. The loss ratio estimate for the current accident year is selected after reviewing historical accident year loss ratios adjusted for rate and price changes, trend, mix of business, and other factors. In addition, as the year matures and, depending upon the line of business, we utilize B-F methods or loss development methods for the current accident year. | |||||||||||||||||||||||||
In most cases, our data are sufficiently credible to determine loss development factors utilizing our own data. In some cases, we supplement our own loss development experience with industry data and utilize historical loss development experience for particular books of business, programs or treaties obtained from our sources. The loss development factors are reviewed at least annually, and whenever there is a significant change in the underlying business. Each quarter we test the loss development by analyzing actual emerging claims compared to expected development. | |||||||||||||||||||||||||
Because of the nature of the business historically written, the Company’s management believes that the Company has limited exposure to environmental claim liabilities. | |||||||||||||||||||||||||
We estimate ALAE reserves separately for claims that are defended by in-house attorneys, claims that are handled by other attorneys that are not employees, and miscellaneous ALAE costs such as investigators, witness fees and court costs. | |||||||||||||||||||||||||
For claims that are defended by in-house attorneys, we attribute to each of these claims a fixed fee for defense work. We allocate to each of these litigated claims 50% of the fixed fee when litigation on a particular claim begins and 50% of the fee when the litigation is closed. The fee is adjusted periodically to reimburse our in-house legal department for all their costs. | |||||||||||||||||||||||||
We determine ULAE reserves by applying a paid-to-paid ratio to the case and IBNR reserves by line of business. The paid-to-paid ratio is based on the ratio of ULAE payments to loss and ALAE payments for last three calendar years. For some types of claims and for some programs where we utilize third-party administrators (“TPA”) to adjust claims, we pay them fees which are included in ULAE. In some cases, we arrange for fixed percentages of premiums earned to be the fee for claims administration, and in other cases we arrange for fixed fees per claim or hourly charges for ULAE services. The reserves for ULAE for these situations is estimated based upon the particular arrangement for these types of claims by product or program. |
Shareholders_Equity
Shareholders' Equity | 12 Months Ended |
Dec. 31, 2013 | |
Shareholders' Equity | ' |
Note 11—Shareholders’ Equity | |
Shares of Common Stock Issued | |
As previously discussed in “Note 3 – Canopius Merger Transaction”, the Canopius Merger Transaction was accounted for as a reverse acquisition with TGI treated as the accounting acquirer. Accordingly, Tower’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 Canopius Merger Transaction by the Company to TGI shareholders (i.e., TGI’s outstanding shares immediately prior to the Canopius 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 Canopius Merger Transaction. | |
For the years ended December 31, 2013 and 2012, 2,674 and no new common shares, respectively, were issued as the result of employee stock option exercises and 242,626 and 422,176 new common shares, for the same periods, respectively, were issued as the result of restricted stock grants. | |
For the years ended December 31, 2013 and 2012, 345,946 and 117,377 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”). 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 years ended December 31, 2013 and 2012, 57,080 and 28,513 shares, respectively, of common stock were surrendered as a result of restricted stock forfeitures. | |
In connection with the Canopius Merger Transaction, all Treasury shares held by TGI as of the effective date of the Canopius Merger Transaction were cancelled. There were 55,471 Treasury shares of the Company held at December 31, 2013. | |
Share Repurchase Program | |
The Board of Directors of Tower approved a $100 million share repurchase program on March 3, 2011. This authorization was in addition to the $100 million share repurchase program approved on February 26, 2010. Purchases under both programs could be made from time to time in the open market or in privately negotiated transactions in accordance with applicable laws and regulations. In the year ended December 31, 2012, 1.2 million shares were purchased under these programs at an aggregate consideration of $21.0 million. The March 3, 2011 and February 26, 2010 share repurchase programs were terminated in March 2013. | |
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 2013 no shares of common stock were purchased under this program. | |
Dividends Declared | |
On November 14, 2013, the Company announced that its Board of Directors determined that it would not declare and pay a dividend to shareholders in the fourth quarter of 2013. The Company paid quarterly dividends of $0.165 per share on February 28, 2013, June 21, 2013 and September 20, 2013. | |
The Company will not resume paying dividends in the near future even if the necessary financial conditions are met and if sufficient cash is available for distribution. |
Accumulated_Other_Comprehensiv
Accumulated Other Comprehensive Income | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Accumulated Other Comprehensive Income | ' | ||||||||||||||||
Note 12—Accumulated Other Comprehensive Income | |||||||||||||||||
The following table provides a summary of changes in accumulated other comprehensive income, by component, for year ended December 31, 2013, with all amounts reflected net of income taxes and noncontrolling interest: | |||||||||||||||||
($ 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 | $ | 87,412 | $ | (5,860 | ) | $ | 1,204 | $ | 82,756 | ||||||||
Other comprehensive income before reclassifications, net of tax | (80,046 | ) | (1,496 | ) | (1,204 | ) | (82,746 | ) | |||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax | (22,894 | ) | 3,377 | - | (19,517 | ) | |||||||||||
Net current period other comprehensive income | (102,940 | ) | 1,881 | (1,204 | ) | (102,263 | ) | ||||||||||
Balance at December 31, 2013 | $ | (15,528 | ) | $ | (3,979 | ) | $ | - | $ | (19,507 | ) | ||||||
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 year ended December 31, 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 | $ | (22,894 | ) | Other net realized investment gains | |||||||||||||
- | Income tax expense | ||||||||||||||||
$ | (22,894 | ) | Total net of income taxes | ||||||||||||||
Gains (losses) on cash flow hedges interest rate swaps | $ | 3,377 | Interest expense | ||||||||||||||
- | Income tax expense | ||||||||||||||||
$ | 3,377 | Total net of income taxes | |||||||||||||||
Debt
Debt | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Debt | ' | ||||||||||||||||
Note 13—Debt | |||||||||||||||||
The Company’s borrowings consisted of the following at December 31, 2013 and 2012: | |||||||||||||||||
31-Dec-13 | 31-Dec-12 | ||||||||||||||||
($ in thousands) | Carrying | Fair | Carrying | Fair | |||||||||||||
Value | Value | Value | Value | ||||||||||||||
Credit facility | $ | - | $ | - | $ | 70,000 | $ | 70,000 | |||||||||
Convertible senior notes | 147,712 | 129,525 | 144,673 | 152,063 | |||||||||||||
Subordinated debentures | 235,058 | 114,900 | 235,058 | 232,678 | |||||||||||||
Total | $ | 382,770 | $ | 244,425 | $ | 449,731 | $ | 454,741 | |||||||||
The fair value of the convertible senior notes are determined utilizing recent transaction prices for these securities between third-party market participants and the fair value of the subordinated debentures are based on discounted cash flow analysis. The significant inputs used for fair value are considered Level 2 in the fair value hierarchy. | |||||||||||||||||
Aggregate Scheduled Maturities and Interest Expense | |||||||||||||||||
Aggregate scheduled maturities of the Company’s borrowings at December 31, 2013 are: | |||||||||||||||||
($ in thousands) | |||||||||||||||||
2014 | $ | 150,000 | (a) | ||||||||||||||
2033 | 20,620 | ||||||||||||||||
2034 | 25,775 | ||||||||||||||||
2035 | 13,403 | ||||||||||||||||
2036 | 123,713 | ||||||||||||||||
2037 | 51,547 | ||||||||||||||||
$ | 385,058 | ||||||||||||||||
(a) Amount reflected in balance sheet for convertible senior notes is net of unamortized original issue discount of $2.3 million | |||||||||||||||||
Total interest expense incurred, including interest expense on the funds held liabilities disclosed in “Note 9 – Reinsurance”, was $33.6 million, $32.6 million and $34.3 million for the years ended December 31, 2013, 2012 and 2011, respectively. | |||||||||||||||||
Subordinated Debentures | |||||||||||||||||
The Company and its wholly-owned subsidiaries have issued trust preferred securities through wholly-owned Delaware statutory business trusts. The trusts use the proceeds of the sale of the trust preferred securities and common securities that the Company acquired from the trusts to purchase junior subordinated debentures from the Company with terms that match the terms of the trust preferred securities. Interest on the junior subordinated debentures and the trust preferred securities is payable quarterly. In some cases, the interest rate is fixed for an initial period of five years after issuance and then floats with changes in the London Interbank Offered Rate (“LIBOR”) and in other cases the interest rate floats with LIBOR without any initial fixed-rate period. The principal terms, before any effects of interest rate swaps, of the outstanding trust preferred securities, including those which were assumed by the Company through acquisitions, are summarized in the following table: | |||||||||||||||||
($ in millions) | Issuer | Maturity Date | Early | Interest Rate | Amount of | Principal | |||||||||||
Issue Date | Redemption | Investment | Amount of | ||||||||||||||
in Common | Junior | ||||||||||||||||
Securities | Subordinated | ||||||||||||||||
of Trust | Debenture | ||||||||||||||||
Issued to | |||||||||||||||||
Trust | |||||||||||||||||
May-03 | Tower Group | May-33 | At our option at par on or after May 15, 2008 | Three-month LIBOR plus 410 basis points | $ | 0.3 | $ | 10.3 | |||||||||
Statutory Trust I | |||||||||||||||||
Sep-03 | Tower Group | Sep-33 | At our option at par on or after September 30, 2008 | Three-month LIBOR plus 400 basis points | $ | 0.3 | $ | 10.3 | |||||||||
Statutory Trust II | |||||||||||||||||
May-04 | Preserver Capital | May-34 | At our option at par on or after May 24, 2009 | Three-month LIBOR plus 425 basis points | $ | 0.4 | $ | 12.4 | |||||||||
Trust I | |||||||||||||||||
Dec-04 | Tower Group | Dec-34 | At our option at par on or after December 15, 2009 | Three-month LIBOR plus 340 basis points | $ | 0.4 | $ | 13.4 | |||||||||
Statutory Trust III | |||||||||||||||||
Dec-04 | Tower Group | Mar-35 | At our option at par on or after March 15, 2010 | Three-month LIBOR plus 340 basis points | $ | 0.4 | $ | 13.4 | |||||||||
Statutory Trust IV | |||||||||||||||||
Mar-06 | Tower Group | Apr-36 | At our option at par on or after April 7, 2011 | Three-month LIBOR plus 330 basis points | $ | 0.6 | $ | 20.6 | |||||||||
Statutory Trust V | |||||||||||||||||
Jan-07 | Tower Group | Mar-37 | At our option at par on or after March 15, 2012 | 8.16% until March 14, 2012; three-month LIBOR plus 300 basis points thereafter | $ | 0.6 | $ | 20.6 | |||||||||
Statutory Trust VI | |||||||||||||||||
Sep-07 | CastlePoint | Dec-37 | At our option at par on or after December 15, 2012 | 8.39% until December 14, 2012; three-month LIBOR plus 350 basis points thereafter. | $ | 0.9 | $ | 30.9 | |||||||||
Bermuda Capital | |||||||||||||||||
Trust I | |||||||||||||||||
Dec-06 | CastlePoint | Dec-36 | At our option at par on or after December 15, 2011 | Three-month LIBOR plus 350 basis points | $ | 1.6 | $ | 51.6 | |||||||||
Management | |||||||||||||||||
Statutory Trust II | |||||||||||||||||
Dec-06 | CastlePoint | Dec-36 | At our option at par on or after December 15, 2011 | Three-month LIBOR plus 350 basis points | $ | 1.6 | $ | 51.6 | |||||||||
Management | |||||||||||||||||
Statutory Trust I | |||||||||||||||||
Total | $ | 7.1 | $ | 235.1 | |||||||||||||
Under the terms for all of the subordinated debentures, an event of default may occur upon: | |||||||||||||||||
• | non-payment of interest on the subordinated debentures, unless such non-payment is due to a valid extension of an interest payment period; | ||||||||||||||||
• | non-payment of all or any part of the principal of the subordinated debentures; | ||||||||||||||||
• | our failure to comply with the covenants or other provisions of the indentures or the subordinated debentures; | ||||||||||||||||
• | bankruptcy or liquidation of us or the trusts; or | ||||||||||||||||
• | If an event of default occurs and is continuing, the entire principal and the interest accrued on the affected subordinated debentures and junior subordinated debentures may be declared to be due and payable immediately. | ||||||||||||||||
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 majority of the Swaps is forward starting and become effective when the respective subordinated debentures change from fixed to floating rates and convert the subordinated debentures to fixed rates ranging from 5.1% to 5.9%. As of December 31, 2013 and 2012, the Swaps had a fair value of $6.1 million and $9.0 million, respectively, in a liability position 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 will be recorded in Accumulated Other Comprehensive Income (“AOCI”), net of tax. For the years ended December 31, 2013, 2012 and 2011, $3.4 million, $1.6 million and $0.4 million, respectively, was reclassified from AOCI to interest expense for the effects of the hedges. As of December 31, 2013 and 2012, the Company had collateral on deposit with the counterparty amounting to $6.3 million and $9.1 million, respectively, pursuant to its 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 Canopius 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 Canopius Merger Transaction. The maturity date and borrowing fees were not changed in this amendment. | |||||||||||||||||
The credit facility contained 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 provided 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) was able to 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. | |||||||||||||||||
On December 13, 2013, TGI paid in full the $70.0 million outstanding on the bank credit facility and the bank credit facility has been terminated. | |||||||||||||||||
Convertible Senior Notes | |||||||||||||||||
In September 2010, TGI 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. Holders may convert their Notes into cash or common shares, at TGI’s option, at any time on or after March 15, 2014 or earlier under certain circumstances determined by: (i) the market price of TGI’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. | |||||||||||||||||
The adjusted conversion rate at December 31, 2013 is 41.4269 shares of common stock per $1,000 principal amount of the Notes (equivalent to a conversion price of $24.14 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. | |||||||||||||||||
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”). The OID of $11.5 million and $5.0 million of deferred origination costs relating to the liability component are being amortized into interest expense over the term of the Notes. 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 $11.9 million for the year ended December 31, 2013. | |||||||||||||||||
The following table shows the amounts recorded for the Notes as of December 31, 2013 and 2012: | |||||||||||||||||
December 31, | |||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||
Liability component | |||||||||||||||||
Outstanding principal | $ | 150,000 | $ | 150,000 | |||||||||||||
Unamortized OID | (2,288 | ) | (5,327 | ) | |||||||||||||
Liability component | 147,712 | 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 Canopius 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 | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||
Stock Based Compensation | ' | ||||||||||||||||||||||||
Note 14—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 73,441 are available for future grants as of December 31, 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 December 31, 2013. | |||||||||||||||||||||||||
Restricted Stock | |||||||||||||||||||||||||
The following table provides an analysis of restricted stock activity for the years ended December 31, 2013, 2012 and 2011 (historical share counts and fair values have been adjusted for the 1.1330 share conversion ratio, as discussed more fully in “Note 3 – Canopius Merger Transaction”): | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
2013 | 2012 | 2011 | |||||||||||||||||||||||
Number of | Weighted | Number of | Weighted | Number of | Weighted | ||||||||||||||||||||
Shares | Average | Shares | Average | Shares | Average | ||||||||||||||||||||
Grant Date | Grant Date | Grant Date | |||||||||||||||||||||||
Fair Value | Fair Value | Fair Value | |||||||||||||||||||||||
Outstanding, January 1 | 1,015,902 | $ | 20.38 | 1,120,090 | $ | 20.69 | 670,366 | $ | 20.39 | ||||||||||||||||
Granted | 242,626 | 18.09 | 422,176 | 19.77 | 741,185 | 21.01 | |||||||||||||||||||
Vested | (965,862 | ) | 20.38 | (497,851 | ) | 20.94 | (270,115 | ) | 20.79 | ||||||||||||||||
Forfeitures | (57,080 | ) | 17.22 | (28,513 | ) | 20.69 | (21,346 | ) | 20.84 | ||||||||||||||||
Outstanding, December 31, | 235,586 | $ | 17.98 | 1,015,902 | $ | 20.38 | 1,120,090 | $ | 20.69 | ||||||||||||||||
On March 13, 2013, 525,548 shares vested as a result of the Canopius Merger Transaction. | |||||||||||||||||||||||||
Stock Options | |||||||||||||||||||||||||
The following table provides an analysis of stock option activity for the years ended December 31, 2013, 2012 and 2011 (historical share counts and fair values have been adjusted for the 1.1330 share conversion ratio, as discussed more fully in “Note 3 – Canopius Merger Transaction”). As of December 31, 2013, the exercise price for all stock options exceeds the December 31, 2013 common share price. | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
2013 | 2012 | 2011 | |||||||||||||||||||||||
Number of | Average | Number of | Average | Number of | Average | ||||||||||||||||||||
Shares | Exercise | Shares | Exercise | Shares | Exercise | ||||||||||||||||||||
Price | Price | Price | |||||||||||||||||||||||
Outstanding, January 1 | 969,307 | $ | 17.78 | 969,307 | $ | 17.78 | 1,039,127 | $ | 17.66 | ||||||||||||||||
Exercised | (2,674 | ) | 16.48 | - | - | (39,215 | ) | 9.48 | |||||||||||||||||
Forfeitures and expirations | (10,829 | ) | 20.19 | - | - | (30,605 | ) | 24.35 | |||||||||||||||||
Outstanding, December 31 | 955,804 | $ | 17.75 | 969,307 | $ | 17.78 | 969,307 | $ | 17.78 | ||||||||||||||||
Exercisable, December 31 | 955,804 | $ | 17.75 | 969,307 | $ | 17.78 | 969,307 | $ | 17.78 | ||||||||||||||||
All options outstanding as of December 31, 2013 are fully exercisable as shown on the following table: | |||||||||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||||||||
Range of Exercise Prices | Number of | Average | Average | Number of | Average | ||||||||||||||||||||
Shares | Remaining | Exercise | Shares | Exercise | |||||||||||||||||||||
Contractual | Price | Price | |||||||||||||||||||||||
Life (Years) | |||||||||||||||||||||||||
$10.01 - $20.00 | 769,833 | 2.6 | $ | 16.32 | 769,833 | $ | 16.32 | ||||||||||||||||||
$20.01 - $30.00 | 183,857 | 4.1 | 23.6 | 183,857 | 23.6 | ||||||||||||||||||||
$30.01 - $40.00 | 2,114 | 1.1 | 30.35 | 2,114 | 30.35 | ||||||||||||||||||||
Total Options | 955,804 | 2.9 | $ | 17.75 | 955,804 | $ | 17.75 | ||||||||||||||||||
The fair value of the options granted to replace the CastlePoint options was estimated using the Black-Scholes pricing model as of February 5, 2009, the date of conversion from CastlePoint stock options to the Company’s stock options, with the following weighted average assumptions: risk free interest rate of 1.46% to 1.83%, dividend yield of 0.8%, volatility factors of the expected market price of the Company’s common stock of 43.8% to 45.3%, and a weighted-average expected life of the options of 3.3 to 5.3 years. | |||||||||||||||||||||||||
The fair value of the options granted to replace the SUA options was estimated using the Black-Scholes pricing model as of November 13, 2009, the date of conversion from SUA stock options to the Company’s stock options, with the following weighted average assumptions: risk free interest rate of 1.66%, dividend yield of 1.2%, volatility factors of the expected market price of the Company’s common stock of 43.8%, and a weighted-average expected life of the options of 1.4 years. | |||||||||||||||||||||||||
The fair value measurement objective of the relevant GAAP guidance is achieved using the Black-Scholes model as the model (a) is applied in a manner consistent with the fair value measurement objective and other requirements of GAAP, (b) is based on established principles of financial economic theory and generally applied in that field and (c) reflects all substantive characteristics of the instrument. | |||||||||||||||||||||||||
Stock Based Compensation Expense | |||||||||||||||||||||||||
The following table provides an analysis of stock based compensation expense for the years ended December 31, 2013, 2012 and 2011: | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||||||||||||||
Restricted stock | |||||||||||||||||||||||||
Expense, net of tax | $ | 8,577 | $ | 6,043 | $ | 6,126 | |||||||||||||||||||
Value of shares vested | 21,278 | 9,485 | 5,622 | ||||||||||||||||||||||
Value of unvested shares | 796 | 15,967 | 19,940 | ||||||||||||||||||||||
Stock options | |||||||||||||||||||||||||
Expense, net of tax | - | - | 105 | ||||||||||||||||||||||
Intrinsic value of outstanding options | - | 1,149 | 1,150 | ||||||||||||||||||||||
Intrinsic value of vested outstanding options | - | 1,149 | 1,150 | ||||||||||||||||||||||
Unrecognized compensation expense | |||||||||||||||||||||||||
Unvested restricted stock, net of tax | 851 | 8,262 | 9,617 | ||||||||||||||||||||||
Weighted average years expense will be recognized | 3.2 | 2.1 | 2.3 |
Income_Taxes
Income Taxes | 12 Months Ended | ||||||||||||||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||||||||||||||
Income Taxes | ' | ||||||||||||||||||||||||||||||||||||
Note 15—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 be engaged in the conduct of a trade or business 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. | |||||||||||||||||||||||||||||||||||||
TGI files a consolidated Federal income tax return. The Reciprocal Exchanges are not included in TGI’s consolidated tax return as TGI does not have an ownership interest in the Reciprocal Exchanges, and they are not a part of the consolidated tax sharing agreement. | |||||||||||||||||||||||||||||||||||||
The provision for Federal, state and local income taxes consist of the following components for the years ended December 31, 2013, 2012 and 2011: | |||||||||||||||||||||||||||||||||||||
Year ended December 31, | |||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | |||||||||||||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | Tower | Reciprocal | Total | Tower | Reciprocal | Total | ||||||||||||||||||||||||||||
Exchanges | Exchanges | Exchanges | |||||||||||||||||||||||||||||||||||
Current Federal income tax expense (benefit) | $ | 3,000 | $ | 132 | $ | 3,132 | $ | (17,400 | ) | $ | 593 | $ | (16,807 | ) | $ | 6,951 | $ | 1,510 | $ | 8,461 | |||||||||||||||||
Current state income tax expense (benefit) | 553 | - | 553 | 200 | - | 200 | (257 | ) | - | (257 | ) | ||||||||||||||||||||||||||
Deferred Federal and state income tax (benefit) | 5,285 | (539 | ) | 4,747 | (9,872 | ) | (2,620 | ) | (12,492 | ) | 4,175 | 1,672 | 5,847 | ||||||||||||||||||||||||
Provision for income taxes | $ | 8,838 | $ | (407 | ) | $ | 8,431 | $ | (27,072 | ) | $ | (2,027 | ) | $ | (29,099 | ) | $ | 10,869 | $ | 3,182 | $ | 14,051 | |||||||||||||||
Deferred tax assets and liabilities are determined using the enacted tax rates applicable to the period the temporary differences are expected to be recovered. Accordingly, the current period income tax provision can be affected by the enactment of new tax rates. The net deferred income taxes on the balance sheet reflect temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and income tax purposes. Significant components of the consolidated deferred tax assets and liabilities are as follows: | |||||||||||||||||||||||||||||||||||||
December 31, | |||||||||||||||||||||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | Tower | Reciprocal | Total | |||||||||||||||||||||||||||||||
Exchanges | Exchanges | ||||||||||||||||||||||||||||||||||||
Deferred tax assets: | |||||||||||||||||||||||||||||||||||||
Claims reserve discount | $ | 26,994 | $ | 1,554 | $ | 28,548 | $ | 44,528 | $ | 1,747 | $ | 46,275 | |||||||||||||||||||||||||
Unearned premium | 22,614 | 5,819 | 28,433 | 55,134 | 5,928 | 61,062 | |||||||||||||||||||||||||||||||
Equity compensation plans | 3,627 | - | 3,627 | 6,072 | - | 6,072 | |||||||||||||||||||||||||||||||
Net operating loss carryforwards | 161,884 | 11,175 | 173,059 | 32,584 | 4,830 | 37,414 | |||||||||||||||||||||||||||||||
Convertible senior note and note hedge OID | - | - | - | 618 | - | 618 | |||||||||||||||||||||||||||||||
AMT credits | 2,008 | 611 | 2,619 | 1,846 | 508 | 2,354 | |||||||||||||||||||||||||||||||
Fair value of interest rate swap | 2,123 | - | 2,123 | 3,155 | - | 3,155 | |||||||||||||||||||||||||||||||
Bad debt reserves | 5,793 | 265 | 6,058 | 5,793 | 22 | 5,815 | |||||||||||||||||||||||||||||||
Deferred rent | 1,977 | - | 1,977 | 1,905 | - | 1,905 | |||||||||||||||||||||||||||||||
Accrued interest from foreign affiliate | 2,199 | - | 2,199 | 3,710 | - | 3,710 | |||||||||||||||||||||||||||||||
Adjustment on Retroactive Reinsurance | 42,882 | - | 42,882 | - | - | - | |||||||||||||||||||||||||||||||
Depreciation and amortization | 18,574 | - | 18,574 | - | - | - | |||||||||||||||||||||||||||||||
Other | 2,052 | 1,754 | 3,806 | - | 1,008 | 1,008 | |||||||||||||||||||||||||||||||
Total gross deferred tax assets | 292,727 | 21,178 | 313,905 | 155,345 | 14,043 | 169,388 | |||||||||||||||||||||||||||||||
Less: valuation allowance | 275,332 | 17,593 | 292,925 | 2,258 | 4,726 | 6,984 | |||||||||||||||||||||||||||||||
Total deferred tax assets | 17,395 | 3,585 | 20,980 | 153,087 | 9,317 | 162,404 | |||||||||||||||||||||||||||||||
Deferred tax liabilities: | |||||||||||||||||||||||||||||||||||||
Deferred acquisition costs net of deferred ceding commission revenue | 11,010 | 3,319 | 14,329 | 59,387 | 3,864 | 63,251 | |||||||||||||||||||||||||||||||
Convertible senior note and note hedge OID | 2,163 | - | 2,163 | - | - | - | |||||||||||||||||||||||||||||||
Depreciation and amortization | - | 2,155 | 2,155 | 46,025 | 2,357 | 48,382 | |||||||||||||||||||||||||||||||
Net unrealized appreciation of securities | 12,030 | 967 | 12,997 | 46,953 | 5,791 | 52,744 | |||||||||||||||||||||||||||||||
Surplus notes | 2,519 | 16,325 | 18,844 | 1,800 | 17,024 | 18,824 | |||||||||||||||||||||||||||||||
Unconsolidated affiliate | - | - | - | 3,843 | - | 3,843 | |||||||||||||||||||||||||||||||
Other | - | - | - | 123 | - | 123 | |||||||||||||||||||||||||||||||
Total deferred tax liabilities | 27,722 | 22,766 | 50,488 | 158,131 | 29,036 | 187,167 | |||||||||||||||||||||||||||||||
Net deferred income tax asset (liability) | $ | (10,327 | ) | $ | (19,181 | ) | $ | (29,508 | ) | $ | (5,044 | ) | $ | (19,719 | ) | $ | (24,763 | ) | |||||||||||||||||||
In assessing the valuation of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. | |||||||||||||||||||||||||||||||||||||
During the year ended December 31, 2013, Tower’s U.S. taxed subsidiaries (excluding the Reciprocal Exchanges) recognized pre-tax losses of approximately $901.4 million. This resulted in $161.9 million of net operating loss carryforwards in ($161.2 million federal NOL and $0.7 million state NOL) the deferred tax inventory and a net deferred tax asset, before any valuation allowance, of $265.0 million (excluding the Reciprocal Exchanges) as of December 31, 2013. Including the Reciprocal Exchanges, the net deferred tax asset, before any valuation allowance, was $263.4 million. | |||||||||||||||||||||||||||||||||||||
At December 31, 2013, a full valuation allowance was recorded against the deferred tax assets. For the year ended December 31, 2013, $240.6 million of the valuation allowance was recorded in income tax expense (benefit) in the statement of operations and $32.5 million was recorded in other comprehensive income as a direct charge to shareholder’s equity ($33.7 million as a component of accumulated other comprehensive income and $(1.2) million as a component of additional paid in capital). | |||||||||||||||||||||||||||||||||||||
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 increases were 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. As of December 31, 2013, management continues to believe the negative evidence outweighs the positive evidence. | |||||||||||||||||||||||||||||||||||||
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 $8.3 million of federal excise tax in 2013. | |||||||||||||||||||||||||||||||||||||
Section 382 of the Internal Revenue Code (“Section 382”) imposes annual limitations on the ability of a corporation to utilize its net operating tax loss carryforwards (“NOLs”) if the corporation experiences an “ownership change” as defined in Section 382. We will perform a Section 382 limitation calculation to determine whether any changes in ownership during 2013, including changes in ownership resulting from the merger with Canopius, caused an “ownership change” that would result in an annual limitation under Section 382. As of December 31, 2013, the Tower NOL totaled $460.6 million, and the NOLs will expire in years 2019 through 2032. | |||||||||||||||||||||||||||||||||||||
Preserver Group, Inc. (“PGI”), acquired by the Company in 2007, and CastlePoint, acquired by the Company in 2009, had NOLs at the time of the acquisitions of $43.7 million and $17.4 million, respectively. As a result of the acquisitions, those NOLs of PGI and CastlePoint are subject to annual limitations of $2.8 million and $11.1 million, respectively. Any unused annual limitation may be carried over to later years. The PGI and CastlePoint NOLs will expire in years 2025 through 2029. | |||||||||||||||||||||||||||||||||||||
Additionally, Tower and the Reciprocal Exchanges have an AMT credit of $2.6 million that can be carried over indefinitely. | |||||||||||||||||||||||||||||||||||||
As of December 31, 2013 and 2012, the Company had no material uncertain tax positions and no adjustments to liabilities or operations were required. | |||||||||||||||||||||||||||||||||||||
The Internal Revenue Service performed an audit of The Company’s 2006 and 2007 tax years and closed these audits in 2011 with no changes. Additionally, in 2011 the IRS performed an audit of CastlePoint and subsidiary’s federal income tax return for the period ended February 2009 and closed this audit with no changes. CastlePoint’s federal excise tax for the 2009 and 2010 tax years were examined by the IRS in 2012. This audit was closed in 2012 with no changes. One of the Reciprocal Exchanges was under an IRS excise tax examination for the 2011 tax year. This audit closed in 2013 with no changes. The 2008 and 2009 years closed by statute. At the end of March 2014, the IRS notified the Company that its 2010, 2011 and 2012 tax returns were selected for examination. | |||||||||||||||||||||||||||||||||||||
The provision for Federal income taxes incurred is different from that which would be obtained by applying the Federal income tax rate to net income before taxes. The items causing this difference at the consolidated level are as follows: | |||||||||||||||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | |||||||||||||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | Tower | Reciprocal | Total | Tower | Reciprocal | Total | ||||||||||||||||||||||||||||
Exchanges | Exchanges | Exchanges | |||||||||||||||||||||||||||||||||||
Federal income tax expense at | |||||||||||||||||||||||||||||||||||||
U.S. statutory rate | $ | (326,239 | ) | $ | (7,075 | ) | $ | (333,314 | ) | $ | (21,458 | ) | $ | 99 | $ | (21,359 | ) | $ | 19,161 | $ | 4,820 | $ | 23,981 | ||||||||||||||
Rate differential on Non U.S. Operations | 10,746 | - | 10,746 | - | - | - | - | - | - | ||||||||||||||||||||||||||||
Tax exempt interest | (4,476 | ) | (397 | ) | (4,873 | ) | (7,374 | ) | (901 | ) | (8,275 | ) | (6,823 | ) | (418 | ) | (7,241 | ) | |||||||||||||||||||
State income taxes net of | - | ||||||||||||||||||||||||||||||||||||
Federal benefit | 359 | - | 359 | 130 | - | 130 | 488 | - | 488 | ||||||||||||||||||||||||||||
Goodwill Impairment | 78,465 | - | 78,465 | - | - | - | - | - | - | ||||||||||||||||||||||||||||
Acquisition related transaction costs | 1,801 | - | 1,801 | 2,261 | - | 2,261 | 100 | - | 100 | ||||||||||||||||||||||||||||
Prior period adjustment | 1,408 | (784 | ) | 624 | (619 | ) | (162 | ) | (781 | ) | 207 | - | 207 | ||||||||||||||||||||||||
Valuation Allowance | 242,189 | 7,944 | 250,133 | - | (1,072 | ) | (1,072 | ) | - | (1,757 | ) | (1,757 | ) | ||||||||||||||||||||||||
Other | 4,585 | (95 | ) | 4,490 | (12 | ) | 9 | (3 | ) | (2,264 | ) | 537 | (1,727 | ) | |||||||||||||||||||||||
Provision for income taxes | $ | 8,838 | $ | (407 | ) | $ | 8,431 | $ | (27,072 | ) | $ | (2,027 | ) | $ | (29,099 | ) | $ | 10,869 | $ | 3,182 | $ | 14,051 |
Employee_Benefit_Plans
Employee Benefit Plans | 12 Months Ended |
Dec. 31, 2013 | |
Employee Benefit Plans | ' |
Note 16—Employee Benefit Plans | |
The Company maintains a defined contribution Employee Pretax Savings Plan (401(k) Plan) for its employees. The Company matches 50% of each participant’s contribution up to 8% of the participant’s eligible contribution. The Company incurred $3.9 million, $3.6 million, and $3.2 million of expense in 2013, 2012 and 2011, respectively, related to the 401(k) Plan. | |
Supplemental Executive Retirement Plan (“SERP”) | |
The SERP is a non-qualified defined contribution plan that was established effective as of January 1, 2009 and is intended to enhance retirement benefits for the Company’s most senior executives and certain other key employees. Eligibility to participate in the SERP generally requires three years of prior employment with the Company for Executive Vice Presidents and Senior Vice Presidents and between five and 10 years of prior employment with the Company for other key employees. In 2013, all of the Named Executive Officers (“NEOs”), as well as certain other key executives selected at the discretion of the Compensation Committee, participated in the SERP. Subject to the approval of the Compensation Committee, the Company may make annual contributions to the SERP on behalf of each participant. The SERP is a defined contribution plan and a target benefit level cannot be guaranteed. For all participants, the amount of the annual contribution is presently equal to 5.0% of their annual cash compensation. In general, Company contributions for each participant remain unvested until such participant has completed 10 years of service with the Company, and vest in full upon completion of 10 years of service. However, as a result of the change in control provision as part of the Canopius Merger Transaction in Q1 2013, all previous Company contributions vested at that time. The Compensation Committee has discretion to terminate the SERP at any time or to adjust upward or downward the level of the Company’s contribution each year. |
Contingencies
Contingencies | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Contingencies | ' | ||||||||||||
Note 17—Contingencies | |||||||||||||
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 current and former officers in the United States District Court for the Southern District of New York. The Lang Complaint purports to be asserted on behalf of a class of persons who purchased Tower stock between July 30, 2012 and August 8, 2013. The Lang Complaint alleges that Tower and certain of its current and former 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”). The Feighay Complaint purports to be asserted on behalf of a class of persons who purchased Tower stock between May 9, 2011 and August 7, 2013. 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 current and former 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 if they would result in a loss, that the amount of any such loss cannot reasonably be estimated. | |||||||||||||
On October 18, 2013, Cinium Financial Services Corporation (“Cinium”) and certain other affiliated parties (collectively, “Plaintiffs”) commenced an action against, among others, Tower, CastlePoint Insurance Company (“CastlePoint”), an indirect wholly owned subsidiary of Tower, and certain officers of Tower (the “New York Action”) 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”). On October 29, 2013, Plaintiffs filed a complaint which revised their initial pleading (the “Complaint”). 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, and for alleged lender liability and fraudulent misrepresentation by the Company. | |||||||||||||
On April 22, 2014, counsel for Plaintiffs notified counsel for Defendants of its intent to file a stipulation of discontinuance without prejudice of the New York Action within thirty days. | |||||||||||||
Tower received a document request from the U.S. Securities and Exchange Commission (the “SEC”) dated January 13, 2014, as part of an informal inquiry (the “SEC Request”). The SEC Request asks for documents related to Tower’s financial statements, accounting policies, and analysis. Tower is cooperating with the SEC’s inquiry and has provided the requested information. | |||||||||||||
On January 14, 2014, Derek Wilson, a purported shareholder of Tower, filed a purported class action complaint (the “Wilson Complaint”) against Tower, certain of its current and former directors, ACP Re Ltd. (“ACP Re”), London Acquisition Company Limited (“Merger Sub”), and AmTrust Financial Services, Inc. (“AmTrust”) in the United States District Court for the Southern District of New York. The Wilson Complaint alleges that the members of the Company’s Board of Directors breached their fiduciary duties owed to the shareholders of Tower under Bermuda law by approving Tower’s entry into the ACP Re Merger Agreement and failing to take steps to maximize the value of Tower to its public shareholders, and that Tower, ACP Re, Merger Sub, and AmTrust aided and abetted such breaches of fiduciary duties. The Wilson Complaint also alleges, among other things, that the proposed transaction undervalues Tower, that the process leading up to the ACP Re Merger Agreement was flawed, and that certain provisions of the ACP Re Merger Agreement improperly favor ACP Re and discourage competing offers for the Company. The Wilson Complaint further alleges oppressive conduct against Tower’s shareholders in violation of Bermuda law. The Wilson Complaint seeks, among other things, declaratory and injunctive relief concerning the alleged fiduciary breaches, injunctive relief prohibiting the defendants from consummating the proposed transaction, rescission of the ACP Re Merger Agreement to the extent already implemented, and other forms of equitable relief. On February 27, 2014, the same shareholder filed an amended complaint alleging, in addition, that the defendants disseminated a materially false and misleading preliminary proxy statement regarding the ACP Re Merger Agreement in violation of Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder (the “Wilson Amended Complaint”). | |||||||||||||
On March 3, 2014, another purported shareholder filed a purported class action complaint against the Company, certain of its current and former officers and directors, ACP Re, Merger Sub, and AmTrust, also in the United States District Court for the Southern District of New York (the “Raul Complaint”). The Raul Complaint alleges that the defendants disseminated a materially false and misleading preliminary proxy statement regarding the ACP Re Merger Agreement in violation of sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9. | |||||||||||||
On March 24, 2014, two purported shareholders of the Company filed a purported class action and shareholder derivative complaint against the Company, certain of its current and former officers and directors, and Tower Group, Inc., in the Supreme Court of the State of New York, County of New York (the “Bekkerman Complaint” and, together with the Wilson Amended Complaint and the Raul Complaint, the “Merger Complaints”). The Bekkerman Complaint alleges, among other things, that the members of the Company’s board of directors breached their fiduciary duties owed to the shareholders of the Company by failing to exercise appropriate oversight over the conduct of the Company’s business, awarding Michael Lee excessive compensation, approving the Company’s entry into the ACP Re Merger Agreement, failing to take steps to maximize the value of the Company to its public shareholders, and misrepresenting or omitting material information in connection with the proposed transaction, and that the Company and Tower Group, Inc., aided and abetted such breaches of fiduciary duties. The Bekkerman Complaint also alleges, among other things, that Lee was unjustly enriched as a result of the compensation he received while allegedly breaching his fiduciary duties and by selling stock while in the possession of material, adverse, non-public information. The Bekkerman Complaint seeks, among other things, an award of money damages, declaratory and injunctive relief concerning the alleged fiduciary breaches, injunctive relief prohibiting the defendants from consummating the proposed transaction, rescission of the ACP Re Merger Agreement to the extent already implemented, and other forms of equitable relief. | |||||||||||||
The Company believes that it is not probable that the Merger Complaints will result in a loss, and if they would result in a loss, that the amount of any such 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. | |||||||||||||
Leases | |||||||||||||
The Company has various lease agreements for office space, furniture and equipment. The terms of the office space lease agreements provide for annual rental increases and certain lease incentives including initial free rent periods and cash allowances for leasehold improvements. | |||||||||||||
The Company amortizes scheduled annual rental increases and lease incentives ratably over the term of the lease. The Company’s future minimum lease payments are as follows: | |||||||||||||
($ in thousands) | Operating | Capital | Total | ||||||||||
Leases | Leases | ||||||||||||
2014 | $ | 10,463 | $ | 12,557 | $ | 23,020 | |||||||
2015 | 10,397 | 14,823 | 25,220 | ||||||||||
2016 | 10,398 | 3,371 | 13,769 | ||||||||||
2017 | 9,142 | 1,787 | 10,929 | ||||||||||
2018 | 8,850 | 640 | 9,490 | ||||||||||
Thereafter | 26,761 | - | 26,761 | ||||||||||
$ | 76,011 | $ | 33,178 | $ | 109,189 | ||||||||
Total rental expense was $10.4 million, $9.7 million and $11.1 million in 2013, 2012 and 2011, respectively. | |||||||||||||
Assessments | |||||||||||||
Tower’s insurance subsidiaries are also required to participate in various mandatory insurance facilities or in funding mandatory pools, which are generally designed to provide insurance coverage for consumers who are unable to obtain insurance in the voluntary insurance market. The insurance subsidiaries are subject to assessments in New York, Florida, New Jersey, Georgia, California and other states for various purposes, including the provision of funds necessary to fund the operations of the New York Insurance Department and the New York Property/Casualty Insurance Security Fund, which pays covered claims under certain policies provided by impaired, insolvent or failed insurance companies and various funds administered by the New York Workers’ Compensation Board, which pays covered claims under certain policies provided by impaired, insolvent or failed insurance companies. | |||||||||||||
The Company paid $4.9 million, $4.8 million and $5.1 million in 2013, 2012 and 2011, respectively, for its proportional share of the operating expenses of the New York Insurance Department. Property casualty insurance company insolvencies or failures may result in additional security fund assessments to the Company at some future date. At this time the Company is unable to estimate the possible amounts, if any, of such assessments. Accordingly, the Company is unable to determine the impact, if any; such assessments may have on financial position or results of operations of the Company. The Company is permitted to assess premium surcharges on workers’ compensation policies that are based on statutorily enacted rates. Actual assessments have resulted in differences to the original estimates based on permitted surcharges of $1.1 million in 2011. The Company estimates its liability for future assessments based on actual written premiums and historical rates and available information. As of December 31, 2013, the liability for the various workers’ compensation funds, which includes amounts assessed on workers’ compensation policies, was $10.3 million. This amount is expected to be paid over an eighteen month period ending June 30, 2015. As of December 31, 2012 the liability for the various workers’ compensation funds was $7.5 million. |
Statutory_Financial_Informatio
Statutory Financial Information and Accounting Policies | 12 Months Ended | ||
Dec. 31, 2013 | |||
Statutory Financial Information and Accounting Policies | ' | ||
Note 18—Statutory Financial Information and Accounting Policies | |||
United States | |||
For regulatory purposes, the Company’s U.S.-based insurance subsidiaries, excluding the Reciprocal Exchanges, prepare their statutory basis financial statements in accordance with practices prescribed or permitted by the state they are domiciled in (“statutory basis” or “SAP”). The more significant SAP variances from GAAP are as follows: | |||
• | Policy acquisition costs are charged to operations in the year such costs are incurred, rather than being deferred and amortized as premiums are earned over the terms of the policies. | ||
• | Ceding commission revenues are earned when ceded premiums are written except for ceding commission revenues in excess of anticipated acquisition costs, which are deferred and amortized as ceded premiums are earned. GAAP requires that all ceding commission revenues be earned as the underlying ceded premiums are earned over the term of the reinsurance agreements. | ||
• | Certain assets including certain receivables, a portion of the net deferred tax asset, prepaid expenses and furniture and equipment are not admitted. | ||
• | Investments in fixed-maturity securities are valued at NAIC value for statutory financial purposes, which is primarily amortized cost. GAAP requires investments in fixed-maturity securities classified as available for sale, to be reported at fair value. | ||
• | For SAP purposes, changes in deferred income taxes relating to temporary differences between net income for financial reporting purposes and taxable income are recognized as a separate component of gains and losses in surplus rather than included in income tax expense or benefit as required under GAAP. | ||
• | Investments in stocks of subsidiaries are carried as assets on the statutory basis balance sheet. Under GAAP, investments in stocks of subsidiaries are generally consolidated if the investor owns greater than fifty percent or otherwise demonstrates control of the subsidiary. | ||
In preparing its statutory basis financial statements, the Company does not use any prescribed or permitted statutory accounting practices. | |||
State insurance laws restrict the ability of our insurance subsidiaries to declare dividends. State insurance regulators require insurance companies to maintain specified levels of statutory capital and surplus. 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. Further, prior approval of the insurance department of its state of domicile is required before any of our insurance subsidiaries can declare and pay an “extraordinary dividend” to the Company. | |||
For the years ended December 31, 2013, 2012 and 2011, the Company’s insurance subsidiaries had SAP net (loss) income of $(402.4) million, $ (42.3) million and $ 52.0 million, respectively. At December 31, 2013 and 2012 the Company’s insurance subsidiaries had reported SAP capital and surplus of $172.9 million and $594.2 million, respectively, as filed with the insurance regulators. | |||
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”). | |||
The Company’s U.S.-based insurance subsidiaries paid zero, $10.2 million and $15.0 million in dividends and or return of capital to TGI in 2013, 2012 and 2011, respectively. As of December 31, 2013, none of the Company’s net statutory assets held at the U.S. insurance subsidiaries were available for distribution or advances to Tower (without prior consent from the insurance regulators). | |||
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 Reinsurance Company (“CastlePoint Re”), one of its Bermuda based insurance subsidiaries. The 2013 obligations that CastlePoint Re assumes from the U.S. based insurance subsidiaries are then retroceded to TRL, Tower’s other Bermuda based insurance subsidiary. 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. CastlePoint Re is required to collateralize $648.9 million of its assumed reserves in a reinsurance trust for the benefit of TICNY, the lead pool company of the U.S. insurance companies. On February 5, 2014, the BMA approved the transfer of $167.3 million in unencumbered liquid assets from TRL to CastlePoint Re, allowing CastlePoint Re to increase the funding in the reinsurance trust for the benefit of TICNY. The New York State Department of Financial Services (the “NYDFS”) has confirmed this will be acceptable for the purpose of admitted surplus and capital on TICNY’s 2013 statutory basis financial statements. For the 2013 statutory basis financial statements, CastlePoint Re reported $581.7 million in its reinsurance trust. | |||
Based on RBC calculations as of December 31, 2013, six of Tower’s ten U.S. based insurance subsidiaries have capital and surplus below Company Action Level and do not meet the minimum capital and surplus requirements of their respective state regulators. As a result, management has discussed the ACP Re Merger Agreement and the Cut-Through Reinsurance Agreement and provided its 2014 RBC forecasts to the regulators to document the Company’s business plan to bring two of three U.S based insurance subsidiaries’ capital and surplus levels above Company Action Level. | |||
As a result of the recognition of the ceding commission relating to the Cut-Through Reinsurance Agreements executed with AmTrust and NGHC in January 2014, the U.S. based insurance subsidiaries’ capital and surplus will increase significantly from December 31, 2013 to January 1, 2014, as the U.S. based subsidiaries will transfer a significant portion of their commercial lines unearned premium to a subsidiary of AmTrust and all of their personal lines unearned premiums to a subsidiary of NGHC. Accordingly, as of January 1, 2014, the effect of the Cut-Through Reinsurance Agreements increased the surplus of two of the U.S. based insurance subsidiaries such that their capital and surplus levels exceeded Company Action Level. | |||
In 2013, the NYDFS issued orders for seven of Tower’s insurance subsidiaries, subjecting them to heightened regulatory oversight, which includes providing the NYDFS with increased information with respect to the insurance subsidiaries’ business, operations and financial condition. In addition, the NYDFS has placed limitations on payments and transactions outside the ordinary course of business and material changes in the insurance subsidiaries’ management and related matters. Tower’s management and Board of Directors have held discussions with the NYDFS, and Tower has been complying with the orders and oversight. | |||
On April 21, 2014, the NYDFS issued additional orders for two of Tower’s insurance subsidiaries instructing them to provide plans to address weaknesses in such insurance subsidiaries’ risk based capital levels as shown in their statutory annual financial statements, and imposing further enhanced reporting and prior approval requirements and limitations on writings of new business. On the same date, the NYDFS issued a letter pertaining to one of Tower’s insurance subsidiaries requiring the submission of a plan to address weaknesses in risk based capital levels. | |||
The Massachusetts Division of Insurance (“MDOI”) and Tower management have agreed to certain restrictions on the operations of Tower’s two Massachusetts domiciled insurance subsidiaries. Tower management has agreed to cause these subsidiaries to provide the MDOI 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. | |||
The Maine Bureau of Insurance entered a Corrective Order imposing certain conditions on Maine domestic insurers York Insurance Company of Maine (“YICM”) and North East Insurance Company (“NEIC”). The Corrective Order imposes increased reporting obligations on YICM and NEIC with respect to business operations and financial condition and imposes restrictions on payments or other transfers of assets from YICM and NEIC outside the ordinary course of business. | |||
On April 11, 2014, the New Jersey Department of Banking and Insurance imposed an enhanced reporting requirement on the intercompany transactions involving Tower’s two New Jersey domiciled insurance subsidiaries and Tower’s New Jersey managed insurer. Such companies are now required to submit for prior approval any transactions with affiliates, even transactions that would otherwise not be reportable under the applicable holding company act. | |||
Dividends | |||
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 December 31, 2013, no dividends may be paid to the Holding Company without the approval of the state regulators or BMA, as appropriate. | |||
Bermuda | |||
CastlePoint Re and TRL are registered as a Class 3 reinsurer under The Insurance Act 1978 (Bermuda), amendments thereto and related regulations (the “Insurance Act”). Under the Insurance Act, CastlePoint Re and TRL are required to prepare Statutory Financial Statements and to file a Statutory Financial Return. The Insurance Act also requires CastlePoint Re and TRL to maintain minimum share capital and surplus, and it has met these requirements as of December 31, 2013. | |||
For Bermuda registered companies, there are some differences between financial statements prepared in accordance with GAAP and those prepared on a Bermuda statutory basis. The more significant Bermuda SAP variances from GAAP are as follows: | |||
• | Deferred policy acquisition costs have been fully expensed to income. | ||
• | Prepaid expenses and fixed assets have been removed from the statutory balance sheet. | ||
• | Investments in fixed-maturity securities are carried at amortized cost. GAAP requires investments in fixed-maturity securities classified as available for sale to be reported at fair value. | ||
• | Deferred income taxes, intangible assets and goodwill are not included in the Bermuda statutory capital and surplus balances. | ||
• | Investments in stocks of subsidiaries are carried as assets on the statutory basis balance sheet. Under GAAP, investments in stocks of subsidiaries are generally consolidated if the investor owns greater than fifty percent or otherwise demonstrates control of the subsidiary. | ||
CastlePoint Re and TRL are also subject to dividend limitations imposed by Bermuda under the Companies Act 1981 of Bermuda, as amended (the “Companies Act”). As of December 31, 2013, CastlePoint Re and TRL were unable to pay dividends to Tower, without BMA approval. | |||
Bermuda based insurance entities minimum capital and surplus requirements are calculated from a solvency formula prescribed by the BMA. As of December 31, 2013, TRL and CastlePoint Re had capital and surplus that did not meet the minimum capital and surplus requirements of the BMA. Management has discussed the ACP Re Merger Agreement and provided 2014 solvency forecasts to the BMA. | |||
The TRL and CastlePoint Re capital and surplus amounts were $14.4 million and $(37.2) million, respectively. The CastlePoint Re negative surplus includes ($109.7) million of a deferred gain associated with retroactive accounting treatment on an intercompany retroactive reinsurance agreement between CastlePoint Re and TRL. This gain will be recognized as the underlying claims are paid on the losses reinsured by TRL. This deferred gain is eliminated in the preparation of the TGIL consolidated financial statements. | |||
The BMA has issued directives for TRL and CastlePoint Re, subjecting them to heightened regulatory oversight and requiring BMA approval before certain transactions can be executed. Tower has been complying with the directives issued by the BMA. | |||
For the year ended December 31, 2013, the Bermuda based insurers had statutory net income (loss) of $ (198.6) million and at December 31, 2013, had statutory surplus of $60.3 million. The statutory capital surplus amounts as of December 31, 2013 include $26.5 million from U.S.-based insurance subsidiaries that are owned by CastlePoint Re. | |||
CastlePoint Re paid $22.0 million, $2.5 million and $20.0 million in dividends and/or return of capital to TGI in 2013, 2012 and 2011, respectively. As of December 31, 2013, none of the Company’s net statutory assets held at its Bermuda based insurance subsidiaries were available for distributions or advances to Tower. | |||
Reciprocal Exchanges | |||
The Reciprocal Exchanges prepare their statutory basis financial statements in accordance with SAP. The more significant SAP variances from GAAP are consistent with those discussed above for the U.S.-based insurance subsidiaries. | |||
For the years ended December 31, 2013, 2012 and 2011, the Reciprocal Exchanges had combined SAP net income (loss) of $(8.8) million, $7.4 million and $16.5 million, respectively. At December 31, 2013 and 2012 the Reciprocal Exchanges had combined capital and surplus of $81.2 million and $91.4 million, respectively. | |||
The Reciprocal Exchanges are required to maintain minimum capital and surplus. The minimum capital and surplus requirements were determined to be above Company Action Level. As of December 31, 2013 and 2012, the combined Company Action Level capital and surplus requirement for Adirondack was $34.5 million and $38.1 million, respectively. As of December 31, 2013 and 2012, the combined Company Action Level capital and surplus requirement for New Jersey Skylands was $11.2 million and $10.2 million, respectively. | |||
The Reciprocal Exchanges are not owned by the Company, but managed through management agreements. Accordingly, the Reciprocal Exchanges’ net assets are not available to the Company. In addition, no dividends can be paid from the Reciprocal Exchanges to Tower. |
Fair_Value_of_Financial_Instru
Fair Value of Financial Instruments | 12 Months Ended |
Dec. 31, 2013 | |
Fair Value of Financial Instruments | ' |
Note 19—Fair Value of Financial Instruments | |
GAAP guidance requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized in the balance sheet, for which it is practicable to estimate fair value. The Company uses the following methods and assumptions in estimating its fair value disclosures for financial instruments: | |
Fixed maturity and equity securities: Fair value disclosures for investments are included in “Note 6—Fair Value Measurements.” | |
Other invested assets: The fair value of securities which are reported under the fair value option are included in “Note 6—Fair Value Measurements. | |
Premiums receivable and reinsurance recoverable: The carrying values reported in the accompanying balance sheets for these financial instruments approximate their fair values. Premiums receivable and reinsurance recoverable are considered Level 3 pursuant to the fair value hierarchy due to the lack of available observable inputs for their valuation in the market. | |
Debt: Fair value disclosures for debt are included in “Note 13—Debt.” The Company uses a discounted cash flow model to fair value the subordinated debentures. Market quotes are used to fair value the senior convertible notes. | |
Reinsurance balances payable and funds held under reinsurance contracts: The carrying value reported in the balance sheet for these financial instruments approximates fair value. Reinsurance balances payable and funds held under reinsurance contracts are considered Level 3 pursuant to the fair value hierarchy due to the lack of available observable inputs for their valuation in the market. |
Earnings_loss_per_Share
Earnings (loss) per Share | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Earnings (loss) per Share | ' | ||||||||||||
Note 20—Earnings (loss) per Share | |||||||||||||
Undistributed net earnings (loss) (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 shareholders 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 share 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 Canopius Merger Transaction): | |||||||||||||
Year Ended December 31, | |||||||||||||
(in thousands, except per share amounts) | 2013 | 2012 | 2011 | ||||||||||
Numerator | |||||||||||||
Net income (loss) attributable to Tower Group International, Ltd. | $ | (942,616 | ) | $ | (34,234 | ) | $ | 44,435 | |||||
Less: Allocation of income for unvested participating restricted stock | - | - | (370 | ) | |||||||||
Less: Dividends on unvested participating restricted stock | (262 | ) | (686 | ) | (679 | ) | |||||||
Net income available to common shareholders - Basic | (942,878 | ) | (34,920 | ) | 43,386 | ||||||||
Reallocation of income for unvested participating restricted stock | - | - | (1 | ) | |||||||||
Net income (loss) available to common shareholders - Diluted | (942,878 | ) | (34,920 | ) | 43,385 | ||||||||
Denominator | |||||||||||||
Basic earnings per share denominator | 54,297 | 42,902 | 45,226 | ||||||||||
Effect of dilutive securities: | - | - | 111 | ||||||||||
Diluted earnings per share denominator | 54,297 | 42,902 | 45,337 | ||||||||||
Earnings (loss) per share attributable to Tower shareholders - Basic | |||||||||||||
Common stock: | |||||||||||||
Distributed earnings | $ | 0.5 | $ | 0.66 | $ | 0.61 | |||||||
Undistributed earnings | (17.86 | ) | (1.47 | ) | 0.35 | ||||||||
Total - Basic | (17.37 | ) | (0.81 | ) | 0.96 | ||||||||
Earnings (loss) per share attributable to Tower shareholders - Diluted | $ | (17.37 | ) | $ | (0.81 | ) | $ | 0.96 | |||||
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 years ended December 31, 2013, 2012 and 2011, 955,800, zero and 166,700, respectively, options and other common stock equivalents to purchase Tower 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. |
Segment_Information
Segment Information | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Segment Information | ' | ||||||||||||
Note 21—Segment Information | |||||||||||||
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. | |||||||||||||
Segment performance is evaluated based on segment profit, which excludes investment income, realized gains and losses, interest expense, income taxes and incidental corporate expenses. Assets, other than intangible assets and goodwill, are not allocated to segments because investments and assets other than intangible assets and goodwill are considered in total by management for decision-making purposes. | |||||||||||||
Business segments results are as follows: | |||||||||||||
Year Ended December 31, | |||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||
Commercial Insurance Segment | |||||||||||||
Revenues | |||||||||||||
Premiums earned | $ | 931,693 | $ | 1,104,551 | $ | 1,052,050 | |||||||
Ceding commission revenue | 30,115 | 7,702 | 14,786 | ||||||||||
Policy billing fees | 5,637 | 5,467 | 4,345 | ||||||||||
Total revenues | 967,445 | 1,117,720 | 1,071,181 | ||||||||||
Expenses | |||||||||||||
Loss and loss adjustment expenses | 1,185,627 | 859,707 | 740,754 | ||||||||||
Underwriting expenses | 406,908 | 388,511 | 352,832 | ||||||||||
Total expenses | 1,592,535 | 1,248,218 | 1,093,586 | ||||||||||
Underwriting profit (loss) | $ | (625,090 | ) | $ | (130,498 | ) | $ | (22,405 | ) | ||||
Assumed Reinsurance Segment | |||||||||||||
Revenues | |||||||||||||
Premiums earned | $ | 116,417 | $ | 120,015 | $ | 35,861 | |||||||
Ceding commission revenue | - | - | - | ||||||||||
Total revenues | 116,417 | 120,015 | 35,861 | ||||||||||
Expenses | |||||||||||||
Loss and loss adjustment expenses | 41,474 | 52,975 | 17,456 | ||||||||||
Underwriting expenses | 57,506 | 44,124 | 11,859 | ||||||||||
Total expenses | 98,980 | 97,099 | 29,315 | ||||||||||
Underwriting profit (loss) | $ | 17,437 | $ | 22,916 | $ | 6,546 | |||||||
Personal Insurance Segment | |||||||||||||
Revenues | |||||||||||||
Premiums earned | $ | 464,805 | $ | 497,298 | $ | 505,939 | |||||||
Ceding commission revenue | 51,267 | 24,633 | 19,182 | ||||||||||
Policy billing fees | 6,662 | 7,148 | 6,189 | ||||||||||
Total revenues | 522,734 | 529,079 | 531,310 | ||||||||||
Expenses | |||||||||||||
Loss and loss adjustment expenses | 292,733 | 351,076 | 318,775 | ||||||||||
Underwriting expenses | 249,779 | 228,289 | 218,463 | ||||||||||
Total expenses | 542,512 | 579,365 | 537,238 | ||||||||||
Underwriting profit (loss) | $ | (19,778 | ) | $ | (50,286 | ) | $ | (5,928 | ) | ||||
Tower | $ | 6,083 | $ | (31,450 | ) | $ | (11,308 | ) | |||||
Reciprocal Exchanges | (25,861 | ) | (18,836 | ) | 5,380 | ||||||||
Total underwriting profit (loss) | $ | (19,778 | ) | $ | (50,286 | ) | $ | (5,928 | ) | ||||
The following table reconciles revenue by segment to consolidated revenues: | |||||||||||||
Year Ended December 31, | |||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||
Commercial insurance segment | $ | 967,445 | $ | 1,117,720 | $ | 1,071,181 | |||||||
Assumed reinsurance segment | 116,417 | 120,015 | 35,861 | ||||||||||
Personal insurance segment | 522,734 | 529,079 | 531,310 | ||||||||||
Total segment revenues | 1,606,596 | 1,766,814 | 1,638,352 | ||||||||||
Net investment income | 109,208 | 127,165 | 126,474 | ||||||||||
Net realized gains (losses) on investments, including other-than-temporary impairments | 25,048 | 25,476 | 9,394 | ||||||||||
Insurance services revenue | 1,150 | 3,420 | 1,570 | ||||||||||
Consolidated revenues | $ | 1,742,002 | $ | 1,922,875 | $ | 1,775,790 | |||||||
The following table reconciles the results of the Company’s individual segments to consolidated income before income taxes: | |||||||||||||
Year Ended December 31, | |||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||
Commercial insurance segment underwriting profit (loss) | $ | (625,090 | ) | $ | (130,498 | ) | $ | (22,405 | ) | ||||
Assumed reinsurance segment underwriting profit (loss) | 17,437 | 22,916 | (6,546 | ) | |||||||||
Personal insurance segment underwriting profit (loss) | (19,778 | ) | (50,286 | ) | (5,928 | ) | |||||||
Net investment income | 109,208 | 127,165 | 126,474 | ||||||||||
Net realized gains (loss) on investments, including other-than-temporary impairments | 25,048 | 25,476 | 9,394 | ||||||||||
Corporate expenses, and other income | (14,581 | ) | (12,460 | ) | (9,950 | ) | |||||||
Acquisition-related transaction costs | (21,322 | ) | (9,229 | ) | (360 | ) | |||||||
Interest expense | (33,594 | ) | (32,630 | ) | (34,290 | ) | |||||||
Goodwill and fixed asset impairment | (397,211 | ) | - | - | |||||||||
Equity income in unconsolidated affiliate | 6,962 | (1,470 | ) | - | |||||||||
Income (loss) before income taxes | $ | (952,921 | ) | $ | (61,016 | ) | $ | 69,481 |
Unaudited_Quarterly_Financial_
Unaudited Quarterly Financial Information | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||
Unaudited Quarterly Financial Information | ' | ||||||||||||||||||||
Note 22—Unaudited Quarterly Financial Information | |||||||||||||||||||||
The following table presents the unaudited quarterly financial information for the Company: | |||||||||||||||||||||
2013 | |||||||||||||||||||||
($ in thousands, except per share amounts) | First | Second (2) | Third (2) (3) | Fourth | Total | ||||||||||||||||
(as revised) | (as revised) | ||||||||||||||||||||
Revenues | $ | 476,483 | $ | 460,518 | $ | 478,881 | $ | 326,120 | $ | 1,742,002 | |||||||||||
Net Income (loss) attributable to Tower Group International, Ltd. | 12,917 | (515,847 | ) | (348,053 | ) | (91,633 | ) | (942,616 | ) | ||||||||||||
Net income (loss) per share attributable to Tower shareholders: | |||||||||||||||||||||
Basic (1) | $ | 0.28 | $ | (9.03 | ) | $ | (6.09 | ) | $ | (1.60 | ) | $ | (17.37 | ) | |||||||
Diluted (1) | $ | 0.28 | $ | (9.03 | ) | $ | (6.09 | ) | $ | (1.60 | ) | $ | (17.37 | ) | |||||||
2012 | |||||||||||||||||||||
First | Second | Third | Fourth | Total | |||||||||||||||||
Revenues | $ | 466,223 | $ | 506,392 | $ | 474,891 | $ | 475,369 | $ | 1,922,875 | |||||||||||
Net Income (loss) attributable to Tower Group International, Ltd. | 19,166 | (16,809 | ) | 21,629 | (58,220 | ) | (34,234 | ) | |||||||||||||
Net income (loss)) per share attributable to Tower shareholders: | |||||||||||||||||||||
Basic (1) | $ | 0.43 | $ | (0.39 | ) | $ | 0.5 | $ | (1.38 | ) | $ | (0.81 | ) | ||||||||
Diluted (1) | $ | 0.43 | $ | (0.39 | ) | $ | 0.5 | $ | (1.38 | ) | $ | (0.81 | ) | ||||||||
-1 | Since the weighted-average shares for the quarters are calculated independently of the weighted-average shares for the year, quarterly earnings (loss) per share may not total to annual earnings per share. Earnings (loss) per share has been calculated using weighted-average shares that have been adjusted for the 1.1330 share conversion ratio resulting from the Canopius Merger Transaction. | ||||||||||||||||||||
-2 | Net Income (loss) attributable to Tower Group International, Ltd. and per share amounts have been revised from amounts previously reported to adjust for a correction in income tax expenses by $8.5 million in the second quarter of 2013 and $0.4 million in the third quarter of 2013. The Company adjusted the valuation allowance recorded on its deferred taxes. This correction included an adjustment to increase total liabilities by $8.5 million in second quarter of 2013. This correction resulted in a total increase to liabilities of $8.9 million and cumulative decrease in equity of $8.5 million by the third quarter of 2013. This correction had no impact to cash flows. Management concluded these revisions were not material to the previously reported financial statements. | ||||||||||||||||||||
-3 | Revenues have been revised from amounts previously reported to adjust for a correction in accounting for the Southport Quota Share. In the third quarter of 2013, management should have used deposit accounting. This correction resulted in greater net earned premiums of $46.1 million and less ceded commission revenue of $10.1 million, and additional loss and loss adjustment expense of $36.0 million. This correction had no impact to net income (loss). This correction also resulted in an adjustment to decrease total assets and total liabilities by $23.9 million. Cash flows provided by (used in) operating activities increased and Cash flows provided by (used in) financing activities decreased by $35.1 million in the third quarter of 2013. Management concluded these revisions were not material to the previously reported financial statements. |
Subsequent_Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2013 | |
Subsequent Events | ' |
Note 23—Subsequent Events | |
Proposed Merger with ACP Re | |
On January 3, 2014, Tower entered into an Agreement and Plan of Merger (“ACP Re Merger Agreement”) with ACP Re Ltd. (“ACP Re”), and a wholly-owned subsidiary of ACP Re (“Merger Sub”), pursuant to which, subject to the satisfaction or waiver of the conditions therein, Merger Sub would merge with and into Tower, with Tower as the surviving corporation in the merger and a wholly owned subsidiary of ACP Re. The transaction would close in the summer of 2014, subject to the satisfaction or waiver of the closing conditions contained in the ACP Re Merger Agreement. ACP Re is a Bermuda based reinsurance company. The controlling shareholder of ACP Re is a trust established by the founder of AmTrust Financial Services, Inc. (“AmTrust”), National General Holdings Corporation (“NGHC”) and Maiden Holdings, Ltd. Notwithstanding any other statement in this Form 10-K or any other document, many of the conditions for closing the ACP Re Merger Agreement remain outstanding and there can be no assurance that they will be satisfied or that the transaction will be consummated or when it may close. | |
Pursuant to the terms of the ACP Re Merger Agreement, at the effective time of the merger, each outstanding share of Tower’s common stock, par value $0.01 per share, following the settlement of all outstanding equity awards, will be converted into the right to receive $3.00 in cash, with an aggregate value of approximately $172.1 million. | |
Each of the parties has made representations and warranties in the ACP Re Merger Agreement. Tower has agreed to certain covenants and agreements, including, among others, (i) to conduct its business in the ordinary course of business, consistent with past practice, during the period between the execution of the ACP Re Merger Agreement and the closing of the merger, (ii) not to solicit alternate transactions, subject to a customary “fiduciary out” provision which allows Tower under certain circumstances to provide information to and participate in discussions with third parties with respect to unsolicited alternative acquisition proposals that Tower’s Board of Directors has determined, in its good faith judgment, is appropriate in furtherance of the best interests of Tower, and (iii) to call and hold a special shareholders’ meeting and recommend adoption of the ACP Re Merger Agreement. | |
Concurrently with the execution of the ACP Re Merger Agreement, several subsidiaries of Tower have entered into two Cut-Through Reinsurance Agreements, pursuant to which a subsidiary of AmTrust and a subsidiary of NGHC agreed to provide 100% quota share reinsurance and a cut-through endorsement to cover all eligible new and renewal commercial and personal lines business, respectively, and at their option, losses incurred on or after January 1, 2014 on not less than 60% of the in-force business. Tower received confirmation on January 16, 2014 from AmTrust and NGHC that they would exercise such option to reinsure on a cut-through basis losses incurred on or after January 1, 2014 under in-force policies with respect to (1) in the case of AmTrust, approximately 65.7% of Tower’s unearned premium reserves as of December 31, 2013 with respect to its ongoing commercial lines business, and (2) in the case of NGHC, 100% of Tower’s unearned premium reserves as of December 31, 2013 with respect to its personal lines segment business. Tower received a 20% ceding commission from AmTrust or NGHC on all Tower unearned premiums that are subject to the Cut-Through Reinsurance Agreements and a 22% ceding commission on 2014 ceded premiums. | |
Concurrently with the execution of the ACP Re Merger Agreement, the controlling shareholder of ACP Re has provided to Tower a guarantee for the payment of the merger consideration, effective upon the closing of the merger. | |
The ACP Re Merger Agreement was unanimously approved by the respective Boards of Directors of ACP Re and Tower, and is conditioned, among other things, on: (i) the approval of Tower’s shareholders, (ii) receipt of governmental approvals, including antitrust and insurance regulatory approvals (on January 30, 2014, the Company was granted early termination of the Hart-Scott-Rodino waiting period which requires persons contemplating certain mergers or acquisitions to give the Federal Trade Commission and the Assistant Attorney General advanced notice and to wait designated periods before consummation of such plans), (iii) the absence of any law, order or injunction prohibiting the merger, (iv) the accuracy of each party’s representations and warranties (subject to customary materiality qualifiers), and (v) each party’s compliance with its covenants and agreements contained in the ACP Re Merger Agreement. In addition, ACP Re’s obligation to consummate the merger is subject to the non-occurrence of any material adverse effect on Tower, as well as the absence of any insolvency-related event affecting Tower. The transaction is also conditioned on holders of not more than 15% of Tower’s common stock dissenting to the merger. | |
There is no financing condition to consummation of the transactions contemplated by the ACP Re Merger Agreement. | |
The ACP Re Merger Agreement provides certain termination rights for each of Tower and ACP Re, and further provides that upon termination of the ACP Re Merger Agreement, under certain circumstances, Tower will be obligated to reimburse ACP Re for certain of its transaction expenses, subject to a cap of $2 million, and to pay ACP Re a termination fee of $8.18 million, net of any transaction expenses it has reimbursed. | |
Michael H. Lee, the former Chairman, President and Chief Executive Officer of Tower, who beneficially owned approximately 4.2% of the issued and outstanding common stock of Tower as of January 3, 2014, has entered into a support agreement pursuant to which he has agreed to vote his shares in favor of the merger. | |
Fitch Downgrades the Company’s Financial Strength and Issuer Credit Ratings | |
On January 2, 2014, Fitch downgraded Tower’s issuer default rating from “B” to “CC” and the insurer strength ratings of its insurance subsidiaries from “BB” to “B”. On October 7, 2013, Fitch downgraded Tower’s issuer default rating to “B” (the sixth highest of 11 such ratings) from “BBB” and the insurer strength ratings of its insurance subsidiaries to “B” (the fifth highest of Fitch Ratings’ nine such ratings) from “A-”. In downgrading such ratings, Fitch stated that it “is concerned that Tower’s competitive position has been materially damaged, negatively impacting the Company’s financial flexibility and ability to write new business” and that “the magnitude of the second quarter charges was large enough to cause several key ratios to fall well outside of previously established ratings downgrade triggers, which resulted in the multi-notch downgrade.” On January 6, 2014, Fitch revised Tower’s rating watch status to “evolving” from “negative” following the ACP Re merger announcement, and stated that “[t]he Evolving Watch reflects that the ratings could go up if the merger closes; however, ratings could be lowered if the merger does not occur and [the Company] is unsuccessful in addressing upcoming debt maturity or if additional reserve deficiencies develop.” | |
Following the announcement of the ACP Re merger, on January 10, 2014 A.M. Best maintained the under review status of Tower’s financial strength and issuer credit ratings and revised the implications from “negative” to “developing” for all of these ratings. A.M. Best stated that, “[t]he under review status with developing implications reflects the potential benefits to be garnered from the transaction as well as the potential downside from any additional adverse reserve development and/or any unforeseen events that might transpire up until the close of the transaction.” | |
Management expects these rating actions, in combination with other items that have impacted the Company in 2013, to result in a significant decrease in the amount of premiums the insurance subsidiaries are able to write. Direct written premiums were $1,606.2 million for the year ended December 31, 2013, respectively. Business written through certain program underwriting agents requires an A.M. Best rating of A- or greater. | |
In January 2014, Tower’s Board of Directors approved Tower’s merger with ACP Re. In light of the adverse ratings actions, concurrent with entering into its merger agreement with ACP Re, Tower entered into cut-through reinsurance treaties with affiliates of ACP Re. As a result of this merger, if it closes, and the execution of the cut-through reinsurance treaties, Tower believes its insurance subsidiaries will retain significant portions of their business. (See “Note 9 –Reinsurance” for a discussion of the cut-through reinsurance treaties). | |
Resignation of Tower’s Chairman of the Board, President and Chief Executive Officer and Appointment of new Chairman of the Board and new President and Chief Executive Officer | |
On February 6, 2014, Tower and Michael H. Lee entered into a Separation and Release Agreement in connection with the resignation of Mr. Lee from his positions as Chairman of the Board of Directors, President and Chief Executive Officer, effective as of February 6, 2014. Mr. Lee’s employment with the Company was terminated effective as of February 6, 2014. In connection with his resignation, Mr. Lee received on March 31, 2014 a severance payment of approximately $3.3 million calculated pursuant to terms of his employment agreement. | |
Jan R. Van Gorder, who is the lead independent director of the Board and a member of the Board’s Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee, was appointed on February 9, 2014 to succeed Mr. Lee as Chairman of the Board. William W. Fox, Jr., who had served as a member of the Board and of the Board’s Audit Committee and Corporate Governance and Nominating Committee until his resignation from the Board on December 31, 2013, succeeded Mr. Lee as President and Chief Executive Officer of Tower, effective as of February 14, 2014. | |
Other | |
On April 7, 2014, the Company and a lessor mutually agreed to enter into a final settlement agreement to terminate a lease agreement for IT systems supporting certain personal lines business. Under the terms of the settlement agreement, the Company paid the lessor $10.4 million from a pledged collateral account funded by the Company for the benefit of the lessor. The final settlement agreement and payment were approved by the NYDFS. |
Summary_of_Investments_Other_T
Summary of Investments - Other Than Investments in Related Parties | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Summary of Investments - Other Than Investments in Related Parties | ' | ||||||||||||
Schedule I – Summary of Investments – Other Than Investments in Related Parties | |||||||||||||
December 31, 2013 | |||||||||||||
($ in thousands) | Cost | Fair | Amount | ||||||||||
Value | Reflected on | ||||||||||||
Balance Sheet | |||||||||||||
Fixed maturities: | |||||||||||||
Available for sale: | |||||||||||||
U.S. Treasury securities and obligations of U.S. Government agencies | $ | 481,321 | $ | 475,183 | $ | 475,183 | |||||||
Corporate securities | 512,444 | 525,942 | 525,942 | ||||||||||
Mortgage-backed securities | 342,487 | 362,464 | 362,464 | ||||||||||
Municipal securities | 277,382 | 279,106 | 279,106 | ||||||||||
Total fixed maturities | 1,613,634 | 1,642,695 | 1,642,695 | ||||||||||
Preferred stocks | 21,330 | 18,848 | 18,848 | ||||||||||
Common stock: | |||||||||||||
Public utilities, industrial and other | 76,378 | 87,782 | 87,782 | ||||||||||
Total equities | 97,708 | 106,630 | 106,630 | ||||||||||
Short-term investments | 5,925 | 5,897 | 5,897 | ||||||||||
Other invested assets | 96,155 | 96,155 | 96,155 | ||||||||||
Total investments | $ | 1,813,422 | $ | 1,851,377 | $ | 1,851,377 | |||||||
31-Dec-12 | |||||||||||||
($ in thousands) | Cost | Fair | Amount | ||||||||||
Value | Reflected on | ||||||||||||
Balance Sheet | |||||||||||||
Fixed maturities: | |||||||||||||
Available for sale: | |||||||||||||
U.S. Treasury securities and obligations of U.S. Government agencies | $ | 281,964 | $ | 287,726 | $ | 287,726 | |||||||
Corporate securities | 698,012 | 746,665 | 746,665 | ||||||||||
Mortgage-backed securities | 576,837 | 624,277 | 624,277 | ||||||||||
Municipal securities | 633,373 | 686,043 | 686,043 | ||||||||||
Total fixed maturities | 2,190,186 | 2,344,711 | 2,344,711 | ||||||||||
Preferred stocks | 31,272 | 31,521 | 31,521 | ||||||||||
Common stock: | |||||||||||||
Public utilities, industrial and other | 118,076 | 114,737 | 114,737 | ||||||||||
Total equities | 149,348 | 146,258 | 146,258 | ||||||||||
Short-term investments | 4,749 | 4,750 | 4,750 | ||||||||||
Other invested assets | 57,786 | 57,786 | 57,786 | ||||||||||
Total investments | $ | 2,402,069 | $ | 2,553,505 | $ | 2,553,505 |
Condensed_Financial_Informatio
Condensed Financial Information of the Registrant | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Condensed Financial Information of the Registrant | ' | ||||||||||||
Tower Group International, Ltd. | |||||||||||||
Schedule II – Condensed Financial Information of the Registrant | |||||||||||||
Condensed Balance Sheets | |||||||||||||
December 31, | |||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||
Assets | |||||||||||||
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $0 and $7,656) | $ | - | $ | 8,121 | |||||||||
Equity securities, available-for-sale, at fair value (cost of $0 and $0) | - | - | |||||||||||
Other invested assets | - | 2,045 | |||||||||||
Cash and cash equivalents | 438 | 17,130 | |||||||||||
Investment in subsidiaries | 108,961 | 1,250,436 | |||||||||||
Investment in unconsolidated affiliate | - | 71,894 | |||||||||||
Federal and state taxes recoverable | - | - | |||||||||||
Deferred income taxes | - | 15,879 | |||||||||||
Investment in statutory business trusts, equity method | - | 2,664 | |||||||||||
Due from affiliate | - | - | |||||||||||
Other assets | 3,317 | 69,172 | |||||||||||
Total assets | $ | 112,716 | $ | 1,437,341 | |||||||||
Liabilities | |||||||||||||
Accounts payable and accrued expenses | $ | 1,826 | $ | 25,622 | |||||||||
Due to affiliates | 15,339 | 75,823 | |||||||||||
Deferred rent liability | - | 4,537 | |||||||||||
Federal and state income taxes payable | - | - | |||||||||||
Debt | - | 381,301 | |||||||||||
Total liabilities | 17,165 | 487,283 | |||||||||||
Shareholders’ equity | 95,551 | 950,058 | |||||||||||
Total liabilities and shareholders’ equity | $ | 112,716 | $ | 1,437,341 | |||||||||
The condensed financial information should be read in conjunction with the notes to the condensed financial information of the registrant and the consolidated financial statements and the notes thereto. | |||||||||||||
Tower Group International, Ltd. | |||||||||||||
Schedule II – Condensed Financial Information of the Registrant | |||||||||||||
Condensed Statements of Operations and Comprehensive Income | |||||||||||||
Year Ended December 31, | |||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||
Revenues | |||||||||||||
Net realized gains (losses) on investments | $ | 221 | $ | (1,570 | ) | $ | (264 | ) | |||||
Investment income | 8,667 | 815 | 1,394 | ||||||||||
Equity in net earnings of subsidiaries | (923,809 | ) | (6,254 | ) | 61,681 | ||||||||
Total revenues | (914,921 | ) | (7,009 | ) | 62,811 | ||||||||
Expenses | |||||||||||||
Other operating expenses | 7,786 | 11,754 | 10,067 | ||||||||||
Interest expense | 4,887 | 18,782 | 17,843 | ||||||||||
Total expenses | 12,673 | 30,536 | 27,910 | ||||||||||
Other Income | |||||||||||||
Equity income in unconsolidated affiliate | 954 | (1,470 | ) | - | |||||||||
Gain on investment in acquired unconsolidated affiliate | - | - | - | ||||||||||
Acquisition related transaction costs | (17,261 | ) | (9,229 | ) | (360 | ) | |||||||
Income before income taxes | (943,901 | ) | (48,244 | ) | 34,541 | ||||||||
Provision/(benefit) for income taxes | (1,285 | ) | (14,010 | ) | (9,894 | ) | |||||||
Net income | $ | (942,616 | ) | $ | (34,234 | ) | $ | 44,435 | |||||
Other comprehensive income (loss) net of tax | (102,262 | ) | 19,704 | 14,774 | |||||||||
Comprehensive income (loss) | (1,044,878 | ) | (14,530 | ) | 59,209 | ||||||||
The condensed financial information should be read in conjunction with the notes to the condensed financial information of the registrant and the consolidated financial statements and the notes thereto. | |||||||||||||
Tower Group International, Ltd. | |||||||||||||
Schedule II – Condensed Financial Information of the Registrant | |||||||||||||
Condensed Statements of Cash Flows | |||||||||||||
Year Ended December 31, | |||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||
Cash flows provided by (used in) operating activities: | |||||||||||||
Net income | $ | (942,616 | ) | $ | (34,234 | ) | $ | 44,435 | |||||
Adjustments to reconcile net income to net cash provided by (used) in operations: | |||||||||||||
(Gain) loss on sale of investments | - | 1,570 | 264 | ||||||||||
Dividends received from consolidated subsidiaries | - | 22,954 | 55,400 | ||||||||||
Equity in undistributed net income of subsidiaries | 923,809 | 2,088 | (62,189 | ) | |||||||||
Depreciation and amortization | - | 4,388 | 3,362 | ||||||||||
Amortization of debt issuance costs | - | 2,830 | 2,635 | ||||||||||
Amortization of restricted stock | - | 9,283 | 10,292 | ||||||||||
Deferred income tax | - | (13,165 | ) | (3,836 | ) | ||||||||
Excess tax benefits from share-based payment arrangements | - | (345 | ) | (162 | ) | ||||||||
Change in operating assets and liabilities | |||||||||||||
Investment income receivable | - | - | 173 | ||||||||||
Federal and state income tax recoverable | - | (18,409 | ) | 15,998 | |||||||||
Equity loss (income) in unconsolidated affiliate | - | 1,746 | - | ||||||||||
Other assets | - | (20,639 | ) | (16,763 | ) | ||||||||
Accounts payable and accrued expenses | 17,166 | 57,610 | 6,089 | ||||||||||
Deferred rent | - | (534 | ) | (581 | ) | ||||||||
Net cash flows provided by operations | (4,958 | ) | 15,143 | 55,117 | |||||||||
Cash flows provided by (used in) investing activities: | |||||||||||||
Net change in cash from reverse acquisition | (7,683 | ) | - | - | |||||||||
Investment in unconsolidated affiliate | - | (71,512 | ) | - | |||||||||
Principal pay-down received on promissory note | 14,500 | - | - | ||||||||||
Sale or maturity - fixed-maturity securities | - | 3,947 | 58,367 | ||||||||||
Purchase - fixed-maturity securities | - | (6,117 | ) | (46,848 | ) | ||||||||
Purchase - equity securities | - | - | (4,224 | ) | |||||||||
Purchase of other invested assets | - | 8,413 | (10,458 | ) | |||||||||
Sale - equity securities | - | 8,390 | 1,304 | ||||||||||
Net cash flows used in investing activities | 6,817 | (56,879 | ) | (1,859 | ) | ||||||||
Cash flows provided by (used in) financing activities: | |||||||||||||
Proceeds from credit facility borrowings | - | 20,000 | 67,000 | ||||||||||
Repayment of credit facility borrowings | - | - | (17,000 | ) | |||||||||
Proceeds from intercompany borrowings | - | 77,968 | - | ||||||||||
Proceeds from convertible senior notes hedge termination | - | - | - | ||||||||||
Payments for warrants termination | - | - | - | ||||||||||
Exercise of stock options and warrants | - | (2,263 | ) | 373 | |||||||||
Excess tax benefits from share-based payment arrangements | - | 345 | 161 | ||||||||||
Treasury stock acquired-net employee share-based compensation | - | (4 | ) | (1,834 | ) | ||||||||
Repurchase of common stock | - | (20,987 | ) | (64,572 | ) | ||||||||
Dividends paid | (18,551 | ) | (29,075 | ) | (27,894 | ) | |||||||
Net cash flows provided by (used in) financing activities | (18,551 | ) | 45,984 | (43,766 | ) | ||||||||
Increase (decrease) in cash and cash equivalents | (16,692 | ) | 4,248 | 9,492 | |||||||||
Cash and cash equivalents, beginning of year | 17,130 | 12,882 | 3,390 | ||||||||||
Cash and cash equivalents, end of year | $ | 438 | $ | 17,130 | $ | 12,882 | |||||||
The condensed financial information should be read in conjunction with the notes to the condensed financial information of the registrant and the consolidated financial statements and the notes thereto. | |||||||||||||
Tower Group International, Ltd. | |||||||||||||
Schedule II – Condensed Financial Information of the Registrant | |||||||||||||
Notes to Condensed Financial Information | |||||||||||||
The accompanying condensed financial statements of Tower Group International, Ltd. (parent company) should be read in conjunction with the consolidated financial statements and notes thereto of Tower Group International, Ltd. | |||||||||||||
Note 1—Organization and Description of Business | |||||||||||||
On March 13, 2013, Tower Group, Inc. (“TGI”) completed a merger transaction whereby TGI merged into a subsidiary of Tower Group International, Ltd. (“TGIL”). TGIL was formerly known as Canopius Holdings Bermuda Limited (“Canopius Bermuda”). This merger (referred to as the “Canopius Merger”) was accounted for as a reverse acquisition under the acquisition method of accounting for business combinations, with TGI treated as the acquiring company for accounting purposes. TGIL is deemed to be the successor to TGI, the predecessor, pursuant to Rule 12g-3(a) under the Exchange Act. | |||||||||||||
The parent company financial statements presented herein include the historical financial information from TGI for the period from January 1, 2013 through March 13, 2013 and for the years ended December 31, 2012 and 2011. The parent company financial statements presented herein also include the financial information from TGIL for the period from March 14, 2013 through December 31, 2013 and as of December 31, 2013. | |||||||||||||
Note 2—Investment in Subsidiaries | |||||||||||||
This amount is inclusive of a promissory note issued by TGI to TGIL in 2013. The $335.5 million loan is included in Investment in Subsidiaries as the ultimate parent would be required to cover any losses generated by its subsidiaries. | |||||||||||||
Note 3—Debt | |||||||||||||
The information relating to debt is incorporated by reference from “Note 13 – Debt” in the consolidated financial statements. The debt disclosed in the balance sheet continued to be held by the predecessor company after the date of the Canopius Merger and was not transferred to the successor company. | |||||||||||||
Note 4—Income Taxes | |||||||||||||
Tower Group Inc. files a consolidated Federal income tax return. The Reciprocal Exchanges are not included in Tower Group, Inc’s consolidated tax return as it does not have an ownership interest in the Reciprocal Exchanges, and they are not a part of the consolidated tax sharing agreement. The Federal income tax provision represents an allocation under the consolidated tax sharing agreement. |
Supplementary_Insurance_Inform
Supplementary Insurance Information | 12 Months Ended | ||||||||||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||||||||||
Supplementary Insurance Information | ' | ||||||||||||||||||||||||||||||||
Schedule III – Supplementary Insurance Information | |||||||||||||||||||||||||||||||||
($ in thousands) | Deferred | Gross | Gross | Net | Benefits, | Amortization | Operating | Net | |||||||||||||||||||||||||
Acquisition | Future | Unearned | Earned | Losses and | of DAC | Expenses | Premiums | ||||||||||||||||||||||||||
Cost, Net of | Policy | Premiums | Premiums | Loss | Written | ||||||||||||||||||||||||||||
Deferred | Benefits, | Expenses | |||||||||||||||||||||||||||||||
Ceding | Losses and | ||||||||||||||||||||||||||||||||
Commission | Loss | ||||||||||||||||||||||||||||||||
Revenue | Expenses | ||||||||||||||||||||||||||||||||
2013 | |||||||||||||||||||||||||||||||||
Commercial Insurance | $ | 60,879 | $ | 1,102,533 | $ | 417,475 | $ | 931,693 | $ | 1,185,627 | $ | (197,980 | ) | $ | 204,131 | $ | 751,698 | ||||||||||||||||
Assumed Reinsurance | 10,140 | 603,380 | 22,837 | 116,417 | 41,474 | (40,576 | ) | 7,879 | 82,530 | ||||||||||||||||||||||||
Personal Insurance | 24,077 | 375,372 | 322,800 | 464,805 | 292,733 | (92,805 | ) | 137,152 | 398,388 | ||||||||||||||||||||||||
Total | $ | 95,096 | $ | 2,081,285 | $ | 763,112 | $ | 1,512,915 | $ | 1,519,834 | $ | (331,361 | ) | $ | 349,162 | $ | 1,232,616 | ||||||||||||||||
2012 | |||||||||||||||||||||||||||||||||
Commercial Insurance | $ | 112,334 | $ | 838,656 | $ | 529,414 | $ | 1,104,551 | $ | 859,707 | $ | (207,208 | ) | $ | 182,891 | $ | 1,077,225 | ||||||||||||||||
Assumed Reinsurance | 16,831 | 619,309 | 65,146 | 120,015 | 52,975 | (42,582 | ) | 1,542 | 148,399 | ||||||||||||||||||||||||
Personal Insurance | 52,033 | 437,714 | 326,711 | 497,298 | 351,076 | (102,612 | ) | 117,184 | 513,816 | ||||||||||||||||||||||||
Total | $ | 181,198 | $ | 1,895,679 | $ | 921,271 | $ | 1,721,864 | $ | 1,263,758 | $ | (352,402 | ) | $ | 301,617 | $ | 1,739,440 | ||||||||||||||||
2011 | |||||||||||||||||||||||||||||||||
Commercial Insurance | $ | 111,649 | $ | 1,192,540 | $ | 551,674 | $ | 1,052,050 | $ | 740,755 | $ | (232,922 | ) | $ | 155,576 | $ | 1,079,676 | ||||||||||||||||
Assumed Reinsurance | 9,006 | 26,141 | 36,762 | 35,861 | 17,456 | (9,490 | ) | 439 | 72,623 | ||||||||||||||||||||||||
Personal Insurance | 48,203 | 413,432 | 304,740 | 505,939 | 318,775 | (103,173 | ) | 117,313 | 486,291 | ||||||||||||||||||||||||
Total | $ | 168,858 | $ | 1,632,113 | $ | 893,176 | $ | 1,593,850 | $ | 1,076,986 | $ | (345,585 | ) | $ | 273,328 | $ | 1,638,590 |
Reinsurance1
Reinsurance | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||
Reinsurance | ' | ||||||||||||||||||||
Tower Group International, Ltd. | |||||||||||||||||||||
Schedule IV – Reinsurance | |||||||||||||||||||||
($ in thousands) | Gross | Ceded to | Assumed from | Net | Percentage of | ||||||||||||||||
Amount | Other | Other | Amount | Amount | |||||||||||||||||
Companies | Companies | Assumed to | |||||||||||||||||||
Net | |||||||||||||||||||||
Year ended December 31, 2013 | |||||||||||||||||||||
Premiums | |||||||||||||||||||||
Property and casualty insurance | $ | 1,717,501 | $ | 513,517 | $ | 308,931 | $ | 1,512,915 | 20.4 | % | |||||||||||
Accident and health insurance | - | - | - | - | - | ||||||||||||||||
Total Premiums | $ | 1,717,501 | $ | 513,517 | $ | 308,931 | $ | 1,512,915 | 20.4 | % | |||||||||||
Year ended December 31, 2012 | |||||||||||||||||||||
Premiums | |||||||||||||||||||||
Property and casualty insurance | $ | 1,759,126 | $ | 221,807 | $ | 184,545 | $ | 1,721,864 | 10.7 | % | |||||||||||
Accident and health insurance | - | - | - | - | - | ||||||||||||||||
Total Premiums | $ | 1,759,126 | $ | 221,807 | $ | 184,545 | $ | 1,721,864 | 10.7 | % | |||||||||||
Year ended December 31, 2011 | |||||||||||||||||||||
Premiums | |||||||||||||||||||||
Property and casualty insurance | $ | 1,684,020 | $ | 195,922 | $ | 105,752 | $ | 1,593,850 | 6.6 | % | |||||||||||
Accident and health insurance | - | - | - | - | - | ||||||||||||||||
Total Premiums | $ | 1,684,020 | $ | 195,922 | $ | 105,752 | $ | 1,593,850 | 6.6 | % | |||||||||||
Tower Group International, Ltd. |
Valuation_and_Qualifying_Accou
Valuation and Qualifying Accounts | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Valuation and Qualifying Accounts | ' | ||||||||||||||||
Schedule V – Valuation and Qualifying Accounts | |||||||||||||||||
($ in thousands) | Balance, | Additions | Deletions | Balance, | |||||||||||||
Beginning of | End of | ||||||||||||||||
Period | Period | ||||||||||||||||
Year ended December 31, 2013 | |||||||||||||||||
Premiums receivable | $ | 16,509 | 13,144 | (12,060 | ) | 17,593 | |||||||||||
Deferred income taxes, net | 6,984 | 285,941 | - | 292,925 | |||||||||||||
Year ended December 31, 2012 | |||||||||||||||||
Premiums receivable | 14,383 | 6,916 | (4,790 | ) | 16,509 | ||||||||||||
Deferred income taxes, net | 6,961 | 23 | - | 6,984 | |||||||||||||
Year ended December 31, 2011 | |||||||||||||||||
Premiums receivable | 7,719 | 9,669 | (3,005 | ) | 14,383 | ||||||||||||
Deferred income taxes, net | 11,824 | - | (4,863 | ) | 6,961 |
Supplemental_Information_Conce
Supplemental Information Concerning Insurance Operations | 12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||||||||||||||||||||||
Supplemental Information Concerning Insurance Operations | ' | ||||||||||||||||||||||||||||||||||||||||||||
Schedule VI – Supplemental Information Concerning Insurance Operations | |||||||||||||||||||||||||||||||||||||||||||||
Reserves | Claims and Claims | ||||||||||||||||||||||||||||||||||||||||||||
For Unpaid | Adjustment Expenses | ||||||||||||||||||||||||||||||||||||||||||||
Incurred and Related to | |||||||||||||||||||||||||||||||||||||||||||||
$ in thousands) | Deferred | Claims and | Discounted | Unearned | Earned | Net | Current | Prior Year* | Amortization | Paid Claims | Net | ||||||||||||||||||||||||||||||||||
Acquisition | Claim | Reserves | Premium | Premium | Investment | Year | Includes | of | and Claim | Premiums | |||||||||||||||||||||||||||||||||||
Cost | Adjustment | Income | PXRE | DAC | Adjustment | Written | |||||||||||||||||||||||||||||||||||||||
Expenses | Commutation | Expenses | |||||||||||||||||||||||||||||||||||||||||||
2013 | |||||||||||||||||||||||||||||||||||||||||||||
Consolidated Insurance Subsidiaries | $ | 95,096 | $ | 2,081,285 | $ | 7,192 | $ | 763,112 | $ | 1,512,915 | $ | 109,208 | $ | 981,713 | $ | 538,121 | $ | (331,360 | ) | $ | 1,305,666 | $ | 1,232,615 | ||||||||||||||||||||||
2012 | |||||||||||||||||||||||||||||||||||||||||||||
Consolidated Insurance Subsidiaries | 181,198 | 1,895,679 | 8,354 | 921,271 | 1,721,864 | 127,165 | 1,184,510 | 79,248 | (352,402 | ) | 1,167,428 | 1,739,382 | |||||||||||||||||||||||||||||||||
2011 | |||||||||||||||||||||||||||||||||||||||||||||
Consolidated Insurance Subsidiaries | 168,858 | 1,632,113 | 3,674 | 893,176 | 1,593,850 | 126,474 | 1,076,045 | 941 | (345,585 | ) | 1,070,539 | 1,638,591 |
Accounting_Policies_and_Basis_1
Accounting Policies and Basis of Presentation (Policies) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Basis of Presentation | ' | ||||||||
Basis of Presentation | |||||||||
The accompanying consolidated financial statements included in this report have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany transactions have been eliminated in consolidation. | |||||||||
The Canopius 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 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 Canopius Merger Transaction. The 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. | |||||||||
In 2013, the Company changed the presentation of its business results by allocating its assumed reinsurance previously reported in the Commercial Insurance segment to a new Assumed 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 reflected the way management organized the Company for operating decisions and assessing profitability in the second quarter of 2013, subsequent to the Canopius Merger Transaction and the significant business developments and risks and uncertainties that occurred in 2013. | |||||||||
Following the changes in presentation the Company now operates in three business segments: Commercial Insurance, Assumed Reinsurance and Personal Insurance: | |||||||||
• | Commercial Insurance (“Commercial”) segment offers a range of standard commercial lines property and casualty insurance products to businesses distributed through a network of retail and wholesale agents and through program underwriting agents, on both an admitted and non-admitted basis; | ||||||||
• | Assumed Reinsurance (“Assumed Reinsurance”) segment offers international assumed reinsurance and certain U.S. based 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 21 – Segment Information” for further information on the composition of the Company’s operating and reportable segments. | |||||||||
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. | |||||||||
Intercompany transactions | ' | ||||||||
Intercompany transactions | |||||||||
In the first quarter 2012, Tower transferred a licensed insurance subsidiary shell to the Reciprocal Exchanges and received cash for its statutory book value. At the date of the transfer, Tower’s GAAP carrying basis in this subsidiary exceeded the statutory book value and the transfer resulted in a loss to Tower of $1.8 million. Since this was a non-recurring transaction between entities under common control, assets are transferred at historical book value. Any difference in the consideration paid and the book value of the assets transferred is treated as an adjustment to equity. This transaction had no effect on consolidated shareholders’ equity. | |||||||||
Reclassifications and Adjustments | ' | ||||||||
Reclassifications and Adjustments | |||||||||
Since the Company accounted for the Canopius Merger Transaction as a reverse acquisition and recapitalization, it has retroactively restated Common Stock, Treasury Stock and Paid-in-Capital accounts and earnings per share for periods prior to the Canopius Merger Transaction to reflect the historical capitalization of TGI, adjusted for the 1.1330 conversion ratio as discussed in “Note 3 – Canopius Merger Transaction”. Certain other reclassifications have also been made to prior years’ financial information to conform to the current year presentation, including the changes in segment presentation discussed in “Note 1 – Nature of Business.” | |||||||||
The table below reflects the previously reported and revised shareholders’ equity accounts resulting from the Canopius Merger Transaction: | |||||||||
($ in thousands, except share amounts) | As previously | Revised | |||||||
Reported | Amount | ||||||||
As of December 31, 2012 | |||||||||
Common stock | $ | 469 | $ | 530 | |||||
Treasury stock | (181,435 | ) | (181,435 | ) | |||||
Paid-in-capital | 780,097 | 780,036 | |||||||
As of December 31, 2011 | |||||||||
Common stock | 465 | 526 | |||||||
Treasury stock | (158,185 | ) | (158,185 | ) | |||||
Paid-in-capital | 772,938 | 772,877 | |||||||
For the year ended December 31, 2012 | |||||||||
Earnings (Loss) per Share: | |||||||||
Basic | $ | (0.73 | ) | $ | (0.81 | ) | |||
Diluted | (0.73 | ) | (0.81 | ) | |||||
Weighted average common shares outstanding | |||||||||
Basic | 38,795 | 42,902 | |||||||
Diluted | 38,975 | 42,902 | |||||||
For the year ended December 31, 2011 | |||||||||
Earnings (Loss) per Share: | |||||||||
Basic | $ | 1.48 | $ | 0.96 | |||||
Diluted | 1.48 | 0.96 | |||||||
Weighted average common shares outstanding | |||||||||
Basic | 40,833 | 45,226 | |||||||
Diluted | 40,931 | 45,337 | |||||||
Revision to the 2012 Consolidated Balance Sheet and 2012 and 2011 Consolidated Statements of Cash Flows | |||||||||
Management is revising the Company’s 2012 consolidated balance sheet and 2012 and 2011 consolidated statements of cash flows to properly reflect the changes in restricted cash as change in cash flows from investing activities. In its Amendment No. 2 to Form 10-K for the year ended December 31, 2012, the Company previously recorded $9.1 million and $7.0 million of restricted cash within the “cash and cash equivalents” caption on the consolidated balance sheet as of December 31, 2012 and 2011, respectively. These amounts should have been recorded within “other assets,” and management has properly corrected those amounts out of the “cash and cash equivalent” balances in the 2012 and 2011 financial statements contained herein. In addition, in the 2012 consolidated balance sheet, management also corrected the classification of $9.4 million of “receivable for securities” that was originally reported within “cash and cash equivalents” to “other assets.” Also, in the 2012 consolidated balance sheet, management previously reported $0.9 million of receivables from reinsurance within “reinsurance balances payable.” The Company has properly reflected the $0.9 million as a receivable reported within “other assets.” These adjustments had no impact on shareholders’ equity or net income (loss). Management has concluded these corrections were not material to the 2012 consolidated balance sheet. | |||||||||
In addition, as a result of the immaterial adjustments to the “cash and cash equivalents” balances discussed above, the Company also revised its statement of cash flows. Cash flows used in investing activities increased from $89.1 million as originally reported to $100.5 million for the year ended December 31, 2012, and cash and cash equivalents as of December 31, 2012 decreased from $102.3 million to $83.8 million. Cash flows used in investing activities increased from $104.5 million as originally reported to $111.9 million for the year ended December 31, 2011, and cash and cash equivalents as of December 31, 2011 decreased from $114.1 million to $107.1 million. Management concluded these corrections were not material to the 2012 or 2011 consolidated statements of cash flows. | |||||||||
Net Premiums Earned | ' | ||||||||
Net Premiums Earned | |||||||||
The insurance policies issued or reinsured by the Company are short-duration contracts. Accordingly, premium revenue, including direct business and reinsurance assumed, net of business ceded to reinsurers, is recognized on a pro-rata basis over the terms of the underlying policies. Unearned premiums represent premium applicable to the unexpired risk of in-force insurance contracts at each balance sheet date. Prepaid reinsurance premiums represent the unexpired portion of reinsurance premiums on risks ceded and are earned consistent with premiums. Mandatory reinstatement premiums are recognized and earned at the time a loss event occurs. | |||||||||
Ceding Commission and Insurance Services Revenue | ' | ||||||||
Ceding Commission Revenue | |||||||||
Commissions on reinsurance premiums ceded are earned in a manner consistent with the recognition of the costs to acquire the underlying policies, generally on a pro-rata basis over the terms of the policies reinsured. Certain reinsurance agreements contain provisions whereby the ceding commission rates vary based on the loss experience of the policies covered by the agreements. The Company records ceding commission revenue based on its current estimate of losses on the reinsured policies subject to variable commission rates. The Company records adjustments to the ceding commission revenue in the period that changes in the estimated losses are determined. | |||||||||
Insurance Services Revenue | |||||||||
Direct commission revenue from the Company’s managing general underwriting services is recognized and earned as insurance policies are placed with the issuing companies of its managing general agencies. Fees relating to the provision of reinsurance intermediary services are earned when the Company’s insurance subsidiaries or the issuing companies of its managing general agencies cede premiums to reinsurers. Management fees earned by the management companies for services provided to the Reciprocal Exchanges are eliminated in consolidation. | |||||||||
Policy Billing Fees | ' | ||||||||
Policy Billing Fees | |||||||||
Policy billing fees are earned on a pro-rata basis over the terms of the underlying policies. These fees include installment and other fees related to billing and collections. | |||||||||
Loss and Loss Adjustment Expenses ("LAE") | ' | ||||||||
Loss and Loss Adjustment Expenses (“LAE”) | |||||||||
The liability for loss and LAE represents management’s best estimate of the ultimate cost and expense of all reported and unreported losses that are unpaid as of the balance sheet date. The liability for loss and LAE is recorded net of a tabular reserve discount for workers’ compensation and excess workers’ compensation claims in the amount of $5.5 million (net of reinsurance basis) and $8.4 million at December 31, 2013 and 2012, respectively. The 2013 discount relates to $244.7 million of total net reserves for workers’ compensation. The projection of future claims payments and reporting is based on an analysis of the Company’s historical experience, supplemented by analyses of industry loss data. Management believes that the liability for loss and LAE is an adequate reasonable provision to cover the ultimate cost of losses and claims to date; however, because of the uncertainty from various sources, including changes in reporting patterns, claims settlement patterns, judicial decisions, legislation, and economic conditions, actual loss experience may not conform to the assumptions used in determining the estimated amounts for such liability at the balance sheet date. As adjustments to these estimates become necessary, such adjustments are reflected in expense for the period in which the estimates are changed. | |||||||||
Tower estimates reserves separately for losses, allocated loss adjustment expenses, and unallocated loss adjustment expenses. Allocated loss adjustment expenses (“ALAE”) refers to costs of attorneys as well as miscellaneous costs such as investigators, witness fees and court costs attributable to specific claims that generally are in various stages of litigation. Unallocated loss adjustment expenses (“ULAE”) refers to costs for administering claims that are not related to attorney fees and miscellaneous costs associated with litigated claims. Tower estimates the ALAE liability separately for claims that are defended by in-house attorneys, claims that are handled by other attorneys that are not employees, and miscellaneous ALAE costs such as witness fees and court costs. Similarly, Tower estimates the ULAE liability separately for claims which are handled internally by our employees and for claims which are handled by third party administrators. | |||||||||
For claims that are defended by in-house attorneys, we attribute to each of these claims a fixed fee for defense work. We allocate to each of these litigated claims 50% of the fixed fee when litigation on a particular claim begins and 50% of the fee when the litigation is closed. The fee is adjusted periodically to reimburse our in-house legal department for all their costs. | |||||||||
We determine ULAE reserves by applying a paid-to-paid ratio to the case and IBNR reserves by line of business. The paid-to-paid ratio is based on ratios of ULAE payments to loss and ALAE payments for last three calendar years. | |||||||||
Reinsurance | ' | ||||||||
Reinsurance | |||||||||
The Company uses reinsurance to limit its exposure to certain risks. Management has evaluated its reinsurance arrangements and determined that significant insurance risk is transferred to the reinsurers. Reinsurance agreements have been determined to be short-duration prospective and retrospective contracts. For prospective contracts, the costs of reinsurance are recognized over the life of the contracts in a manner consistent with the earning of premiums on the underlying policies subject to the reinsurance contract. For retroactive reinsurance agreements, when incurred losses and loss reserves exceed consideration paid for the retroactive reinsurance agreement, a gain results. The gain is deferred and amortized over the estimated remaining settlement period. | |||||||||
Reinsurance recoverable represents management’s best estimate of paid and unpaid loss and LAE recoverable from reinsurers. Ceded losses recoverable are estimated using techniques and assumptions consistent with those used in estimating the liability for loss and LAE. These techniques and assumptions are continually reviewed and updated with any resulting adjustments recorded in current earnings. Loss and LAE incurred as presented in the consolidated statement of income and comprehensive net income are net of reinsurance recoveries. | |||||||||
Management estimates uncollectible amounts receivable from reinsurers based on an assessment of a number of factors. The Company recorded no allowance for uncollectible reinsurance at December 31, 2013 or 2012. The Company did not write-off balances from reinsurers during the three year period ended December 31, 2013. | |||||||||
Deposit Assets | ' | ||||||||
Deposit Assets | |||||||||
Deposit assets arise from ceded reinsurance contracts purchased that do not transfer significant underwriting or timing risk. Under deposit accounting, consideration received or paid, excluding non-refundable fees, is recorded as a deposit asset or liability in the balance sheet as opposed to recording premiums and losses in the statement of operations. At December 31, 2013, deposit assets of $28.7 million are included in Other Assets. | |||||||||
Cash and Cash Equivalents | ' | ||||||||
Cash and Cash Equivalents | |||||||||
Cash consists of cash in banks, generally in operating accounts. The Company maintains its cash balances at several financial institutions. Management monitors balances and believes they do not represent a significant credit risk to the Company. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are presented at cost, which approximates fair value. Cash restricted as to use is included in Other Assets. | |||||||||
Restricted Cash | ' | ||||||||
Restricted Cash | |||||||||
Restricted cash balances relate primarily to “Funds at Lloyd’s” collateral balances for its assumed reinsurance programs. The Company also has restricted cash collateralizing its interest rate swap contracts. Restricted cash balances are reported in “Other Assets” on the accompanying consolidated balance sheets. As of December 31, 2013 and 2012, these assets were approximately $134.1 million and $44.2 million, respectively. Certain amounts in prior years have been reclassified to conform to the current year presentation. These reclassifications had no effect on net income or equity. | |||||||||
Investments | ' | ||||||||
Investments | |||||||||
The Company’s fixed-maturity and equity securities are classified as available-for-sale and carried at fair value. The Company may sell its available-for-sale securities in response to changes in interest rates, risk/reward characteristics, liquidity needs or other factors. | |||||||||
Fair value for fixed-maturity securities and equity securities is primarily based on quoted market prices or a matrix pricing using observable inputs, with limited exceptions as discussed in “Note 6 – Fair Value Measurements”. Changes in unrealized gains and losses, net of tax effects, are reported as a separate component of other comprehensive income while cumulative unrealized gains and losses are reported net of tax effects within accumulated other comprehensive income in shareholders’ equity. Realized gains and losses are determined on the specific identification method. Investment income is recorded when earned and includes the amortization of premium and discount on investments. | |||||||||
The Company, along with its outside portfolio managers, regularly reviews its fixed-maturity and equity security portfolios to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of investments. In evaluating potential impairment, management considers, among other criteria: (i) the overall financial condition of the issuer, (ii) the current fair value compared to amortized cost or cost, as appropriate; (iii) the length of time the security’s fair value has been below amortized cost or cost; (iv) specific credit issues related to the issuer such as changes in credit rating, reduction or elimination of dividends or non-payment of scheduled interest payments; (v) whether management intends to sell the security and, if not, whether it is not more likely than not that the Company will be required to sell the security before recovery of its cost or amortized cost basis; (vi) specific cash flow estimations for fixed-maturity securities and (vii) current economic conditions. If an other-than-temporary-impairment (“OTTI”) loss is determined for a fixed-maturity security (and management does not intend to sell the security or it is not more likely than not that the Company will be required to sell the security), the credit portion is recorded in the statement of income as net realized losses on investments and the non-credit portion is recorded in accumulated other comprehensive income. The credit portion results in a permanent reduction of the cost basis of the underlying investment. OTTI losses on fixed-maturity securities management has the intent to sell or it is more likely than not that the Company will be required to sell and on equity securities are reported in realized losses for the entire impairment. | |||||||||
The Company’s other invested assets consist of investments in limited partnerships accounted for using the equity method of accounting, real estate and certain securities for which the Company has elected the fair value option. In accounting for the partnerships, management uses the financial information provided by the general partners, which is on a three-month lag. As of December 31, 2013, the Company had future funding commitments of $45.3 million to these limited partnerships. For securities in which the Company has elected the fair value option, interest and dividends are reported in net investment income with the remaining change in overall fair value reported in other net realized investment gains (losses). | |||||||||
Fair Value | ' | ||||||||
Fair Value | |||||||||
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) followed by similar but not identical assets or liabilities (Level 2) 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 Company primarily uses outside pricing services to assist in determining fair values. For investments in active markets, the Company uses the quoted market prices provided by the outside pricing services to determine fair value. In circumstances where quoted market prices are unavailable, the pricing services utilize fair value estimates based upon other observable inputs including matrix pricing, benchmark interest rates, market comparables and other relevant inputs. | |||||||||
As management is responsible for the recorded fair values, the Company has processes in place to validate the market prices obtained from the outside pricing sources including, but not limited to, periodic evaluation of model pricing methodologies and analytical reviews of certain prices. The Company also periodically performs back-testing of selected sales activity to determine whether there are any significant differences between the market price used to value the security prior to sale and the actual sale price. | |||||||||
Premiums Receivable | ' | ||||||||
Premiums Receivable | |||||||||
Premiums receivable represent amounts due from insureds and reinsureds for insurance coverage and are presented net of an allowance for doubtful accounts of $17.6 million and $16.5 million at December 31, 2013 and 2012, respectively. The allowance for uncollectible amounts is based on an analysis of amounts receivable giving consideration to historical loss experience and current economic conditions and reflects an amount that, in management’s judgment, is adequate. Uncollectible premiums receivable of $12.1 million, $4.8 million and $3.0 million were written off in 2013, 2012 and 2011, respectively. | |||||||||
Deferred Acquisition Costs | ' | ||||||||
Deferred Acquisition Costs | |||||||||
Acquisition costs represent the costs of writing business that vary with, and are primarily related to, the successful production of insurance business (principally commissions, premium taxes and certain underwriting costs). Policy acquisition costs are deferred and recognized as expense as related premiums are earned. Deferred acquisition costs (“DAC”) presented in the balance sheet are net of deferred ceding commission revenue. | |||||||||
The value of business acquired (“VOBA”) is an intangible asset relating to the estimated fair value of the unexpired insurance policies acquired in a business combination. VOBA is determined at the time of a business combination and is reported on the consolidated balance sheet with DAC and is amortized in proportion to the timing of the estimated underwriting profit associated with the in force policies acquired. The Company fully amortized the VOBA in the year ended December 31, 2011 and, accordingly, does not have any VOBA recorded on its balance sheet as of December 31, 2013 or 2012. The Company considers anticipated investment income in determining the recoverability of these costs and believes they are fully recoverable. See “Note 8 – Deferred Acquisition Costs” for additional information regarding deferred acquisition costs. | |||||||||
Goodwill | ' | ||||||||
Goodwill | |||||||||
In business combinations, including the acquisition of a group of assets, the Company allocates the purchase price to the net tangible and intangible assets acquired based on their relative fair values. Any portion of the purchase price in excess of this amount results in goodwill. Identifiable intangible assets with a finite useful life are amortized over the period that the asset is expected to contribute directly or indirectly to the future cash flows of the Company and are tested for impairment when impairment indicators are present. Intangible assets with an indefinite life and goodwill are not amortized and are subject to annual impairment testing at the reporting unit level or more frequently if circumstances indicate that the value of goodwill may be impaired. | |||||||||
To estimate the fair value of its reporting units, the Company may utilize a combination of widely accepted valuation techniques including a stock price and market capitalization analysis, discounted cash flow calculations and peer company price to earnings multiples analysis. The stock price and market capitalization analysis takes into consideration the quoted market price of the Company’s outstanding common stock and includes a control premium, derived from historical insurance industry acquisition activity, in determining the estimated fair value of the consolidated entity before allocating that fair value to individual reporting units. The discounted cash flow analysis utilizes long term assumptions for revenue growth, capital growth, earnings projections including those used in the Company’s strategic plan, and an appropriate discount rate. The peer company price to earnings multiples analysis takes into consideration the price earnings multiples of peer companies for each reporting unit and estimated income from the Company’s strategic plan. | |||||||||
The second and third quarter reserve increases were viewed by the Company as events or circumstances that required the Company to perform a detailed quantitative analysis of whether its recorded goodwill was impaired. After performing the quantitative analysis in the second quarter of 2013, it was determined that $214.0 million of goodwill, which represents all of the goodwill allocated to the Commercial Insurance reporting unit, was impaired. In the third quarter of 2013, management in its judgment impaired the remaining $55.5 million of goodwill, all of which was allocated to the Personal Insurance reporting unit. See “Note 7 – Goodwill, Intangible and Fixed Asset Impairments” for additional detail on the Goodwill impairment. | |||||||||
Intangible Assets | ' | ||||||||
Intangible Assets | |||||||||
Identifiable intangible assets with a finite useful life are amortized over the period in which the asset is expected to contribute directly or indirectly to our future cash flows. Identifiable intangible assets with finite useful lives are amortized over their useful lives and tested for recoverability whenever events or changes in circumstances indicate that a carrying amount may not be recoverable. Identifiable intangible assets with indefinite useful lives are not amortized. Rather, they are tested for recoverability at least annually or whenever events or changes in circumstances indicate that a carrying amount may not be recoverable. Management performed its impairment analysis on its intangible assets with a finite useful life in 2013 and concluded impairment charges of $21.9 million were required to reduce its customer relationship intangible assets. These charges are reported in Other Operating Expenses in the consolidated statements of operations. No impairment losses were recognized on intangible assets with a finite useful life in 2012 or 2011. | |||||||||
The Company completed its annual indefinite lived intangible asset assessment as of December 31, 2013. An impairment loss is recognized if the carrying value of an intangible asset is not recoverable and its carrying amount exceeds its fair value. Any amount of intangible assets determined to be impaired will be recorded as an expense in the period in which the impairment determination is made. No impairment losses were recognized on indefinite lived intangible assets in 2013, 2012 or 2011. | |||||||||
Other Assets | ' | ||||||||
Other Assets | |||||||||
Tower’s other assets balances are comprised primarily of fixed assets, restricted cash, deposit assets, receivables for securities sold, receivables for the participation in involuntary pools and current tax receivables. | |||||||||
Fixed Assets | ' | ||||||||
Fixed Assets | |||||||||
Furniture, leasehold improvements, computer equipment, and software, including internally developed software, are reported at cost less accumulated depreciation and amortization. We periodically evaluate our long-lived assets to be held and used. Our judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions and legal factors. Any adverse changes in these factors could cause an impairment in our assets. For long-lived assets to be held and used, if an impairment indicator exists, we compare the expected future undiscounted cash flows against the carrying amount of that asset. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset, we record an impairment loss for the carrying amount in excess of the estimated fair value, if any, of the asset. Gross fixed assets and accumulated depreciation were $194.0 million and $54.7 million, as of December 31, 2013, and 2012, respectively. As a result of the reserve increases, rating downgrades and the expected significant declines in net written premiums and the orders and restrictions placed by various insurance departments, management tested fixed assets for recoverability in 2013 and recorded a non-cash charge to earnings of $125.8 million in 2013. Gross fixed assets and accumulated depreciation (after the effects of the impairment) were $20.7 million and $1.0 million as of December 31, 2013. | |||||||||
Other liabilities | ' | ||||||||
Other liabilities | |||||||||
Tower’s other liabilities balances are comprised primarily of accrued operating expenses, payables for securities purchased, accrued boards, bureaus and tax expenses, and capital lease obligations. | |||||||||
Variable Interest Entities | ' | ||||||||
Variable Interest Entities | |||||||||
The Company consolidates the Reciprocal Exchanges as it has determined that these are variable interest entities and that the Company is the primary beneficiary. See “Note 4 – Variable Interest Entities” for more details. | |||||||||
Investment in unconsolidated affiliate | ' | ||||||||
Investment in unconsolidated affiliate | |||||||||
Although the Company owned less than 20% of the outstanding common stock of Canopius Group at December 31, 2012, it recorded its investment in Canopius Group under the equity method of accounting as it was able to significantly influence the operating and financial policies and decisions of Canopius Group. In the twelve months ended December 31, 2013 and December 31, 2012, the change in the value of the Company’s investment in Canopius was a gain of $6.9 million and a loss of $1.5 million, respectively. Changes in the value were recognized in Equity in income (loss) of unconsolidated affiliate in the consolidated statement of operations. On December 13, 2013, Tower sold its 10.7% ownership in Canopius Group. | |||||||||
Income Taxes | ' | ||||||||
Income Taxes | |||||||||
Pursuant to a written tax agreement (the “Tax Sharing Agreement”), each of the Tower’s subsidiaries is required to make payments to Tower for federal income tax imposed on its taxable income in a manner consistent with filing a separate federal income tax return (but subject to certain limitations that are applied to the Tower consolidated group as a whole). The Reciprocal Exchanges are not subject to the Tax Sharing Agreement but file separate tax returns annually. | |||||||||
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that all or some portion of the deferred tax asset will not be realized. | |||||||||
Management in its judgment concluded that a full valuation allowance was required for the net deferred tax assets after its consideration of the cumulative three-year pre-tax loss in its U.S. taxed subsidiaries resulting from certain 2013 events and the 2012 pre-tax loss of $61.0 million. In 2013, Tower had $325.6 million of prior year adverse reserve development, of which $149.7 million was recorded in 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, 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 subsequently recorded the full valuation allowance. | |||||||||
Treasury Stock | ' | ||||||||
Treasury Stock | |||||||||
The Company accounts for the treasury stock at the repurchase price as a reduction to shareholders’ equity as it does not currently intend to retire the treasury stock held at December 31, 2013. | |||||||||
Stock-based Compensation | ' | ||||||||
Stock-based Compensation | |||||||||
The Company accounts for restricted stock shares and options awarded at fair value at the date awarded and compensation expense is recorded over the requisite service period that has not been rendered. The Company amortizes awards with graded vesting on a straight-line basis over the requisite service period. | |||||||||
Assessments | ' | ||||||||
Assessments | |||||||||
Insurance related assessments are accrued in the period in which they have been incurred. The Company is subject to a variety of assessments. Among such assessments are state guaranty funds and workers’ compensation second injury funds. State guaranty fund assessments are used by state insurance oversight boards to cover losses of policyholders of insolvent insurance companies and for the operating expenses of such agencies. The Company uses estimates derived from state regulators and/or NAIC Tax and Assessments Guidelines. | |||||||||
Earnings (loss) per Share | ' | ||||||||
Earnings (loss) per Share | |||||||||
The Company measures earnings (loss) per share at two levels: basic earnings (loss) per share and diluted earnings (loss) per share. Basic earnings per share is calculated by dividing net income (loss) attributable to Tower common shareholders by the weighted average number of common shares outstanding during the year. Undistributed net earnings (loss) (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 shareholders. 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 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. | |||||||||
Foreign currency | ' | ||||||||
Foreign currency | |||||||||
The Company’s functional currency is the U.S. dollar. | |||||||||
Concentration and Credit Risk | ' | ||||||||
Concentration and Credit Risk | |||||||||
Financial instruments that potentially subject the Company to concentration and credit risk are primarily cash and cash equivalents, investments, interest rate swaps, premiums receivable and reinsurance recoverables. Investments are diversified through many industries and geographic regions through the use of money managers who employ different investment strategies. The Company limits the amount of credit exposure with any one financial institution and believes that no significant concentration of credit risk exists with respect to cash and investments. The interest rate swap contracts contain credit support annex agreements with collateral posting provisions which reduces counterparty non-performance risk. The premiums receivable balances are generally diversified due to the number of entities comprising the Company’s distribution network and its customer base, which is largely concentrated in the Northeast, Florida, Texas and California. To reduce credit risk, the Company performs ongoing evaluations of its distribution network’s and customers’ financial condition. The Company also has receivables from its reinsurers. Reinsurance contracts do not relieve the Company from its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company periodically evaluates the financial condition of its reinsurers and, in certain cases, requires collateral from its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. As of December 31, 2013, the largest uncollateralized reinsurance recoverable balance from any one reinsurer was $56.4 million representing 6.8% of the Company’s total reinsurance recoverable balance. Management’s policy is to review all outstanding receivables at period end as well as the bad debt write-offs experienced in the past and establish an allowance for doubtful accounts, if deemed necessary. | |||||||||
Our largest agent accounted for 9.7%, 7.5% and 10%, respectively, of the insurance subsidiaries’ premiums receivable balances at December 31, 2013, 2012 and 2011. Our largest agent accounted for 9%, 7% and 7% of the insurance subsidiaries’ direct premiums written in 2013, 2012 and 2011, respectively. | |||||||||
Accounting guidance adopted in 2013 | ' | ||||||||
Accounting guidance adopted in 2013 | |||||||||
In July 2012, the Financial Accounting Standards Board (FASB) issued an accounting standard that allows a company, as a first step in an impairment review, to assess qualitatively whether it is more likely than not that an indefinite-lived intangible asset is impaired. We are not required to calculate the fair value of an indefinite-lived intangible asset and perform a quantitative impairment test unless we determine, based on the results of the qualitative assessment, that it is more likely than not the asset is impaired. The standard became effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. We adopted the standard on its required effective date of January 1, 2013. (See Note 7 for a discussion of Goodwill, Intangible and Fixed Asset Impairments in 2013). | |||||||||
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 March 2013, the FASB issued an accounting standard addressing whether consolidation guidance or foreign currency guidance applies to the release of the cumulative translation adjustment into net income when a parent sells all or a part of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or net assets that are a business (other than a sale of in-substance real estate) within a foreign entity. The guidance also resolves the diversity in practice for the cumulative translation adjustment treatment in business combinations achieved in stages involving foreign entities. | |||||||||
Under this standard, the entire amount of the cumulative translation adjustment associated with the foreign entity should be released into earnings when there has been: (i) a sale of a subsidiary or group of net assets within a foreign entity and the sale represents a complete or substantially complete liquidation of the foreign entity in which the subsidiary or the net assets had resided; (ii) a loss of a controlling financial interest in an investment in a foreign entity; or (iii) a change in accounting method from applying the equity method to an investment in a foreign entity to consolidating the foreign entity. The standard is effective for fiscal years and interim periods beginning after December 15, 2013, and will be applied prospectively. We plan to adopt the standard on its required effective date of January 1, 2014 and do not expect the adoption of the standard to have a material effect on our consolidated financial condition, results of operations or cash flows. | |||||||||
In July 2013, the FASB clarified the applicable guidance for the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward as long as it is available, at the reporting date under the tax law of the applicable jurisdiction, to settle any additional income taxes that would result from the disallowance of a tax position (with certain exceptions). The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. This ASC update is effective for annual and interim periods beginning after December 15, 2013, with early adoption permitted, and is to be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company does not expect the adoption of this standard to have a material impact on its financial position or results of operations. | |||||||||
In July 2013, the FASB issued an accounting standard that permits the Federal Funds Effective Swap Rate (or Overnight Index Swap Rate) to be used as a U.S. benchmark interest rate for hedge accounting purposes in addition to U.S. Treasury rates and LIBOR. The standard also removes the prohibition on the use of differing benchmark rates when entering into similar hedging relationships. The standard became effective on a prospective basis for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013 to the extent the Federal Funds Effective Swap Rate is used as a U.S. benchmark interest rate for hedge accounting purposes. The Company will consider this guidance if and when it enters into any new hedging relationships. | |||||||||
Accounting for the Merger Transaction | ' | ||||||||
Accounting for the Canopius Merger Transaction | |||||||||
The Company has accounted for the Canopius 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 Canopius Merger Transaction was primarily based on the fact that immediately following the close of the Canopius 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 Canopius 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 Canopius 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 Canopius 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 Canopius Merger Transaction, TGI entered into a commutation agreement whereby 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. | |||||||||
Statutory Financial Information and Accounting Policies | ' | ||||||||
United States | |||||||||
For regulatory purposes, the Company’s U.S.-based insurance subsidiaries, excluding the Reciprocal Exchanges, prepare their statutory basis financial statements in accordance with practices prescribed or permitted by the state they are domiciled in (“statutory basis” or “SAP”). The more significant SAP variances from GAAP are as follows: | |||||||||
• | Policy acquisition costs are charged to operations in the year such costs are incurred, rather than being deferred and amortized as premiums are earned over the terms of the policies. | ||||||||
• | Ceding commission revenues are earned when ceded premiums are written except for ceding commission revenues in excess of anticipated acquisition costs, which are deferred and amortized as ceded premiums are earned. GAAP requires that all ceding commission revenues be earned as the underlying ceded premiums are earned over the term of the reinsurance agreements. | ||||||||
• | Certain assets including certain receivables, a portion of the net deferred tax asset, prepaid expenses and furniture and equipment are not admitted. | ||||||||
• | Investments in fixed-maturity securities are valued at NAIC value for statutory financial purposes, which is primarily amortized cost. GAAP requires investments in fixed-maturity securities classified as available for sale, to be reported at fair value. | ||||||||
• | For SAP purposes, changes in deferred income taxes relating to temporary differences between net income for financial reporting purposes and taxable income are recognized as a separate component of gains and losses in surplus rather than included in income tax expense or benefit as required under GAAP. | ||||||||
• | Investments in stocks of subsidiaries are carried as assets on the statutory basis balance sheet. Under GAAP, investments in stocks of subsidiaries are generally consolidated if the investor owns greater than fifty percent or otherwise demonstrates control of the subsidiary. | ||||||||
In preparing its statutory basis financial statements, the Company does not use any prescribed or permitted statutory accounting practices. | |||||||||
State insurance laws restrict the ability of our insurance subsidiaries to declare dividends. State insurance regulators require insurance companies to maintain specified levels of statutory capital and surplus. 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. Further, prior approval of the insurance department of its state of domicile is required before any of our insurance subsidiaries can declare and pay an “extraordinary dividend” to the Company. | |||||||||
For the years ended December 31, 2013, 2012 and 2011, the Company’s insurance subsidiaries had SAP net (loss) income of $(402.4) million, $ (42.3) million and $ 52.0 million, respectively. At December 31, 2013 and 2012 the Company’s insurance subsidiaries had reported SAP capital and surplus of $172.9 million and $594.2 million, respectively, as filed with the insurance regulators. | |||||||||
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”). | |||||||||
The Company’s U.S.-based insurance subsidiaries paid zero, $10.2 million and $15.0 million in dividends and or return of capital to TGI in 2013, 2012 and 2011, respectively. As of December 31, 2013, none of the Company’s net statutory assets held at the U.S. insurance subsidiaries were available for distribution or advances to Tower (without prior consent from the insurance regulators). | |||||||||
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 Reinsurance Company (“CastlePoint Re”), one of its Bermuda based insurance subsidiaries. The 2013 obligations that CastlePoint Re assumes from the U.S. based insurance subsidiaries are then retroceded to TRL, Tower’s other Bermuda based insurance subsidiary. 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. CastlePoint Re is required to collateralize $648.9 million of its assumed reserves in a reinsurance trust for the benefit of TICNY, the lead pool company of the U.S. insurance companies. On February 5, 2014, the BMA approved the transfer of $167.3 million in unencumbered liquid assets from TRL to CastlePoint Re, allowing CastlePoint Re to increase the funding in the reinsurance trust for the benefit of TICNY. The New York State Department of Financial Services (the “NYDFS”) has confirmed this will be acceptable for the purpose of admitted surplus and capital on TICNY’s 2013 statutory basis financial statements. For the 2013 statutory basis financial statements, CastlePoint Re reported $581.7 million in its reinsurance trust. | |||||||||
Based on RBC calculations as of December 31, 2013, six of Tower’s ten U.S. based insurance subsidiaries have capital and surplus below Company Action Level and do not meet the minimum capital and surplus requirements of their respective state regulators. As a result, management has discussed the ACP Re Merger Agreement and the Cut-Through Reinsurance Agreement and provided its 2014 RBC forecasts to the regulators to document the Company’s business plan to bring two of three U.S based insurance subsidiaries’ capital and surplus levels above Company Action Level. | |||||||||
As a result of the recognition of the ceding commission relating to the Cut-Through Reinsurance Agreements executed with AmTrust and NGHC in January 2014, the U.S. based insurance subsidiaries’ capital and surplus will increase significantly from December 31, 2013 to January 1, 2014, as the U.S. based subsidiaries will transfer a significant portion of their commercial lines unearned premium to a subsidiary of AmTrust and all of their personal lines unearned premiums to a subsidiary of NGHC. Accordingly, as of January 1, 2014, the effect of the Cut-Through Reinsurance Agreements increased the surplus of two of the U.S. based insurance subsidiaries such that their capital and surplus levels exceeded Company Action Level. | |||||||||
In 2013, the NYDFS issued orders for seven of Tower’s insurance subsidiaries, subjecting them to heightened regulatory oversight, which includes providing the NYDFS with increased information with respect to the insurance subsidiaries’ business, operations and financial condition. In addition, the NYDFS has placed limitations on payments and transactions outside the ordinary course of business and material changes in the insurance subsidiaries’ management and related matters. Tower’s management and Board of Directors have held discussions with the NYDFS, and Tower has been complying with the orders and oversight. | |||||||||
On April 21, 2014, the NYDFS issued additional orders for two of Tower’s insurance subsidiaries instructing them to provide plans to address weaknesses in such insurance subsidiaries’ risk based capital levels as shown in their statutory annual financial statements, and imposing further enhanced reporting and prior approval requirements and limitations on writings of new business. On the same date, the NYDFS issued a letter pertaining to one of Tower’s insurance subsidiaries requiring the submission of a plan to address weaknesses in risk based capital levels. | |||||||||
The Massachusetts Division of Insurance (“MDOI”) and Tower management have agreed to certain restrictions on the operations of Tower’s two Massachusetts domiciled insurance subsidiaries. Tower management has agreed to cause these subsidiaries to provide the MDOI 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. | |||||||||
The Maine Bureau of Insurance entered a Corrective Order imposing certain conditions on Maine domestic insurers York Insurance Company of Maine (“YICM”) and North East Insurance Company (“NEIC”). The Corrective Order imposes increased reporting obligations on YICM and NEIC with respect to business operations and financial condition and imposes restrictions on payments or other transfers of assets from YICM and NEIC outside the ordinary course of business. | |||||||||
On April 11, 2014, the New Jersey Department of Banking and Insurance imposed an enhanced reporting requirement on the intercompany transactions involving Tower’s two New Jersey domiciled insurance subsidiaries and Tower’s New Jersey managed insurer. Such companies are now required to submit for prior approval any transactions with affiliates, even transactions that would otherwise not be reportable under the applicable holding company act. | |||||||||
Dividends | |||||||||
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 December 31, 2013, no dividends may be paid to the Holding Company without the approval of the state regulators or BMA, as appropriate. | |||||||||
Bermuda | |||||||||
CastlePoint Re and TRL are registered as a Class 3 reinsurer under The Insurance Act 1978 (Bermuda), amendments thereto and related regulations (the “Insurance Act”). Under the Insurance Act, CastlePoint Re and TRL are required to prepare Statutory Financial Statements and to file a Statutory Financial Return. The Insurance Act also requires CastlePoint Re and TRL to maintain minimum share capital and surplus, and it has met these requirements as of December 31, 2013. | |||||||||
For Bermuda registered companies, there are some differences between financial statements prepared in accordance with GAAP and those prepared on a Bermuda statutory basis. The more significant Bermuda SAP variances from GAAP are as follows: | |||||||||
• | Deferred policy acquisition costs have been fully expensed to income. | ||||||||
• | Prepaid expenses and fixed assets have been removed from the statutory balance sheet. | ||||||||
• | Investments in fixed-maturity securities are carried at amortized cost. GAAP requires investments in fixed-maturity securities classified as available for sale to be reported at fair value. | ||||||||
• | Deferred income taxes, intangible assets and goodwill are not included in the Bermuda statutory capital and surplus balances. | ||||||||
• | Investments in stocks of subsidiaries are carried as assets on the statutory basis balance sheet. Under GAAP, investments in stocks of subsidiaries are generally consolidated if the investor owns greater than fifty percent or otherwise demonstrates control of the subsidiary. | ||||||||
CastlePoint Re and TRL are also subject to dividend limitations imposed by Bermuda under the Companies Act 1981 of Bermuda, as amended (the “Companies Act”). As of December 31, 2013, CastlePoint Re and TRL were unable to pay dividends to Tower, without BMA approval. | |||||||||
Bermuda based insurance entities minimum capital and surplus requirements are calculated from a solvency formula prescribed by the BMA. As of December 31, 2013, TRL and CastlePoint Re had capital and surplus that did not meet the minimum capital and surplus requirements of the BMA. Management has discussed the ACP Re Merger Agreement and provided 2014 solvency forecasts to the BMA. | |||||||||
The TRL and CastlePoint Re capital and surplus amounts were $14.4 million and $(37.2) million, respectively. The CastlePoint Re negative surplus includes ($109.7) million of a deferred gain associated with retroactive accounting treatment on an intercompany retroactive reinsurance agreement between CastlePoint Re and TRL. This gain will be recognized as the underlying claims are paid on the losses reinsured by TRL. This deferred gain is eliminated in the preparation of the TGIL consolidated financial statements. | |||||||||
The BMA has issued directives for TRL and CastlePoint Re, subjecting them to heightened regulatory oversight and requiring BMA approval before certain transactions can be executed. Tower has been complying with the directives issued by the BMA. | |||||||||
For the year ended December 31, 2013, the Bermuda based insurers had statutory net income (loss) of $ (198.6) million and at December 31, 2013, had statutory surplus of $60.3 million. The statutory capital surplus amounts as of December 31, 2013 include $26.5 million from U.S.-based insurance subsidiaries that are owned by CastlePoint Re. | |||||||||
CastlePoint Re paid $22.0 million, $2.5 million and $20.0 million in dividends and/or return of capital to TGI in 2013, 2012 and 2011, respectively. As of December 31, 2013, none of the Company’s net statutory assets held at its Bermuda based insurance subsidiaries were available for distributions or advances to Tower. |
Accounting_Policies_and_Basis_2
Accounting Policies and Basis of Presentation (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Previously Reported and Revised Shareholders' Equity Accounts Resulting from Merger Transaction | ' | ||||||||
The table below reflects the previously reported and revised shareholders’ equity accounts resulting from the Canopius Merger Transaction: | |||||||||
($ in thousands, except share amounts) | As previously | Revised | |||||||
Reported | Amount | ||||||||
As of December 31, 2012 | |||||||||
Common stock | $ | 469 | $ | 530 | |||||
Treasury stock | (181,435 | ) | (181,435 | ) | |||||
Paid-in-capital | 780,097 | 780,036 | |||||||
As of December 31, 2011 | |||||||||
Common stock | 465 | 526 | |||||||
Treasury stock | (158,185 | ) | (158,185 | ) | |||||
Paid-in-capital | 772,938 | 772,877 | |||||||
For the year ended December 31, 2012 | |||||||||
Earnings (Loss) per Share: | |||||||||
Basic | $ | (0.73 | ) | $ | (0.81 | ) | |||
Diluted | (0.73 | ) | (0.81 | ) | |||||
Weighted average common shares outstanding | |||||||||
Basic | 38,795 | 42,902 | |||||||
Diluted | 38,975 | 42,902 | |||||||
For the year ended December 31, 2011 | |||||||||
Earnings (Loss) per Share: | |||||||||
Basic | $ | 1.48 | $ | 0.96 | |||||
Diluted | 1.48 | 0.96 | |||||||
Weighted average common shares outstanding | |||||||||
Basic | 40,833 | 45,226 | |||||||
Diluted | 40,931 | 45,337 |
Canopius_Merger_Transaction_Ta
Canopius Merger Transaction (Tables) | 12 Months Ended | ||||||||
Dec. 31, 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 | 463,745 | ||||||||
Prepaid reinsurance | 152,431 | ||||||||
Funds held by reinsured companies | 698,819 | ||||||||
Other assets | 80,201 | ||||||||
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. | |||||||||
Year Ended | |||||||||
December 31, | |||||||||
($ in thousands) | 2013 | 2012 | |||||||
Revenues | $ | 1,745,146 | $ | 1,933,942 | |||||
Net Income (Loss) | (922,959 | ) | (19,567 | ) |
Investments_Tables
Investments (Tables) | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 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 as of December 31, 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) | ||||||||||||||||||||||
December 31, 2013 | |||||||||||||||||||||||||
U.S. Treasury securities | $ | 370,959 | $ | 729 | $ | (7,726 | ) | $ | 363,962 | $ | - | ||||||||||||||
U.S. Agency securities | 110,362 | 1,420 | (561 | ) | 111,221 | - | |||||||||||||||||||
Municipal bonds | 277,382 | 7,981 | (6,257 | ) | 279,106 | - | |||||||||||||||||||
Corporate and other bonds | |||||||||||||||||||||||||
Finance | 148,132 | 9,797 | (1,028 | ) | 156,901 | - | |||||||||||||||||||
Industrial | 316,474 | 8,286 | (3,008 | ) | 321,752 | - | |||||||||||||||||||
Utilities | 47,838 | 1,341 | (1,890 | ) | 47,289 | (17 | ) | ||||||||||||||||||
Commercial mortgage-backed securities | 189,808 | 16,852 | (1,754 | ) | 204,906 | (634 | ) | ||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency backed securities | 63,668 | 891 | (1,218 | ) | 63,341 | - | |||||||||||||||||||
Non-agency backed securities | 30,228 | 4,659 | (31 | ) | 34,856 | (13 | ) | ||||||||||||||||||
Asset-backed securities | 58,783 | 681 | (103 | ) | 59,361 | - | |||||||||||||||||||
Total fixed-maturity securities | 1,613,634 | 52,637 | (23,576 | ) | 1,642,695 | (664 | ) | ||||||||||||||||||
Preferred stocks, principally financial sector | 21,330 | 54 | (2,536 | ) | 18,848 | - | |||||||||||||||||||
Common stocks, principally financial and industrial sectors | 76,378 | 11,432 | (28 | ) | 87,782 | - | |||||||||||||||||||
Short-term investments | 5,925 | - | (28 | ) | 5,897 | - | |||||||||||||||||||
Total, December 31, 2013 | $ | 1,717,267 | $ | 64,123 | $ | (26,168 | ) | $ | 1,755,222 | $ | (664 | ) | |||||||||||||
Tower | $ | 1,465,039 | $ | 56,480 | $ | (21,369 | ) | $ | 1,500,150 | $ | (664 | ) | |||||||||||||
Reciprocal Exchanges | 252,228 | 7,643 | (4,799 | ) | 255,072 | - | |||||||||||||||||||
Total, December 31, 2013 | $ | 1,717,267 | $ | 64,123 | $ | (26,168 | ) | $ | 1,755,222 | $ | (664 | ) | |||||||||||||
December 31, 2012 | |||||||||||||||||||||||||
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 | $ | 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 | $ | 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: | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||||||||||||||
Income | |||||||||||||||||||||||||
Fixed-maturity securities | $ | 75,731 | $ | 96,056 | $ | 105,533 | |||||||||||||||||||
Equity securities | 22,912 | 28,989 | 24,576 | ||||||||||||||||||||||
Cash and cash equivalents | 244 | 1,112 | 695 | ||||||||||||||||||||||
Other invested assets | 16,138 | 6,680 | 274 | ||||||||||||||||||||||
Other | 736 | 387 | 643 | ||||||||||||||||||||||
Total | 115,761 | 133,224 | 131,721 | ||||||||||||||||||||||
Expenses | |||||||||||||||||||||||||
Investment expenses | (6,553 | ) | (6,059 | ) | (5,247 | ) | |||||||||||||||||||
Net investment income | $ | 109,208 | $ | 127,165 | $ | 126,474 | |||||||||||||||||||
Tower | 106,309 | 121,907 | 120,083 | ||||||||||||||||||||||
Reciprocal Exchanges | 9,578 | 12,575 | 12,846 | ||||||||||||||||||||||
Elimination of interest on Reciprocal Exchange surplus notes | (6,679 | ) | (7,317 | ) | (6,455 | ) | |||||||||||||||||||
Net investment income | $ | 109,208 | $ | 127,165 | $ | 126,474 | |||||||||||||||||||
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: | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||||||||||||||
Fixed-maturity securities | |||||||||||||||||||||||||
Gross realized gains | $ | 51,598 | $ | 59,319 | $ | 44,550 | |||||||||||||||||||
Gross realized losses | (9,760 | ) | (2,780 | ) | (11,101 | ) | |||||||||||||||||||
41,838 | 56,539 | 33,449 | |||||||||||||||||||||||
Equity securities | |||||||||||||||||||||||||
Gross realized gains | 18,004 | 13,090 | 8,328 | ||||||||||||||||||||||
Gross realized losses | (28,649 | ) | (31,404 | ) | (29,138 | ) | |||||||||||||||||||
(10,645 | ) | (18,314 | ) | (20,810 | ) | ||||||||||||||||||||
Other (1) | |||||||||||||||||||||||||
Gross realized gains | 12,946 | 3,432 | - | ||||||||||||||||||||||
Gross realized losses | (5,676 | ) | (6,548 | ) | - | ||||||||||||||||||||
7,270 | (3,116 | ) | - | ||||||||||||||||||||||
Net realized gains on investments | 38,463 | 35,109 | 12,639 | ||||||||||||||||||||||
Other-than-temporary impairment losses: | |||||||||||||||||||||||||
Fixed-maturity securities | (6,682 | ) | (1,320 | ) | (580 | ) | |||||||||||||||||||
Equity securities | (6,733 | ) | (8,313 | ) | (2,665 | ) | |||||||||||||||||||
Total other-than-temporary impairment losses recognized in earnings | (13,415 | ) | (9,633 | ) | (3,245 | ) | |||||||||||||||||||
Total net realized investment gains (losses) | $ | 25,048 | $ | 25,476 | $ | 9,394 | |||||||||||||||||||
Tower | $ | 22,894 | $ | 12,245 | $ | 6,980 | |||||||||||||||||||
Reciprocal Exchanges | 2,154 | 13,231 | 2,414 | ||||||||||||||||||||||
Total net realized investment gains (losses) | $ | 25,048 | $ | 25,476 | $ | 9,394 | |||||||||||||||||||
(1) | Other gross realized gains and losses consists primarily of foreign exchange and “debt and equity securities sold, not yet purchased,” which are reported in Other liabilities. The Company recorded a $4.3 million gain from translation of foreign currency transactions to the functional currency. | ||||||||||||||||||||||||
Amount of Fixed-Maturity and Equity Securities that were Other-Than-Temporary Impairment | ' | ||||||||||||||||||||||||
The following table shows the amount of fixed-maturity and equity securities that were OTTI for the years ended December 31, 2013, 2012 and 2011. This resulted in recording impairment write-downs included in net realized investment gains (losses), and reduced the unrealized loss in other comprehensive net income: | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||||||||||||||
U.S. Treasury securities | $ | (801 | ) | $ | - | $ | - | ||||||||||||||||||
U.S. Agency securities | (572 | ) | - | - | |||||||||||||||||||||
Municipal bonds | (367 | ) | (113 | ) | - | ||||||||||||||||||||
Corporate and other bonds | (4,271 | ) | (1,029 | ) | - | ||||||||||||||||||||
Commercial mortgage-backed securities | (1,176 | ) | (430 | ) | (219 | ) | |||||||||||||||||||
Residential mortgage-backed securities | (423 | ) | (34 | ) | (235 | ) | |||||||||||||||||||
Asset-backed securities | (53 | ) | - | (391 | ) | ||||||||||||||||||||
Equities | (6,733 | ) | (8,313 | ) | (2,664 | ) | |||||||||||||||||||
Other-than-temporary-impairments | (14,396 | ) | (9,919 | ) | (3,509 | ) | |||||||||||||||||||
Portion of loss recognized in accumulated other comprehensive income (loss) | 981 | 286 | 264 | ||||||||||||||||||||||
Impairment losses recognized in earnings | $ | (13,415 | ) | $ | (9,633 | ) | $ | (3,245 | ) | ||||||||||||||||
Tower | $ | (13,414 | ) | $ | (9,919 | ) | $ | (3,245 | ) | ||||||||||||||||
Reciprocal Exchanges | (1 | ) | 286 | - | |||||||||||||||||||||
Impairment losses recognized in earnings | $ | (13,415 | ) | $ | (9,633 | ) | $ | (3,245 | ) | ||||||||||||||||
Rollforward of Cumulative Amount of Other-Than-Temporary Impairment for Securities Held Showing Amounts that have been Included in Earnings on Pretax Basis | ' | ||||||||||||||||||||||||
The following table provides a rollforward of the cumulative amount of credit related OTTI for securities still held showing the amounts that have been included in earnings on a pretax basis for the years ended 2013 and 2012 (none of such OTTI was included within the Reciprocal Exchanges): | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||||||||||||||
Balance, January 1, | $ | 4,492 | $ | 12,666 | $ | 18,075 | |||||||||||||||||||
Additional credit losses recognized during the period, related to securities for which: | |||||||||||||||||||||||||
No OTTI has been previously recognized | 6,252 | 1,259 | 44 | ||||||||||||||||||||||
OTTI has been previously recognized | 430 | 61 | 537 | ||||||||||||||||||||||
Reductions due to: | |||||||||||||||||||||||||
Securities sold during the period (realized) | (3,357 | ) | (9,494 | ) | (5,990 | ) | |||||||||||||||||||
Balance, December 31, | $ | 7,817 | $ | 4,492 | $ | 12,666 | |||||||||||||||||||
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 December 31, 2013 and December 31, 2012 by amount of time in a continuous unrealized loss position: | |||||||||||||||||||||||||
Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||||
($ in thousands) | Fair | Unrealized | Fair | Unrealized | Aggregate | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Fair Value | Losses | ||||||||||||||||||||
December 31, 2013 | |||||||||||||||||||||||||
U.S. Treasury securities | $ | 273,217 | $ | (7,726 | ) | $ | - | $ | - | $ | 273,217 | $ | (7,726 | ) | |||||||||||
U.S. Agency securities | 51,808 | (561 | ) | - | - | 51,808 | (561 | ) | |||||||||||||||||
Municipal bonds | 109,345 | (5,056 | ) | 4,268 | (1,201 | ) | 113,613 | (6,257 | ) | ||||||||||||||||
Corporate and other bonds | |||||||||||||||||||||||||
Finance | 37,811 | (1,005 | ) | 335 | (23 | ) | 38,146 | (1,028 | ) | ||||||||||||||||
Industrial | 124,869 | (2,550 | ) | 10,023 | (458 | ) | 134,892 | (3,008 | ) | ||||||||||||||||
Utilities | 27,698 | (805 | ) | 7,292 | (1,085 | ) | 34,990 | (1,890 | ) | ||||||||||||||||
Commercial mortgage-backed securities | 26,469 | (597 | ) | 20,397 | (1,157 | ) | 46,866 | (1,754 | ) | ||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency backed | 37,660 | (925 | ) | 5,166 | (293 | ) | 42,826 | (1,218 | ) | ||||||||||||||||
Non-agency backed | 1,027 | (19 | ) | 182 | (12 | ) | 1,209 | (31 | ) | ||||||||||||||||
Asset-backed securities | 32,461 | (103 | ) | - | - | 32,461 | (103 | ) | |||||||||||||||||
Total fixed-maturity securities | 722,365 | (19,347 | ) | 47,663 | (4,229 | ) | 770,028 | (23,576 | ) | ||||||||||||||||
Preferred stocks | 10,538 | (2,285 | ) | 6,154 | (251 | ) | 16,692 | (2,536 | ) | ||||||||||||||||
Common stocks | 7,125 | (28 | ) | - | - | 7,125 | (28 | ) | |||||||||||||||||
Short-term investments | 3,897 | (28 | ) | - | - | 3,897 | (28 | ) | |||||||||||||||||
Total, December 31, 2013 | $ | 743,925 | $ | (21,688 | ) | $ | 53,817 | $ | (4,480 | ) | $ | 797,742 | $ | (26,168 | ) | ||||||||||
Tower | $ | 663,127 | $ | (19,335 | ) | $ | 23,096 | $ | (2,034 | ) | $ | 686,223 | $ | (21,369 | ) | ||||||||||
Reciprocal Exchanges | 80,798 | (2,353 | ) | 30,721 | (2,446 | ) | 111,519 | (4,799 | ) | ||||||||||||||||
Total, December 31, 2013 | $ | 743,925 | $ | (21,688 | ) | $ | 53,817 | $ | (4,480 | ) | $ | 797,742 | $ | (26,168 | ) | ||||||||||
December 31, 2012 | |||||||||||||||||||||||||
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 | (667 | ) | 4,188 | (201 | ) | 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 | (2 | ) | 4,232 | (12 | ) | 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 | $ | 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 | $ | 328,618 | $ | (7,134 | ) | $ | 15,110 | $ | (577 | ) | $ | 343,728 | $ | (7,711 | ) | ||||||||||
Composition of Fixed-Maturity Portfolio by Remaining Time to Maturity | ' | ||||||||||||||||||||||||
The following table shows the composition of the fixed-maturity portfolio by remaining time to maturity at December 31, 2013 and 2012. For securities that are redeemable at the option of the issuer and have a market price that is greater than par value, the maturity used for the table below is the earliest redemption date. For securities that are redeemable at the option of the issuer and have a market price that is less than par value, the maturity used for the table below is the final maturity date. | |||||||||||||||||||||||||
Tower | Reciprocal Exchanges | Total | |||||||||||||||||||||||
($ in thousands) | Amortized | Fair Value | Amortized | Fair | Amortized | Fair Value | |||||||||||||||||||
Cost | Cost | Value | Cost | ||||||||||||||||||||||
December 31, 2013 | |||||||||||||||||||||||||
Remaining Time to Maturity | |||||||||||||||||||||||||
Less than one year | $ | 33,305 | $ | 33,727 | $ | 7,866 | $ | 8,021 | $ | 41,171 | $ | 41,748 | |||||||||||||
One to five years | 507,388 | 513,841 | 39,469 | 41,381 | 546,857 | 555,222 | |||||||||||||||||||
Five to ten years | 459,070 | 459,251 | 82,003 | 81,515 | 541,073 | 540,766 | |||||||||||||||||||
More than 10 years | 100,977 | 102,801 | 41,069 | 39,693 | 142,046 | 142,494 | |||||||||||||||||||
Mortgage and asset-backed securities | 263,417 | 280,526 | 79,070 | 81,939 | 342,487 | 362,465 | |||||||||||||||||||
Total | $ | 1,364,157 | $ | 1,390,146 | $ | 249,477 | $ | 252,549 | $ | 1,613,634 | $ | 1,642,695 | |||||||||||||
December 31, 2012 | |||||||||||||||||||||||||
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 | $ | 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 December 31, 2013 and 2012: | |||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||||||||||
Limited partnerships, equity method | $ | 46,521 | $ | 23,864 | |||||||||||||||||||||
Real estate, amortized cost | 6,054 | 7,422 | |||||||||||||||||||||||
Securities reported under the fair value option: | 43,580 | 25,000 | |||||||||||||||||||||||
Other | - | 1,500 | |||||||||||||||||||||||
Total | $ | 96,155 | $ | 57,786 |
Fair_Value_Measurements_Tables
Fair Value Measurements (Tables) | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||
Financial Instruments at Fair Value among Levels | ' | ||||||||||||||||||||||||
As of December 31, 2013 and 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 | |||||||||||||||||||||
December 31, 2013 | |||||||||||||||||||||||||
Fixed-maturity securities | |||||||||||||||||||||||||
U.S. Treasury securities | $ | - | $ | 363,962 | $ | - | $ | 363,962 | |||||||||||||||||
U.S. Agency securities | - | 111,221 | - | 111,221 | |||||||||||||||||||||
Municipal bonds | - | 279,106 | - | 279,106 | |||||||||||||||||||||
Corporate and other bonds | - | 522,516 | 3,426 | 525,942 | |||||||||||||||||||||
Commercial mortgage-backed securities | - | 204,906 | - | 204,906 | |||||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency | - | 63,341 | - | 63,341 | |||||||||||||||||||||
Non-agency | - | 34,856 | - | 34,856 | |||||||||||||||||||||
Asset-backed securities | - | 59,361 | - | 59,361 | |||||||||||||||||||||
Total fixed-maturities | - | 1,639,269 | 3,426 | 1,642,695 | |||||||||||||||||||||
Equity securities | 106,630 | - | - | 106,630 | |||||||||||||||||||||
Short-term investments | - | 5,897 | - | 5,897 | |||||||||||||||||||||
Total investments at fair value | 106,630 | 1,645,166 | 3,426 | 1,755,222 | |||||||||||||||||||||
Other invested assets (1) | - | - | 43,580 | 43,580 | |||||||||||||||||||||
Other Assets | |||||||||||||||||||||||||
Additional Payment derivative | - | - | 9,343 | 9,343 | |||||||||||||||||||||
Other liabilities | |||||||||||||||||||||||||
Interest rate swap contracts | - | (6,066 | ) | - | (6,066 | ) | |||||||||||||||||||
Debt and equity securities sold, not yet purchased | - | (11,099 | ) | - | (11,099 | ) | |||||||||||||||||||
Total, December 31, 2013 | $ | 106,630 | $ | 1,628,001 | $ | 56,349 | $ | 1,790,980 | |||||||||||||||||
Tower | $ | 104,107 | $ | 1,375,452 | $ | 56,349 | $ | 1,535,908 | |||||||||||||||||
Reciprocal Exchanges | 2,523 | 252,549 | - | 255,072 | |||||||||||||||||||||
Total, December 31, 2013 | $ | 106,630 | $ | 1,628,001 | $ | 56,349 | $ | 1,790,980 | |||||||||||||||||
December 31, 2012 | |||||||||||||||||||||||||
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 | 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 | $ | 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 | $ | 146,258 | $ | 2,323,344 | $ | 25,000 | $ | 2,494,602 | |||||||||||||||||
(1) $43.6 million of the $96.2 million Other invested assets reported on the consolidated balance sheet at December 31, 2013 is reported at fair value. The remaining $52.6 million of Other invested assets is reported under the equity method of accounting. | |||||||||||||||||||||||||
(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 $32.8 million of Other invested assets is reported under the equity method of accounting or at amortized cost. | |||||||||||||||||||||||||
Summary of Changes in Level Three Assets Measured at Fair Value | ' | ||||||||||||||||||||||||
The following table summarizes changes in Level 3 assets measured at fair value for the years ended December 31, 2013, 2012 and 2011 for Tower (the Reciprocal Exchanges do not have any Level 3 assets): | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
2013 | 2012 (1) | 2011(1) | |||||||||||||||||||||||
($ in thousands) | Other | Fixed | Additional | Total | |||||||||||||||||||||
Invested | Maturity | Payment | |||||||||||||||||||||||
Assets | Securities (2) | Derivative | |||||||||||||||||||||||
Beginning balance, January 1 | $ | 25,000 | - | - | 25,000 | $ | 25,000 | $ | 2,058 | ||||||||||||||||
Total gains (losses)-realized / unrealized | |||||||||||||||||||||||||
Included in net income | (670 | ) | - | 2,081 | (670 | ) | - | (1,067 | ) | ||||||||||||||||
Included in other comprehensive income (loss) | - | - | - | - | - | - | |||||||||||||||||||
Purchases | 19,250 | - | 7,262 | 28,593 | - | 25,000 | |||||||||||||||||||
Issuances | - | - | - | - | - | - | |||||||||||||||||||
Settlements | - | - | - | - | - | - | |||||||||||||||||||
Net transfers into (out of) Level 3 | - | 3,426 | - | 3,426 | - | (991 | ) | ||||||||||||||||||
Ending balance, December 31, | $ | 43,580 | 3,426 | 9,343 | 56,349 | $ | 25,000 | $ | 25,000 | ||||||||||||||||
(1) All activity for years ended December 31, 2012 and 2011 is comprised of other invested assets | |||||||||||||||||||||||||
(2) Comprised of corporate and other bonds |
Goodwill_Intangible_and_Fixed_1
Goodwill, Intangible and Fixed Assets Impairments (Tables) | 12 Months Ended | ||||||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||||||
Summary of Goodwill by Reporting Units | ' | ||||||||||||||||||||||||||||
The following table reflects the changes to goodwill during the years ended December 31, 2013 and 2012 and is presented using the reporting units prior to the reorganizations. | |||||||||||||||||||||||||||||
($ in thousands) | Commercial | Personal | Total | ||||||||||||||||||||||||||
Insurance | Insurance | ||||||||||||||||||||||||||||
Balance, January 1, 2012 | $ | 185,918 | $ | 55,540 | $ | 241,458 | |||||||||||||||||||||||
Adjustments | - | - | - | ||||||||||||||||||||||||||
Balance, December 31, 2012 | 185,918 | 55,540 | 241,458 | ||||||||||||||||||||||||||
Goodwill from Canopius Merger Transaction | 28,131 | - | 28,131 | ||||||||||||||||||||||||||
Goodwill from Marine and Energy acquisition | 1,853 | - | 1,853 | ||||||||||||||||||||||||||
Goodwill impairment | (215,902 | ) | (55,540 | ) | (271,442 | ) | |||||||||||||||||||||||
Total, December 31, 2013 | $ | - | $ | - | $ | - | |||||||||||||||||||||||
Components of Intangible Assets and their Useful Lives, Accumulated Amortization, and Net Carrying Value | ' | ||||||||||||||||||||||||||||
The components of intangible assets and their useful lives, accumulated amortization, and net carrying value as of December 31, 2013 and 2012 are as follows: | |||||||||||||||||||||||||||||
December 31, 2013 | December 31, 2012 | ||||||||||||||||||||||||||||
($ in thousands) | Useful | Gross | Accumulated | Net | Gross | Accumulated | Net | ||||||||||||||||||||||
Life | Carrying | Amortization/ | Carrying | Carrying | Amortization/ | Carrying | |||||||||||||||||||||||
(in-yrs) | Amount | Impairment | Amount | Amount | Impairment | Amount | |||||||||||||||||||||||
Insurance licenses | - | $ | 19,003 | $ | - | $ | 19,003 | $ | 19,003 | $ | - | $ | 19,003 | ||||||||||||||||
Management contracts | - | 54,600 | - | 54,600 | 54,600 | - | 54,600 | ||||||||||||||||||||||
Customer relationships | 25-Oct | 57,890 | (53,030 | ) | 4,860 | 57,890 | (26,754 | ) | 31,136 | ||||||||||||||||||||
Trademarks | 5 | 5,290 | (3,817 | ) | 1,473 | 5,290 | (3,261 | ) | 2,029 | ||||||||||||||||||||
Total | $ | 136,783 | $ | (56,847 | ) | $ | 79,936 | $ | 136,783 | $ | (30,015 | ) | $ | 106,768 | |||||||||||||||
Tower | $ | 128,283 | $ | (54,684 | ) | $ | 73,599 | $ | 128,283 | $ | (28,369 | ) | $ | 99,914 | |||||||||||||||
Reciprocal Exchanges | 8,500 | (2,163 | ) | 6,337 | 8,500 | (1,646 | ) | 6,854 | |||||||||||||||||||||
Total | $ | 136,783 | $ | (56,847 | ) | $ | 79,936 | $ | 136,783 | $ | (30,015 | ) | $ | 106,768 | |||||||||||||||
Activity in Components of Intangible Assets Consisted of Intangible Assets Acquired from Business Combinations and Amortization Expense | ' | ||||||||||||||||||||||||||||
The activity in the components of intangible assets for the years ended December 31, 2013 and 2012 consisted of intangible assets acquired from business combinations and amortization expense as shown in the table below: | |||||||||||||||||||||||||||||
($ in thousands) | Insurance | Management | Customer | Trademarks | Total | ||||||||||||||||||||||||
Licenses | Contracts | Relationships | |||||||||||||||||||||||||||
Balance, January 1, 2012 | $ | 19,003 | $ | 54,600 | $ | 38,463 | $ | 2,854 | $ | 114,920 | |||||||||||||||||||
Additions | - | - | - | - | - | ||||||||||||||||||||||||
Amortization | - | - | (7,327 | ) | (825 | ) | (8,152 | ) | |||||||||||||||||||||
Balance, December 31, 2012 | $ | 19,003 | $ | 54,600 | $ | 31,136 | $ | 2,029 | $ | 106,768 | |||||||||||||||||||
Tower | $ | 16,003 | $ | 54,600 | $ | 28,600 | $ | 711 | $ | 99,914 | |||||||||||||||||||
Reciprocal Exchanges (a) | 3,000 | - | 2,536 | 1,318 | 6,854 | ||||||||||||||||||||||||
Total, December 31, 2012 | $ | 19,003 | $ | 54,600 | $ | 31,136 | $ | 2,029 | $ | 106,768 | |||||||||||||||||||
Additions | - | - | - | - | - | ||||||||||||||||||||||||
Amortization | - | - | (4,359 | ) | (556 | ) | (4,915 | ) | |||||||||||||||||||||
Impairment | - | - | (21,917 | ) | - | (21,917 | ) | ||||||||||||||||||||||
Balance, December 31, 2013 | $ | 19,003 | $ | 54,600 | $ | 4,860 | $ | 1,473 | $ | 79,936 | |||||||||||||||||||
Tower | $ | 16,003 | $ | 54,600 | $ | 2,608 | $ | 388 | $ | 73,599 | |||||||||||||||||||
Reciprocal Exchanges | 3,000 | - | 2,252 | 1,085 | 6,337 | ||||||||||||||||||||||||
Total, December 31, 2013 | $ | 19,003 | $ | 54,600 | $ | 4,860 | $ | 1,473 | $ | 79,936 | |||||||||||||||||||
(a) In 2012, Tower transferred a licensed insurance subsidiary shell to the Reciprocal Exchanges, as discussed in Note 2-Accounting Policies and Procedures. This resulted in classifying $2.6 million insurance licenses out of Tower and into the Reciprocal Exchange. | |||||||||||||||||||||||||||||
Estimated Amortization Expense for Each of Next Five Years | ' | ||||||||||||||||||||||||||||
The estimated amortization expense associated with these intangible assets for each of the next five years is: | |||||||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | ||||||||||||||||||||||||||
Exchanges | |||||||||||||||||||||||||||||
2014 | $ | 544 | $ | 466 | $ | 1,010 | |||||||||||||||||||||||
2015 | 303 | 405 | 708 | ||||||||||||||||||||||||||
2016 | 191 | 354 | 545 | ||||||||||||||||||||||||||
2017 | 171 | 311 | 482 | ||||||||||||||||||||||||||
2018 | 155 | 276 | 431 |
Deferred_Acquisition_Costs_DAC1
Deferred Acquisition Costs ("DAC") (Tables) | 12 Months Ended | ||||||||||||||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||||||||||||||
Acquisition Costs Incurred and Policy-Related Ceding Commission Revenue Deferred and Amortized to Income on Property and Casualty Business | ' | ||||||||||||||||||||||||||||||||||||
Acquisition costs incurred and policy-related ceding commission revenue are deferred and amortized to income on property and casualty business for the year ended December 31, 2013, 2012 and 2011 as follows: | |||||||||||||||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | |||||||||||||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | Tower | Reciprocal | Total | Tower | Reciprocal | Total | ||||||||||||||||||||||||||||
Exchanges | Exchanges | Exchanges | |||||||||||||||||||||||||||||||||||
Deferred acquisition costs, net, January 1 | $ | 169,834 | $ | 11,364 | $ | 181,198 | $ | 156,992 | $ | 11,866 | $ | 168,858 | $ | 145,917 | $ | 18,206 | $ | 164,123 | |||||||||||||||||||
Cost incurred and deferred: | |||||||||||||||||||||||||||||||||||||
Commissions and brokerage | 266,987 | 32,425 | 299,412 | 298,701 | 31,266 | 329,967 | 279,699 | 31,837 | 311,536 | ||||||||||||||||||||||||||||
Other underwriting and acquisition costs | 58,846 | 7,627 | 66,473 | 68,238 | 7,467 | 75,705 | 64,416 | 5,896 | 70,312 | ||||||||||||||||||||||||||||
Ceding commission revenue | (101,640 | ) | (18,987 | ) | (120,627 | ) | (25,052 | ) | (15,878 | ) | (40,930 | ) | (20,082 | ) | (11,446 | ) | (31,528 | ) | |||||||||||||||||||
Net costs incurred and deferred | 224,193 | 21,065 | 245,258 | 341,887 | 22,855 | 364,742 | 324,033 | 26,287 | 350,320 | ||||||||||||||||||||||||||||
Amortization | (308,542 | ) | (22,818 | ) | (331,360 | ) | (329,045 | ) | (23,357 | ) | (352,402 | ) | (312,958 | ) | (32,627 | ) | (345,585 | ) | |||||||||||||||||||
Deferred acquisition costs, net, December 31, | $ | 85,485 | $ | 9,611 | $ | 95,096 | $ | 169,834 | $ | 11,364 | $ | 181,198 | $ | 156,992 | $ | 11,866 | $ | 168,858 |
Reinsurance_Tables
Reinsurance (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Premiums, Written, Ceded and Earned | ' | ||||||||||||||||
The table below shows direct, assumed and ceded premiums for the years ended December 31, 2013, 2012 and 2011: | |||||||||||||||||
($ in thousands) | Direct | Assumed | Ceded | Net | |||||||||||||
2013 | |||||||||||||||||
Premiums written | $ | 1,606,249 | $ | 121,411 | $ | 495,045 | $ | 1,232,615 | |||||||||
Change in unearned premiums | 111,252 | 187,520 | 18,472 | 280,300 | |||||||||||||
Premiums earned | $ | 1,717,501 | $ | 308,931 | $ | 513,517 | $ | 1,512,915 | |||||||||
2012 | |||||||||||||||||
Premiums written | $ | 1,755,157 | $ | 215,915 | $ | 231,691 | $ | 1,739,381 | |||||||||
Change in unearned premiums | 3,969 | (31,370 | ) | (9,884 | ) | (17,517 | ) | ||||||||||
Premiums earned | $ | 1,759,126 | $ | 184,545 | $ | 221,807 | $ | 1,721,864 | |||||||||
2011 | |||||||||||||||||
Premiums written | $ | 1,692,282 | $ | 118,642 | $ | 172,333 | $ | 1,638,591 | |||||||||
Change in unearned premiums | (8,262 | ) | (12,890 | ) | 23,589 | (44,741 | ) | ||||||||||
Premiums earned | $ | 1,684,020 | $ | 105,752 | $ | 195,922 | $ | 1,593,850 |
Loss_and_Loss_Adjustment_Expen1
Loss and Loss Adjustment Expense (Tables) | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||
Components of Liability for Loss and Loss and Loss Adjustment Expenses and Related Reinsurance Recoverables | ' | ||||||||||||||||||||||||
The components of the liability for loss and LAE expenses and related reinsurance recoverables for the years ended December 31, 2013 and 2012 are as follows: | |||||||||||||||||||||||||
Tower | Reciprocal Exchanges | Total | |||||||||||||||||||||||
($ in thousands) | Gross | Reinsurance | Gross | Reinsurance | Gross | Reinsurance | |||||||||||||||||||
Liability | Recoverable | Liability | Recoverable | Liability | Recoverable | ||||||||||||||||||||
December 31, 2013 | |||||||||||||||||||||||||
Case-basis reserves | $ | 936,751 | $ | 290,080 | $ | 63,198 | $ | 5,945 | $ | 999,949 | $ | 296,025 | |||||||||||||
IBNR reserves | 1,037,220 | 267,377 | 44,116 | 7,458 | 1,081,336 | 274,835 | |||||||||||||||||||
Recoverable on paid losses | - | 66,974 | - | 1,989 | - | 68,963 | |||||||||||||||||||
Total, December 31, 2013 | $ | 1,973,971 | $ | 624,431 | $ | 107,314 | $ | 15,392 | $ | 2,081,285 | $ | 639,823 | |||||||||||||
December 31, 2012 | |||||||||||||||||||||||||
Case-basis reserves | $ | 913,411 | $ | 79,911 | $ | 63,465 | $ | 10,160 | $ | 976,876 | $ | 90,071 | |||||||||||||
IBNR reserves | 846,477 | 327,157 | 72,326 | 42,229 | 918,803 | 369,386 | |||||||||||||||||||
Recoverable on paid losses | - | 16,927 | - | 682 | - | 17,609 | |||||||||||||||||||
Total, December 31, 2012 | $ | 1,759,888 | $ | 423,995 | $ | 135,791 | $ | 53,071 | $ | 1,895,679 | $ | 477,066 | |||||||||||||
Reconciliation of Beginning and Ending Consolidated Balances for Unpaid Losses and Loss Adjustment Expense | ' | ||||||||||||||||||||||||
The following tables provide a reconciliation of the beginning and ending consolidated balances for unpaid losses and LAE for the years ended December 31, 2013, 2012 and 2011: | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | Tower | Reciprocal | Total | |||||||||||||||||||
Exchanges | Exchanges | ||||||||||||||||||||||||
Balance at January 1, | $ | 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 | 166,868 | - | 166,868 | - | - | - | |||||||||||||||||||
Reduction in net reserves for the Southport Re agreements (i) | (306,833 | ) | - | (306,833 | ) | - | - | - | |||||||||||||||||
Incurred related to: | |||||||||||||||||||||||||
Current year | 871,767 | 109,946 | 981,713 | 1,066,411 | 118,099 | 1,184,510 | |||||||||||||||||||
Prior years unfavorable/(favorable) development | 533,038 | 5,083 | 538,121 | 88,129 | (8,881 | ) | 79,248 | ||||||||||||||||||
Total incurred | 1,404,805 | 115,029 | 1,519,834 | 1,154,540 | 109,218 | 1,263,758 | |||||||||||||||||||
Paid related to: | |||||||||||||||||||||||||
Current year | 502,791 | 73,771 | 576,562 | 431,437 | 98,682 | 530,119 | |||||||||||||||||||
Prior years | 696,365 | 32,739 | 729,104 | 585,154 | 52,155 | 637,309 | |||||||||||||||||||
Total paid | 1,199,156 | 106,510 | 1,305,666 | 1,016,591 | 150,837 | 1,167,428 | |||||||||||||||||||
Net balance at end of period | 1,418,504 | 91,921 | 1,510,425 | 1,352,820 | 83,402 | 1,436,222 | |||||||||||||||||||
Add reinsurance recoverables on unpaid losses | 555,468 | 15,392 | 570,860 | 407,068 | 52,389 | 459,457 | |||||||||||||||||||
Balance at December 31, | $ | 1,973,972 | $ | 107,313 | $ | 2,081,285 | $ | 1,759,888 | $ | 135,791 | $ | 1,895,679 | |||||||||||||
(i) In the third quarter of 2013, Tower executed the Southport Re ADCs (see “Note 1 - Nature of the Business” for further description). The Southport Re ADCs resulted in a direct reduction to net loss reserves. A deferred gain of $12.5 million was recorded on the Southport Re ADCs and is reported in Other Liabilities. In addition, Tower executed the Southport Re Quota Share in the third quarter of 2013. This treaty is accounted for using deposit accounting and reduced the net reserves by $7.2 million. | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
2011 | |||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | ||||||||||||||||||||||
Exchanges | |||||||||||||||||||||||||
Balance at January 1, | $ | 1,439,106 | $ | 171,315 | $ | 1,610,421 | |||||||||||||||||||
Less reinsurance recoverables on unpaid losses | (265,592 | ) | (11,384 | ) | (276,976 | ) | |||||||||||||||||||
1,173,514 | 159,931 | 1,333,445 | |||||||||||||||||||||||
Net reserves, at fair value, of acquired entities | - | - | - | ||||||||||||||||||||||
Incurred related to: | |||||||||||||||||||||||||
Current year | 933,791 | 142,254 | 1,076,045 | ||||||||||||||||||||||
Prior years unfavorable/(favorable) development | 38,776 | (37,835 | ) | 941 | |||||||||||||||||||||
Total incurred | 972,567 | 104,419 | 1,076,986 | ||||||||||||||||||||||
Paid related to: | |||||||||||||||||||||||||
Current year | 337,268 | 59,078 | 396,346 | ||||||||||||||||||||||
Prior years | 593,942 | 80,251 | 674,193 | ||||||||||||||||||||||
Total paid | 931,210 | 139,329 | 1,070,539 | ||||||||||||||||||||||
Net balance at end of period | 1,214,871 | 125,021 | 1,339,892 | ||||||||||||||||||||||
Add reinsurance recoverables on unpaid losses | 280,968 | 11,253 | 292,221 | ||||||||||||||||||||||
Balance at December 31, | $ | 1,495,839 | $ | 136,274 | $ | 1,632,113 |
Accumulated_Other_Comprehensiv1
Accumulated Other Comprehensive Income (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 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 year ended December 31, 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 | $ | 87,412 | $ | (5,860 | ) | $ | 1,204 | $ | 82,756 | ||||||||
Other comprehensive income before reclassifications, net of tax | (80,046 | ) | (1,496 | ) | (1,204 | ) | (82,746 | ) | |||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax | (22,894 | ) | 3,377 | - | (19,517 | ) | |||||||||||
Net current period other comprehensive income | (102,940 | ) | 1,881 | (1,204 | ) | (102,263 | ) | ||||||||||
Balance at December 31, 2013 | $ | (15,528 | ) | $ | (3,979 | ) | $ | - | $ | (19,507 | ) | ||||||
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 year ended December 31, 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 | $ | (22,894 | ) | Other net realized investment gains | |||||||||||||
- | Income tax expense | ||||||||||||||||
$ | (22,894 | ) | Total net of income taxes | ||||||||||||||
Gains (losses) on cash flow hedges interest rate swaps | $ | 3,377 | Interest expense | ||||||||||||||
- | Income tax expense | ||||||||||||||||
$ | 3,377 | Total net of income taxes | |||||||||||||||
Debt_Tables
Debt (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Borrowings | ' | ||||||||||||||||
The Company’s borrowings consisted of the following at December 31, 2013 and 2012: | |||||||||||||||||
December 31, 2013 | December 31, 2012 | ||||||||||||||||
($ in thousands) | Carrying | Fair | Carrying | Fair | |||||||||||||
Value | Value | Value | Value | ||||||||||||||
Credit facility | $ | - | $ | - | $ | 70,000 | $ | 70,000 | |||||||||
Convertible senior notes | 147,712 | 129,525 | 144,673 | 152,063 | |||||||||||||
Subordinated debentures | 235,058 | 114,900 | 235,058 | 232,678 | |||||||||||||
Total | $ | 382,770 | $ | 244,425 | $ | 449,731 | $ | 454,741 | |||||||||
Aggregate Scheduled Maturities of Borrowings | ' | ||||||||||||||||
Aggregate scheduled maturities of the Company’s borrowings at December 31, 2013 are: | |||||||||||||||||
($ in thousands) | |||||||||||||||||
2014 | $ | 150,000 | (a) | ||||||||||||||
2033 | 20,620 | ||||||||||||||||
2034 | 25,775 | ||||||||||||||||
2035 | 13,403 | ||||||||||||||||
2036 | 123,713 | ||||||||||||||||
2037 | 51,547 | ||||||||||||||||
$ | 385,058 | ||||||||||||||||
(a) Amount reflected in balance sheet for convertible senior notes is net of unamortized original issue discount of $2.3 million | |||||||||||||||||
Principal Terms of Subordinated Debentures | ' | ||||||||||||||||
The principal terms, before any effects of interest rate swaps, of the outstanding trust preferred securities, including those which were assumed by the Company through acquisitions, are summarized in the following table: | |||||||||||||||||
($ in millions) | Issuer | Maturity Date | Early | Interest Rate | Amount of | Principal | |||||||||||
Issue Date | Redemption | Investment | Amount of | ||||||||||||||
in Common | Junior | ||||||||||||||||
Securities | Subordinated | ||||||||||||||||
of Trust | Debenture | ||||||||||||||||
Issued to | |||||||||||||||||
Trust | |||||||||||||||||
May-03 | Tower Group | May-33 | At our option at par on or after May 15, 2008 | Three-month LIBOR plus 410 basis points | $ | 0.3 | $ | 10.3 | |||||||||
Statutory Trust I | |||||||||||||||||
Sep-03 | Tower Group | September 2033 | At our option at par on or after September 30, 2008 | Three-month LIBOR plus 400 basis points | $ | 0.3 | $ | 10.3 | |||||||||
Statutory Trust II | |||||||||||||||||
May-04 | Preserver Capital | May-34 | At our option at par on or after May 24, 2009 | Three-month LIBOR plus 425 basis points | $ | 0.4 | $ | 12.4 | |||||||||
Trust I | |||||||||||||||||
Dec-04 | Tower Group | December 2034 | At our option at par on or after December 15, 2009 | Three-month LIBOR plus 340 basis points | $ | 0.4 | $ | 13.4 | |||||||||
Statutory Trust III | |||||||||||||||||
Dec-04 | Tower Group | Mar-35 | At our option at par on or after March 15, 2010 | Three-month LIBOR plus 340 basis points | $ | 0.4 | $ | 13.4 | |||||||||
Statutory Trust IV | |||||||||||||||||
Mar-06 | Tower Group | Apr-36 | At our option at par on or after April 7, 2011 | Three-month LIBOR plus 330 basis points | $ | 0.6 | $ | 20.6 | |||||||||
Statutory Trust V | |||||||||||||||||
Jan-07 | Tower Group | Mar-37 | At our option at par on or after March 15, 2012 | 8.16% until March 14, 2012; three-month LIBOR plus 300 basis points thereafter | $ | 0.6 | $ | 20.6 | |||||||||
Statutory Trust VI | |||||||||||||||||
Sep-07 | CastlePoint | Dec-37 | At our option at par on or after December 15, 2012 | 8.39% until December 14, 2012; three-month LIBOR plus 350 basis points thereafter. | $ | 0.9 | $ | 30.9 | |||||||||
Bermuda Capital | |||||||||||||||||
Trust I | |||||||||||||||||
Dec-06 | CastlePoint | Dec-36 | At our option at par on or after December 15, 2011 | Three-month LIBOR plus 350 basis points | $ | 1.6 | $ | 51.6 | |||||||||
Management | |||||||||||||||||
Statutory Trust II | |||||||||||||||||
Dec-06 | CastlePoint | Dec-36 | At our option at par on or after December 15, 2011 | Three-month LIBOR plus 350 basis points | $ | 1.6 | $ | 51.6 | |||||||||
Management | |||||||||||||||||
Statutory Trust I | |||||||||||||||||
Total | $ | 7.1 | $ | 235.1 | |||||||||||||
Amounts Recorded for Notes | ' | ||||||||||||||||
The following table shows the amounts recorded for the Notes as of December 31, 2013 and 2012: | |||||||||||||||||
December 31, | |||||||||||||||||
($ in thousands) | 2013 | 2012 | |||||||||||||||
Liability component | |||||||||||||||||
Outstanding principal | $ | 150,000 | $ | 150,000 | |||||||||||||
Unamortized OID | (2,288 | ) | (5,327 | ) | |||||||||||||
Liability component | 147,712 | 144,673 | |||||||||||||||
Equity component, net of tax | $ | 7,469 | $ | 7,469 |
Stock_Based_Compensation_Table
Stock Based Compensation (Tables) | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||
Analysis of Restricted Stock Activity | ' | ||||||||||||||||||||||||
The following table provides an analysis of restricted stock activity for the years ended December 31, 2013, 2012 and 2011 (historical share counts and fair values have been adjusted for the 1.1330 share conversion ratio, as discussed more fully in “Note 3 – Canopius Merger Transaction”): | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
2013 | 2012 | 2011 | |||||||||||||||||||||||
Number of | Weighted | Number of | Weighted | Number of | Weighted | ||||||||||||||||||||
Shares | Average | Shares | Average | Shares | Average | ||||||||||||||||||||
Grant Date | Grant Date | Grant Date | |||||||||||||||||||||||
Fair Value | Fair Value | Fair Value | |||||||||||||||||||||||
Outstanding, January 1 | 1,015,902 | $ | 20.38 | 1,120,090 | $ | 20.69 | 670,366 | $ | 20.39 | ||||||||||||||||
Granted | 242,626 | 18.09 | 422,176 | 19.77 | 741,185 | 21.01 | |||||||||||||||||||
Vested | (965,862 | ) | 20.38 | (497,851 | ) | 20.94 | (270,115 | ) | 20.79 | ||||||||||||||||
Forfeitures | (57,080 | ) | 17.22 | (28,513 | ) | 20.69 | (21,346 | ) | 20.84 | ||||||||||||||||
Outstanding, December 31, | 235,586 | $ | 17.98 | 1,015,902 | $ | 20.38 | 1,120,090 | $ | 20.69 | ||||||||||||||||
Analysis of Stock Option Activity | ' | ||||||||||||||||||||||||
The following table provides an analysis of stock option activity for the years ended December 31, 2013, 2012 and 2011 (historical share counts and fair values have been adjusted for the 1.1330 share conversion ratio, as discussed more fully in “Note 3 – Canopius Merger Transaction”). As of December 31, 2013, the exercise price for all stock options exceeds the December 31, 2013 common share price. | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
2013 | 2012 | 2011 | |||||||||||||||||||||||
Number of | Average | Number of | Average | Number of | Average | ||||||||||||||||||||
Shares | Exercise | Shares | Exercise | Shares | Exercise | ||||||||||||||||||||
Price | Price | Price | |||||||||||||||||||||||
Outstanding, January 1 | 969,307 | $ | 17.78 | 969,307 | $ | 17.78 | 1,039,127 | $ | 17.66 | ||||||||||||||||
Exercised | (2,674 | ) | 16.48 | - | - | (39,215 | ) | 9.48 | |||||||||||||||||
Forfeitures and expirations | (10,829 | ) | 20.19 | - | - | (30,605 | ) | 24.35 | |||||||||||||||||
Outstanding, December 31 | 955,804 | $ | 17.75 | 969,307 | $ | 17.78 | 969,307 | $ | 17.78 | ||||||||||||||||
Exercisable, December 31 | 955,804 | $ | 17.75 | 969,307 | $ | 17.78 | 969,307 | $ | 17.78 | ||||||||||||||||
Options Outstanding and Exercisable | ' | ||||||||||||||||||||||||
All options outstanding as of December 31, 2013 are fully exercisable as shown on the following table: | |||||||||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||||||||
Range of Exercise Prices | Number of | Average | Average | Number of | Average | ||||||||||||||||||||
Shares | Remaining | Exercise | Shares | Exercise | |||||||||||||||||||||
Contractual | Price | Price | |||||||||||||||||||||||
Life (Years) | |||||||||||||||||||||||||
$10.01 - $20.00 | 769,833 | 2.6 | $ | 16.32 | 769,833 | $ | 16.32 | ||||||||||||||||||
$20.01 - $30.00 | 183,857 | 4.1 | 23.6 | 183,857 | 23.6 | ||||||||||||||||||||
$30.01 - $40.00 | 2,114 | 1.1 | 30.35 | 2,114 | 30.35 | ||||||||||||||||||||
Total Options | 955,804 | 2.9 | $ | 17.75 | 955,804 | $ | 17.75 | ||||||||||||||||||
Analysis of Stock Based Compensation Expense | ' | ||||||||||||||||||||||||
The following table provides an analysis of stock based compensation expense for the years ended December 31, 2013, 2012 and 2011: | |||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||||||||||||||
Restricted stock | |||||||||||||||||||||||||
Expense, net of tax | $ | 8,577 | $ | 6,043 | $ | 6,126 | |||||||||||||||||||
Value of shares vested | 21,278 | 9,485 | 5,622 | ||||||||||||||||||||||
Value of unvested shares | 796 | 15,967 | 19,940 | ||||||||||||||||||||||
Stock options | |||||||||||||||||||||||||
Expense, net of tax | - | - | 105 | ||||||||||||||||||||||
Intrinsic value of outstanding options | - | 1,149 | 1,150 | ||||||||||||||||||||||
Intrinsic value of vested outstanding options | - | 1,149 | 1,150 | ||||||||||||||||||||||
Unrecognized compensation expense | |||||||||||||||||||||||||
Unvested restricted stock, net of tax | 851 | 8,262 | 9,617 | ||||||||||||||||||||||
Weighted average years expense will be recognized | 3.2 | 2.1 | 2.3 |
Income_Taxes_Tables
Income Taxes (Tables) | 12 Months Ended | ||||||||||||||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||||||||||||||
Provision for Federal, State and Local Income Taxes | ' | ||||||||||||||||||||||||||||||||||||
The provision for Federal, state and local income taxes consist of the following components for the years ended December 31, 2013, 2012 and 2011: | |||||||||||||||||||||||||||||||||||||
Year ended December 31, | |||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | |||||||||||||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | Tower | Reciprocal | Total | Tower | Reciprocal | Total | ||||||||||||||||||||||||||||
Exchanges | Exchanges | Exchanges | |||||||||||||||||||||||||||||||||||
Current Federal income tax expense (benefit) | $ | 3,000 | $ | 132 | $ | 3,132 | $ | (17,400 | ) | $ | 593 | $ | (16,807 | ) | $ | 6,951 | $ | 1,510 | $ | 8,461 | |||||||||||||||||
Current state income tax expense (benefit) | 553 | - | 553 | 200 | - | 200 | (257 | ) | - | (257 | ) | ||||||||||||||||||||||||||
Deferred Federal and state income tax (benefit) | 5,285 | (539 | ) | 4,747 | (9,872 | ) | (2,620 | ) | (12,492 | ) | 4,175 | 1,672 | 5,847 | ||||||||||||||||||||||||
Provision for income taxes | $ | 8,838 | $ | (407 | ) | $ | 8,431 | $ | (27,072 | ) | $ | (2,027 | ) | $ | (29,099 | ) | $ | 10,869 | $ | 3,182 | $ | 14,051 | |||||||||||||||
Significant Components of Deferred Tax Assets and Liabilities | ' | ||||||||||||||||||||||||||||||||||||
Significant components of the consolidated deferred tax assets and liabilities are as follows: | |||||||||||||||||||||||||||||||||||||
December 31, | |||||||||||||||||||||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | Tower | Reciprocal | Total | |||||||||||||||||||||||||||||||
Exchanges | Exchanges | ||||||||||||||||||||||||||||||||||||
Deferred tax assets: | |||||||||||||||||||||||||||||||||||||
Claims reserve discount | $ | 26,994 | $ | 1,554 | $ | 28,548 | $ | 44,528 | $ | 1,747 | $ | 46,275 | |||||||||||||||||||||||||
Unearned premium | 22,614 | 5,819 | 28,433 | 55,134 | 5,928 | 61,062 | |||||||||||||||||||||||||||||||
Equity compensation plans | 3,627 | - | 3,627 | 6,072 | - | 6,072 | |||||||||||||||||||||||||||||||
Net operating loss carryforwards | 161,884 | 11,175 | 173,059 | 32,584 | 4,830 | 37,414 | |||||||||||||||||||||||||||||||
Convertible senior note and note hedge OID | - | - | - | 618 | - | 618 | |||||||||||||||||||||||||||||||
AMT credits | 2,008 | 611 | 2,619 | 1,846 | 508 | 2,354 | |||||||||||||||||||||||||||||||
Fair value of interest rate swap | 2,123 | - | 2,123 | 3,155 | - | 3,155 | |||||||||||||||||||||||||||||||
Bad debt reserves | 5,793 | 265 | 6,058 | 5,793 | 22 | 5,815 | |||||||||||||||||||||||||||||||
Deferred rent | 1,977 | - | 1,977 | 1,905 | - | 1,905 | |||||||||||||||||||||||||||||||
Accrued interest from foreign affiliate | 2,199 | - | 2,199 | 3,710 | - | 3,710 | |||||||||||||||||||||||||||||||
Adjustment on Retroactive Reinsurance | 42,882 | - | 42,882 | - | - | - | |||||||||||||||||||||||||||||||
Depreciation and amortization | 18,574 | - | 18,574 | - | - | - | |||||||||||||||||||||||||||||||
Other | 2,052 | 1,754 | 3,806 | - | 1,008 | 1,008 | |||||||||||||||||||||||||||||||
Total gross deferred tax assets | 292,727 | 21,178 | 313,905 | 155,345 | 14,043 | 169,388 | |||||||||||||||||||||||||||||||
Less: valuation allowance | 275,332 | 17,593 | 292,925 | 2,258 | 4,726 | 6,984 | |||||||||||||||||||||||||||||||
Total deferred tax assets | 17,395 | 3,585 | 20,980 | 153,087 | 9,317 | 162,404 | |||||||||||||||||||||||||||||||
Deferred tax liabilities: | |||||||||||||||||||||||||||||||||||||
Deferred acquisition costs net of deferred ceding commission revenue | 11,010 | 3,319 | 14,329 | 59,387 | 3,864 | 63,251 | |||||||||||||||||||||||||||||||
Convertible senior note and note hedge OID | 2,163 | - | 2,163 | - | - | - | |||||||||||||||||||||||||||||||
Depreciation and amortization | - | 2,155 | 2,155 | 46,025 | 2,357 | 48,382 | |||||||||||||||||||||||||||||||
Net unrealized appreciation of securities | 12,030 | 967 | 12,997 | 46,953 | 5,791 | 52,744 | |||||||||||||||||||||||||||||||
Surplus notes | 2,519 | 16,325 | 18,844 | 1,800 | 17,024 | 18,824 | |||||||||||||||||||||||||||||||
Unconsolidated affiliate | - | - | - | 3,843 | - | 3,843 | |||||||||||||||||||||||||||||||
Other | - | - | - | 123 | - | 123 | |||||||||||||||||||||||||||||||
Total deferred tax liabilities | 27,722 | 22,766 | 50,488 | 158,131 | 29,036 | 187,167 | |||||||||||||||||||||||||||||||
Net deferred income tax asset (liability) | $ | (10,327 | ) | $ | (19,181 | ) | $ | (29,508 | ) | $ | (5,044 | ) | $ | (19,719 | ) | $ | (24,763 | ) | |||||||||||||||||||
Items Causing Provision for Federal Income Taxes Incurred Different from that which would be Obtained by Applying Federal Income Tax Rate to Net Income Before Taxes | ' | ||||||||||||||||||||||||||||||||||||
The provision for Federal income taxes incurred is different from that which would be obtained by applying the Federal income tax rate to net income before taxes. The items causing this difference at the consolidated level are as follows: | |||||||||||||||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | |||||||||||||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | Tower | Reciprocal | Total | Tower | Reciprocal | Total | ||||||||||||||||||||||||||||
Exchanges | Exchanges | Exchanges | |||||||||||||||||||||||||||||||||||
Federal income tax expense at | |||||||||||||||||||||||||||||||||||||
U.S. statutory rate | $ | (326,239 | ) | $ | (7,075 | ) | $ | (333,314 | ) | $ | (21,458 | ) | $ | 99 | $ | (21,359 | ) | $ | 19,161 | $ | 4,820 | $ | 23,981 | ||||||||||||||
Rate differential on Non U.S. Operations | 10,746 | - | 10,746 | - | - | - | - | - | - | ||||||||||||||||||||||||||||
Tax exempt interest | (4,476 | ) | (397 | ) | (4,873 | ) | (7,374 | ) | (901 | ) | (8,275 | ) | (6,823 | ) | (418 | ) | (7,241 | ) | |||||||||||||||||||
State income taxes net of | - | ||||||||||||||||||||||||||||||||||||
Federal benefit | 359 | - | 359 | 130 | - | 130 | 488 | - | 488 | ||||||||||||||||||||||||||||
Goodwill Impairment | 78,465 | - | 78,465 | - | - | - | - | - | - | ||||||||||||||||||||||||||||
Acquisition related transaction costs | 1,801 | - | 1,801 | 2,261 | - | 2,261 | 100 | - | 100 | ||||||||||||||||||||||||||||
Prior period adjustment | 1,408 | (784 | ) | 624 | (619 | ) | (162 | ) | (781 | ) | 207 | - | 207 | ||||||||||||||||||||||||
Valuation Allowance | 242,189 | 7,944 | 250,133 | - | (1,072 | ) | (1,072 | ) | - | (1,757 | ) | (1,757 | ) | ||||||||||||||||||||||||
Other | 4,585 | (95 | ) | 4,490 | (12 | ) | 9 | (3 | ) | (2,264 | ) | 537 | (1,727 | ) | |||||||||||||||||||||||
Provision for income taxes | $ | 8,838 | $ | (407 | ) | $ | 8,431 | $ | (27,072 | ) | $ | (2,027 | ) | $ | (29,099 | ) | $ | 10,869 | $ | 3,182 | $ | 14,051 |
Contingencies_Tables
Contingencies (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Future Minimum Lease Payments | ' | ||||||||||||
The Company’s future minimum lease payments are as follows: | |||||||||||||
($ in thousands) | Operating | Capital | Total | ||||||||||
Leases | Leases | ||||||||||||
2014 | $ | 10,463 | $ | 12,557 | $ | 23,020 | |||||||
2015 | 10,397 | 14,823 | 25,220 | ||||||||||
2016 | 10,398 | 3,371 | 13,769 | ||||||||||
2017 | 9,142 | 1,787 | 10,929 | ||||||||||
2018 | 8,850 | 640 | 9,490 | ||||||||||
Thereafter | 26,761 | - | 26,761 | ||||||||||
$ | 76,011 | $ | 33,178 | $ | 109,189 |
Earnings_loss_per_Share_Tables
Earnings (loss) per Share (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 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 Canopius Merger Transaction): | |||||||||||||
Year Ended December 31, | |||||||||||||
(in thousands, except per share amounts) | 2013 | 2012 | 2011 | ||||||||||
Numerator | |||||||||||||
Net income (loss) attributable to Tower Group International, Ltd. | $ | (942,616 | ) | $ | (34,234 | ) | $ | 44,435 | |||||
Less: Allocation of income for unvested participating restricted stock | - | - | (370 | ) | |||||||||
Less: Dividends on unvested participating restricted stock | (262 | ) | (686 | ) | (679 | ) | |||||||
Net income available to common shareholders - Basic | (942,878 | ) | (34,920 | ) | 43,386 | ||||||||
Reallocation of income for unvested participating restricted stock | - | - | (1 | ) | |||||||||
Net income (loss) available to common shareholders - Diluted | (942,878 | ) | (34,920 | ) | 43,385 | ||||||||
Denominator | |||||||||||||
Basic earnings per share denominator | 54,297 | 42,902 | 45,226 | ||||||||||
Effect of dilutive securities: | - | - | 111 | ||||||||||
Diluted earnings per share denominator | 54,297 | 42,902 | 45,337 | ||||||||||
Earnings (loss) per share attributable to Tower shareholders - Basic | |||||||||||||
Common stock: | |||||||||||||
Distributed earnings | $ | 0.5 | $ | 0.66 | $ | 0.61 | |||||||
Undistributed earnings | (17.86 | ) | (1.47 | ) | 0.35 | ||||||||
Total - Basic | (17.37 | ) | (0.81 | ) | 0.96 | ||||||||
Earnings (loss) per share attributable to Tower shareholders - Diluted | $ | (17.37 | ) | $ | (0.81 | ) | $ | 0.96 |
Segment_Information_Tables
Segment Information (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Business Segments Results | ' | ||||||||||||
Business segments results are as follows: | |||||||||||||
Year Ended December 31, | |||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||
Commercial Insurance Segment | |||||||||||||
Revenues | |||||||||||||
Premiums earned | $ | 931,693 | $ | 1,104,551 | $ | 1,052,050 | |||||||
Ceding commission revenue | 30,115 | 7,702 | 14,786 | ||||||||||
Policy billing fees | 5,637 | 5,467 | 4,345 | ||||||||||
Total revenues | 967,445 | 1,117,720 | 1,071,181 | ||||||||||
Expenses | |||||||||||||
Loss and loss adjustment expenses | 1,185,627 | 859,707 | 740,754 | ||||||||||
Underwriting expenses | 406,908 | 388,511 | 352,832 | ||||||||||
Total expenses | 1,592,535 | 1,248,218 | 1,093,586 | ||||||||||
Underwriting profit (loss) | $ | (625,090 | ) | $ | (130,498 | ) | $ | (22,405 | ) | ||||
Assumed Reinsurance Segment | |||||||||||||
Revenues | |||||||||||||
Premiums earned | $ | 116,417 | $ | 120,015 | $ | 35,861 | |||||||
Ceding commission revenue | - | - | - | ||||||||||
Total revenues | 116,417 | 120,015 | 35,861 | ||||||||||
Expenses | |||||||||||||
Loss and loss adjustment expenses | 41,474 | 52,975 | 17,456 | ||||||||||
Underwriting expenses | 57,506 | 44,124 | 11,859 | ||||||||||
Total expenses | 98,980 | 97,099 | 29,315 | ||||||||||
Underwriting profit (loss) | $ | 17,437 | $ | 22,916 | $ | 6,546 | |||||||
Personal Insurance Segment | |||||||||||||
Revenues | |||||||||||||
Premiums earned | $ | 464,805 | $ | 497,298 | $ | 505,939 | |||||||
Ceding commission revenue | 51,267 | 24,633 | 19,182 | ||||||||||
Policy billing fees | 6,662 | 7,148 | 6,189 | ||||||||||
Total revenues | 522,734 | 529,079 | 531,310 | ||||||||||
Expenses | |||||||||||||
Loss and loss adjustment expenses | 292,733 | 351,076 | 318,775 | ||||||||||
Underwriting expenses | 249,779 | 228,289 | 218,463 | ||||||||||
Total expenses | 542,512 | 579,365 | 537,238 | ||||||||||
Underwriting profit (loss) | $ | (19,778 | ) | $ | (50,286 | ) | $ | (5,928 | ) | ||||
Tower | $ | 6,083 | $ | (31,450 | ) | $ | (11,308 | ) | |||||
Reciprocal Exchanges | (25,861 | ) | (18,836 | ) | 5,380 | ||||||||
Total underwriting profit (loss) | $ | (19,778 | ) | $ | (50,286 | ) | $ | (5,928 | ) | ||||
Reconciliation of Revenue by Segment to Consolidated Revenues | ' | ||||||||||||
The following table reconciles revenue by segment to consolidated revenues: | |||||||||||||
Year Ended December 31, | |||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||
Commercial insurance segment | $ | 967,445 | $ | 1,117,720 | $ | 1,071,181 | |||||||
Assumed reinsurance segment | 116,417 | 120,015 | 35,861 | ||||||||||
Personal insurance segment | 522,734 | 529,079 | 531,310 | ||||||||||
Total segment revenues | 1,606,596 | 1,766,814 | 1,638,352 | ||||||||||
Net investment income | 109,208 | 127,165 | 126,474 | ||||||||||
Net realized gains (losses) on investments, including other-than-temporary impairments | 25,048 | 25,476 | 9,394 | ||||||||||
Insurance services revenue | 1,150 | 3,420 | 1,570 | ||||||||||
Consolidated revenues | $ | 1,742,002 | $ | 1,922,875 | $ | 1,775,790 | |||||||
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: | |||||||||||||
Year Ended December 31, | |||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | ||||||||||
Commercial insurance segment underwriting profit (loss) | $ | (625,090 | ) | $ | (130,498 | ) | $ | (22,405 | ) | ||||
Assumed reinsurance segment underwriting profit (loss) | 17,437 | 22,916 | (6,546 | ) | |||||||||
Personal insurance segment underwriting profit (loss) | (19,778 | ) | (50,286 | ) | (5,928 | ) | |||||||
Net investment income | 109,208 | 127,165 | 126,474 | ||||||||||
Net realized gains (loss) on investments, including other-than-temporary impairments | 25,048 | 25,476 | 9,394 | ||||||||||
Corporate expenses, and other income | (14,581 | ) | (12,460 | ) | (9,950 | ) | |||||||
Acquisition-related transaction costs | (21,322 | ) | (9,229 | ) | (360 | ) | |||||||
Interest expense | (33,594 | ) | (32,630 | ) | (34,290 | ) | |||||||
Goodwill and fixed asset impairment | (397,211 | ) | - | - | |||||||||
Equity income in unconsolidated affiliate | 6,962 | (1,470 | ) | - | |||||||||
Income (loss) before income taxes | $ | (952,921 | ) | $ | (61,016 | ) | $ | 69,481 |
Unaudited_Quarterly_Financial_1
Unaudited Quarterly Financial Information (Tables) | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||
Unaudited Quarterly Financial Information | ' | ||||||||||||||||||||
The following table presents the unaudited quarterly financial information for the Company: | |||||||||||||||||||||
2013 | |||||||||||||||||||||
($ in thousands, except per share amounts) | First | Second (2) | Third (2) (3) | Fourth | Total | ||||||||||||||||
(as revised) | (as revised) | ||||||||||||||||||||
Revenues | $ | 476,483 | $ | 460,518 | $ | 478,881 | $ | 326,120 | $ | 1,742,002 | |||||||||||
Net Income (loss) attributable to Tower Group International, Ltd. | 12,917 | (515,847 | ) | (348,053 | ) | (91,633 | ) | (942,616 | ) | ||||||||||||
Net income (loss) per share attributable to Tower shareholders: | |||||||||||||||||||||
Basic (1) | $ | 0.28 | $ | (9.03 | ) | $ | (6.09 | ) | $ | (1.60 | ) | $ | (17.37 | ) | |||||||
Diluted (1) | $ | 0.28 | $ | (9.03 | ) | $ | (6.09 | ) | $ | (1.60 | ) | $ | (17.37 | ) | |||||||
2012 | |||||||||||||||||||||
First | Second | Third | Fourth | Total | |||||||||||||||||
Revenues | $ | 466,223 | $ | 506,392 | $ | 474,891 | $ | 475,369 | $ | 1,922,875 | |||||||||||
Net Income (loss) attributable to Tower Group International, Ltd. | 19,166 | (16,809 | ) | 21,629 | (58,220 | ) | (34,234 | ) | |||||||||||||
Net income (loss)) per share attributable to Tower shareholders: | |||||||||||||||||||||
Basic (1) | $ | 0.43 | $ | (0.39 | ) | $ | 0.5 | $ | (1.38 | ) | $ | (0.81 | ) | ||||||||
Diluted (1) | $ | 0.43 | $ | (0.39 | ) | $ | 0.5 | $ | (1.38 | ) | $ | (0.81 | ) | ||||||||
-1 | Since the weighted-average shares for the quarters are calculated independently of the weighted-average shares for the year, quarterly earnings (loss) per share may not total to annual earnings per share. Earnings (loss) per share has been calculated using weighted-average shares that have been adjusted for the 1.1330 share conversion ratio resulting from the Canopius Merger Transaction. | ||||||||||||||||||||
-2 | Net Income (loss) attributable to Tower Group International, Ltd. and per share amounts have been revised from amounts previously reported to adjust for a correction in income tax expenses by $8.5 million in the second quarter of 2013 and $0.4 million in the third quarter of 2013. The Company adjusted the valuation allowance recorded on its deferred taxes. This correction included an adjustment to increase total liabilities by $8.5 million in second quarter of 2013. This correction resulted in a total increase to liabilities of $8.9 million and cumulative decrease in equity of $8.5 million by the third quarter of 2013. This correction had no impact to cash flows. Management concluded these revisions were not material to the previously reported financial statements. | ||||||||||||||||||||
-3 | Revenues have been revised from amounts previously reported to adjust for a correction in accounting for the Southport Quota Share. In the third quarter of 2013, management should have used deposit accounting. This correction resulted in greater net earned premiums of $46.1 million and less ceded commission revenue of $10.1 million, and additional loss and loss adjustment expense of $36.0 million. This correction had no impact to net income (loss). This correction also resulted in an adjustment to decrease total assets and total liabilities by $23.9 million. Cash flows provided by (used in) operating activities increased and Cash flows provided by (used in) financing activities decreased by $35.1 million in the third quarter of 2013. Management concluded these revisions were not material to the previously reported financial statements. |
Nature_of_Business_Additional_
Nature of Business - Additional Information (Detail) (USD $) | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | 12 Months Ended | 12 Months Ended | 12 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | 12 Months Ended | 3 Months Ended | 9 Months Ended | 0 Months Ended | 1 Months Ended | 0 Months Ended | 1 Months Ended | 0 Months Ended | 1 Months Ended | 0 Months Ended | 1 Months Ended | 0 Months Ended | 1 Months Ended | ||||||||||||||||||||||||||||||||||||||||
Dec. 13, 2013 | Nov. 22, 2013 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Jul. 02, 2013 | Jul. 02, 2013 | Dec. 31, 2013 | Jul. 02, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Oct. 31, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2013 | Sep. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 13, 2013 | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Sep. 30, 2013 | Dec. 20, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Feb. 15, 2012 | Sep. 30, 2010 | Jan. 03, 2014 | Mar. 31, 2014 | Jan. 03, 2014 | Feb. 14, 2014 | Jan. 03, 2014 | Jan. 03, 2014 | Jan. 03, 2014 | Jan. 03, 2014 | Jan. 03, 2014 | Jan. 03, 2014 | Jan. 03, 2014 | Jan. 03, 2014 | Jan. 03, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | |
Employee | Agreement | Other Assets | Arch | Hannover | Southport Re | Southport Re | Southport Re | Maximum | TRL | TRL | Tower Insurance Company of New York | Tower Insurance Company of New York | Tower Insurance Company of New York | Tower Insurance Company of New York | Tower Insurance Company of New York | CastlePoint Re | Retail agencies | Wholesale agencies | Personal Insurance | Personal Insurance | Personal Insurance | Personal Insurance | Personal Insurance | Personal Insurance | Assumed Reinsurance Segment | Assumed Reinsurance Segment | Assumed Reinsurance Segment | Acp Re Ltd | Canopius Group Limited | Tower | Tower | Tower | Tower | Tower | Marine Energy Acquisition | 2014 Senior Convertible Notes | Convertible Senior Notes | Convertible Senior Notes | Convertible Senior Notes | Convertible Senior Notes | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | ||||||||
2014 Reporting | Arch | Hannover | Southport Re | Southport Re | Southport Re | AmTrust | NGHC | Southport Re | Acp Re Ltd | Acp Re Ltd | Acp Re Ltd | Acp Re Ltd | Tower | Tower | Tower | Tower | Tower | Tower | Tower | ||||||||||||||||||||||||||||||||||||||||||||
Other Assets | Maximum | Maximum | Maximum | 2014 Ceded Premiums | 2014 Ceded Premiums | AmTrust | NGHC | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature Of Business [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock, par value | ' | ' | $0.01 | ' | ' | ' | $0.01 | $0.01 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0.01 | ' | $0.01 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Equity awards settlement in cash | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $3 | ' | $3 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Outstanding equity awards, aggregate value | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $172,100,000 | ' | $172,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Reinsured percentage on losses incurred | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 60.00% | 60.00% | ' | ' | ' | ' | ' |
Commission percentage on premium | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 20.00% | 20.00% | ' | 22.00% | 22.00% | ' | ' |
Quota share reinsurance cede, percentage | ' | ' | ' | ' | ' | ' | ' | 35.50% | ' | ' | 17.50% | 14.00% | ' | 30.00% | ' | ' | ' | ' | 17.50% | 14.00% | ' | 30.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 100.00% | 100.00% | ' | ' | ' | ' | ' |
Unearned premium reserve percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 65.70% | 100.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 65.70% | 100.00% |
Percentage of common stockholders dissenting to the merger | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 15.00% | ' | ' | ' | ' |
Reimburse transaction expense | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,000,000 | 2,000,000 | ' | ' | ' | ' | ' | ' | ' |
Annual cost savings due to workforce reduction | ' | 21,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 6,400,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 6,400,000 | -8,180,000 | -8,180,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
President and Chief Executive Officer of Tower,who beneficially owns percentage of issued and outstanding common stock | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 4.20% | ' | 4.20% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Loss and loss adjustment expenses | ' | ' | ' | 36,000,000 | ' | ' | 1,519,834,000 | 1,263,758,000 | 1,076,986,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 292,733,000 | 351,076,000 | 318,775,000 | ' | 41,474,000 | 52,975,000 | 17,456,000 | 533,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of loss reserves covered by reserve study | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 98.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Goodwill impairment charge | ' | ' | ' | ' | 214,000,000 | 214,000,000 | 271,442,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 55,500,000 | 55,500,000 | 55,540,000 | ' | ' | ' | ' | ' | ' | ' | ' | 214,000,000 | ' | ' | ' | ' | 1,900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fixed assets impairment charge | ' | ' | ' | 125,800,000 | ' | ' | 125,800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Goodwill | ' | ' | 0 | ' | ' | ' | 0 | 241,458,000 | 241,458,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 55,540,000 | 55,540,000 | 55,500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of reinsurers | ' | ' | ' | 3 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Deposit assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | 28,700,000 | ' | ' | 28,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | 28,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Ceded premium earned | ' | ' | ' | 46,100,000 | ' | ' | 1,512,915,000 | 1,721,864,000 | 1,593,850,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 76,800,000 | ' | ' | ' | ' | ' | ' | ' | 464,805,000 | 497,298,000 | 505,939,000 | ' | ' | 120,015,000 | 35,861,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Ceding commission revenue | ' | ' | ' | 10,100,000 | ' | ' | 81,382,000 | 32,335,000 | 33,968,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 22,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Ceded loss and adjustment expenses | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 41,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt carrying amount | ' | ' | 385,058,000 | ' | ' | ' | 385,058,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 147,700,000 | 150,000,000 | 150,000,000 | 150,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt instrument interest rate | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5.00% | ' | ' | ' | 5.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Direct written premiums | ' | ' | ' | ' | ' | ' | 1,606,249,000 | 1,755,157,000 | 1,692,282,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,606,200,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net written premiums | ' | ' | ' | ' | ' | ' | 1,232,615,000 | 1,739,381,000 | 1,638,591,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 98,100,000 | 98,100,000 | ' | ' | 398,388,000 | 513,816,000 | 486,291,000 | ' | ' | 148,399,000 | 72,623,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Additional collateral requested | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 26,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amount required to be collateralized against adverse loss reserve development | ' | ' | 222,159,000 | ' | ' | ' | 222,159,000 | 98,581,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 648,900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unencumbered liquid assets | ' | ' | 68,963,000 | ' | ' | ' | 68,963,000 | 17,609,000 | ' | ' | ' | ' | ' | ' | ' | ' | 167,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 66,974,000 | 16,927,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Funds held by reinsured companies | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 581,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Repayment of credit facility borrowings | 70,000,000 | ' | ' | ' | ' | ' | 70,000,000 | ' | 17,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of ownership sold | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 10.70% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
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 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Employee severance payment | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of workforce reduction | ' | 10.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total number of employees to be affected by workforce reduction | ' | 1,400 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Recognized pre-tax charges for severance and other one-time termination benefits and other associated costs | ' | ' | $5,500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Accounting_Policies_and_Basis_3
Accounting Policies and Basis of Presentation - Additional Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | 12 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | 12 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | ||||||||||||||||||||||||||||||||
Sep. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 | Sep. 30, 2013 | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 13, 2013 | Aug. 20, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Jun. 30, 2013 | Jun. 30, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Mar. 31, 2012 | |
Segment | Customer relationships | Customer relationships | Customer relationships | Customer relationships | Customer relationships | Largest agent | Largest agent | Largest agent | Reinsurance | Reinsurance | Maximum | Canopius Group Limited | Canopius Group Limited | Canopius Group Limited | Canopius Group Limited | Personal Insurance | Personal Insurance | Personal Insurance | After the effects of the impairment | As previously Reported | As previously Reported | Actual | Actual | Other Assets | Other Assets | Other Assets | Other Assets | Other Assets | Allocated Loss Adjustment Expenses | Allocated Loss Adjustment Expenses | Tower | Tower | Tower | Tower | Tower | Tower | Tower | Tower | Tower | Tower | Tower | |||||||
Reinsurers | Restricted Cash | Restricted Cash | Receivable for securities | Receivables from reinsurance | Claims Opened | Claims Closed | Personal Insurance | U.S. | U.S. | U.S. | U.S. | Non - U.S. and Eliminations | Reciprocal Exchanges | |||||||||||||||||||||||||||||||||||
Significant Accounting Policies [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of business segments | ' | ' | ' | 3 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Transfer of assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $1,800,000 |
Conversion ratio | ' | ' | ' | 1.133 | 1.133 | 1.133 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Prior period adjustment | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 9,100,000 | 7,000,000 | 9,400,000 | 900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cash flows used in investing activities | ' | ' | ' | 701,306,000 | -100,654,000 | -111,947,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 89,100,000 | 104,500,000 | 100,500,000 | 111,900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cash and cash equivalents | ' | ' | ' | 293,898,000 | 83,800,000 | 107,101,000 | 140,221,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 102,300,000 | 114,100,000 | 83,800,000 | 107,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Worker compensation discount amount | ' | ' | ' | 5,500,000 | 8,400,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Reserve for workers compensation | ' | ' | ' | 244,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Allocation percentage of fixed fee per in-house litigation claim | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 50.00% | 50.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Allowance for uncollectible reinsurance | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0 | 0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Deposit assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 28,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Restricted cash | ' | ' | ' | 134,100,000 | 44,200,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Future funding commitments to limited partnerships | ' | ' | ' | 45,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Allowance for doubtful accounts | ' | ' | ' | 17,600,000 | 16,500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Uncollectible premiums receivable written off | ' | ' | ' | 12,100,000 | 4,800,000 | 3,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Goodwill impairment charge | ' | 214,000,000 | 214,000,000 | 271,442,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 55,500,000 | 55,500,000 | 55,540,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 214,000,000 | ' | ' | ' | ' | 185,900,000 | ' | ' | ' | ' | ' |
Impairment of intangible assets | ' | ' | ' | 21,917,000 | 0 | 0 | ' | 18,100,000 | 3,800,000 | 21,900,000 | 0 | 0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fixed assets impairment charge | 125,800,000 | ' | ' | 125,800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fixed assets,gross | ' | ' | ' | 194,000,000 | 194,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 20,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Accumulated depreciation and amortization | ' | ' | ' | 54,700,000 | 54,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Gain (loss) on investments | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 6,900,000 | -1,500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of ownership sold | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 100.00% | ' | 10.70% | 10.70% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Income (loss) before income taxes | ' | ' | ' | -952,921,000 | -61,016,000 | 69,481,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -61,300,000 | 901,400,000 | -61,000,000 | ' | ' |
Prior years unfavorable/(favorable) development | ' | ' | ' | 538,121,000 | 79,248,000 | 941,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 325,600,000 | 533,038,000 | 88,129,000 | 38,776,000 | 1,400,000 | 149,700,000 | ' | 149,700,000 | ' | 325,600,000 | ' |
Reinsurance recoverable balance | ' | ' | ' | $639,823,000 | $477,066,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $56,400,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $624,431,000 | $423,995,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Reinsurance recoverable balance, percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 6.80% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Largest agent, premiums receivable balances percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 9.70% | 7.50% | 10.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Largest agent, direct premiums written percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 9.00% | 7.00% | 7.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Reflects_the_Previously_Report
Reflects the Previously Reported and Revised Shareholders' Equity Accounts (Detail) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||||||||||||
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | ||||||||||
Common stock | $574 | ' | ' | ' | $530 | ' | ' | ' | $574 | $530 | ' | ||||||||||
Treasury stock | -39 | ' | ' | ' | -181,435 | ' | ' | ' | -39 | -181,435 | ' | ||||||||||
Paid-in-capital | 815,119 | ' | ' | ' | 780,036 | ' | ' | ' | 815,119 | 780,036 | ' | ||||||||||
Earnings (Loss) per Share: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||
Basic | ($1.60) | [1] | ($6.09) | [1],[2],[3] | ($9.03) | [1],[2] | $0.28 | [1] | ($1.38) | [1] | $0.50 | [1] | ($0.39) | [1] | $0.43 | [1] | ($17.37) | [1] | ($0.81) | [1] | $0.96 |
Diluted | ($1.60) | [1] | ($6.09) | [1],[2],[3] | ($9.03) | [1],[2] | $0.28 | [1] | ($1.38) | [1] | $0.50 | [1] | ($0.39) | [1] | $0.43 | [1] | ($17.37) | [1] | ($0.81) | [1] | $0.96 |
Weighted average common shares outstanding | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||
Basic | ' | ' | ' | ' | ' | ' | ' | ' | 54,297,000 | 42,902,000 | 45,226,000 | ||||||||||
Diluted | ' | ' | ' | ' | ' | ' | ' | ' | 54,297,000 | 42,902,000 | 45,337,000 | ||||||||||
As Previously Reported | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||
Common stock | ' | ' | ' | ' | 469 | ' | ' | ' | ' | 469 | 465 | ||||||||||
Treasury stock | ' | ' | ' | ' | -181,435 | ' | ' | ' | ' | -181,435 | -158,185 | ||||||||||
Paid-in-capital | ' | ' | ' | ' | 780,097 | ' | ' | ' | ' | 780,097 | 772,938 | ||||||||||
Earnings (Loss) per Share: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||
Basic | ' | ' | ' | ' | ' | ' | ' | ' | ' | ($0.73) | $1.48 | ||||||||||
Diluted | ' | ' | ' | ' | ' | ' | ' | ' | ' | ($0.73) | $1.48 | ||||||||||
Weighted average common shares outstanding | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||
Basic | ' | ' | ' | ' | ' | ' | ' | ' | ' | 38,795 | 40,833 | ||||||||||
Diluted | ' | ' | ' | ' | ' | ' | ' | ' | ' | 38,975 | 40,931 | ||||||||||
Revised | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||
Common stock | ' | ' | ' | ' | 530 | ' | ' | ' | ' | 530 | 526 | ||||||||||
Treasury stock | ' | ' | ' | ' | -181,435 | ' | ' | ' | ' | -181,435 | -158,185 | ||||||||||
Paid-in-capital | ' | ' | ' | ' | $780,036 | ' | ' | ' | ' | $780,036 | $772,877 | ||||||||||
Earnings (Loss) per Share: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||
Basic | ' | ' | ' | ' | ' | ' | ' | ' | ' | ($0.81) | $0.96 | ||||||||||
Diluted | ' | ' | ' | ' | ' | ' | ' | ' | ' | ($0.81) | $0.96 | ||||||||||
Weighted average common shares outstanding | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||
Basic | ' | ' | ' | ' | ' | ' | ' | ' | ' | 42,902 | 45,226 | ||||||||||
Diluted | ' | ' | ' | ' | ' | ' | ' | ' | ' | 42,902 | 45,337 | ||||||||||
[1] | Since the weighted-average shares for the quarters are calculated independently of the weighted-average shares for the year, quarterly earnings (loss) per share may not total to annual earnings per share. Earnings (loss) per share has been calculated using weighted-average shares that have been adjusted for the 1.1330 share conversion ratio resulting from the Canopius Merger Transaction. | ||||||||||||||||||||
[2] | Net Income (loss) attributable to Tower Group International, Ltd. and per share amounts have been revised from amounts previously reported to adjust for a correction in income tax expenses by $8.5 million in the second quarter of 2013 and $0.4 million in the third quarter of 2013. The Company adjusted the valuation allowance recorded on its deferred taxes. Management concluded these revisions were not material to the previously reported financial statements. | ||||||||||||||||||||
[3] | Revenues have been revised from amounts previously reported to adjust for a correction in accounting for the Southport Quota Share. In the third quarter of 2013, management should have used deposit accounting. This correction resulted in lower net earned premiums of $46.1 million and lower ceded commission revenue of $10.1 million, offset by $36.0 million higher loss and loss adjustment expense. This correction had no impact to net income (loss). This correction also resulted in an adjustment to decrease total assets and total liabilities by $23.9 million. Cash flows provided by (used in) operating activities increased and Cash flows provided by (used in) financing activities decreased by $35.1 million in the third quarter of 2013. Management concluded these revisions were not material to the previously reported financial statements. |
Canopius_Merger_Transaction_Ad
Canopius Merger Transaction - Additional Information (Detail) | 1 Months Ended | 10 Months Ended | 12 Months Ended | 12 Months Ended | 1 Months Ended | 1 Months Ended | |||||||||||||||||
Dec. 13, 2013 | Sep. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 18, 2013 | Jul. 30, 2012 | Dec. 31, 2013 | Dec. 13, 2013 | Dec. 13, 2013 | Mar. 06, 2013 | Aug. 20, 2012 | Dec. 13, 2013 | Dec. 13, 2013 | Mar. 06, 2013 | |
USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | Realized gains | Other Assets | 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 | Canopius Group Limited | Canopius Group Limited | Canopius Group Limited | Canopius Group Limited | Canopius Group Limited | |
USD ($) | USD ($) | USD ($) | USD ($) | Restricted Stock | USD ($) | USD ($) | USD ($) | USD ($) | GBP (£) | USD ($) | Condition One | Condition Two | Third Party Investors | ||||||||||
USD ($) | GBP (£) | GBP (£) | USD ($) | ||||||||||||||||||||
Business Acquisition [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Initial purchase price | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $26,485,000 | $69,700,000 | £ 42,500,000 | ' | $74,900,000 | £ 40,600,000 | £ 1,950,000 | ' |
Percentage of ownership interest | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 100.00% | 10.70% | 10.70% | ' | 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 bCommon Sharesb), (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 Canopius 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 TGIbs 2008 Long-Term Equity Compensation Plan or otherwise, automatically vested, free of any forfeiture conditions, and were 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 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of outstanding shares | ' | ' | 57,381,686 | 43,513,678 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 57,432,150 | ' | ' | ' | ' | ' | ' | ' |
Percentage of outstanding shares held | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 76.00% | 24.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Sale of investment to NKSJ Holdings, percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 100.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Initial fair value of derivative | ' | ' | ' | ' | ' | ' | 7,200,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Increase in fair value of the derivative | ' | ' | ' | ' | ' | 2,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Repayment of credit facility borrowings | 70,000,000 | ' | 70,000,000 | ' | 17,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Direct cost of the acquisition | ' | ' | 21,322,000 | 9,229,000 | 360,000 | ' | ' | 20,300,000 | 11,600,000 | 10,300,000 | 8,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unamortized reserve for risk premium | ' | ' | 19,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unencumbered liquid assets approved to be transferred | ' | ' | 30,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consolidated revenue since effective date of merger | ' | 53,500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consolidated net income (loss) since effective date of merger | ' | ($11,800,000) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Preliminary_Purchase_Considera
Preliminary Purchase Consideration (Detail) (Canopius Group Limited, USD $) | Dec. 31, 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 | $1,000 |
Fair_Values_of_Respective_Asse
Fair Values of Respective Assets Acquired and Liabilities Assumed (Detail) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 13, 2013 | Dec. 13, 2013 | Aug. 20, 2012 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | USD ($) | USD ($) | USD ($) | Canopius Group Limited | Canopius Group Limited | Canopius Group Limited | Canopius Group Limited | Canopius Group Limited |
USD ($) | USD ($) | GBP (£) | USD ($) | Unpaid Losses and Loss Adjustment Expenses | ||||
USD ($) | ||||||||
Assets | ' | ' | ' | ' | ' | ' | ' | ' |
Cash and cash equivalents | ' | ' | ' | $134,741 | ' | ' | ' | ' |
Investments | ' | ' | ' | 26,485 | 69,700 | 42,500 | 74,900 | ' |
Reinsurance recoverables | ' | ' | ' | 463,745 | ' | ' | ' | ' |
Prepaid reinsurance | ' | ' | ' | 152,431 | ' | ' | ' | ' |
Funds held by reinsured companies | ' | ' | ' | 698,819 | ' | ' | ' | ' |
Other assets | ' | ' | ' | 80,201 | ' | ' | ' | ' |
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 | $0 | $241,458 | $241,458 | $28,131 | ' | ' | ' | ' |
Pro_Forma_Financial_Informatio
Pro Forma Financial Information (Detail) (USD $) | 12 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 |
Business Acquisition, Pro Forma Information [Line Items] | ' | ' |
Revenues | $1,745,146 | $1,933,942 |
Net Income (Loss) | ($922,959) | ($19,567) |
Variable_Interest_Entities_VIE1
Variable Interest Entities ("VIEs") - Additional Information (Detail) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | ||
Variable Interest Entity [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Total revenues | $326,120 | $478,881 | [1],[2] | $460,518 | [1] | $476,483 | $475,369 | $474,891 | $506,392 | $466,223 | $1,742,002 | $1,922,875 | $1,775,790 |
Total expenses | ' | ' | ' | ' | ' | ' | ' | ' | 2,309,674 | 1,982,421 | 1,706,309 | ||
Net income (loss) | ' | ' | ' | ' | ' | ' | ' | ' | -18,736 | 2,317 | 10,995 | ||
Reciprocal Exchanges | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Variable Interest Entity [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Total revenues | ' | ' | ' | ' | ' | ' | ' | ' | 190,200 | 204,700 | ' | ||
Total expenses | ' | ' | ' | ' | ' | ' | ' | ' | 211,000 | 202,400 | ' | ||
Net income (loss) | ' | ' | ' | ' | ' | ' | ' | ' | ($20,400) | $2,300 | ' | ||
[1] | Net Income (loss) attributable to Tower Group International, Ltd. and per share amounts have been revised from amounts previously reported to adjust for a correction in income tax expenses by $8.5 million in the second quarter of 2013 and $0.4 million in the third quarter of 2013. The Company adjusted the valuation allowance recorded on its deferred taxes. Management concluded these revisions were not material to the previously reported financial statements. | ||||||||||||
[2] | Revenues have been revised from amounts previously reported to adjust for a correction in accounting for the Southport Quota Share. In the third quarter of 2013, management should have used deposit accounting. This correction resulted in lower net earned premiums of $46.1 million and lower ceded commission revenue of $10.1 million, offset by $36.0 million higher loss and loss adjustment expense. This correction had no impact to net income (loss). This correction also resulted in an adjustment to decrease total assets and total liabilities by $23.9 million. Cash flows provided by (used in) operating activities increased and Cash flows provided by (used in) financing activities decreased by $35.1 million in the third quarter of 2013. Management concluded these revisions were not material to the previously reported financial statements. |
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 $) | Dec. 31, 2013 | Dec. 31, 2012 | ||
In Thousands, unless otherwise specified | ||||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | $1,717,267 | $2,344,283 | ||
Gross Unrealized Gains | 64,123 | 159,147 | ||
Gross Unrealized Losses | -26,168 | -7,711 | ||
Investments | 1,755,222 | 2,495,719 | ||
Unrealized OTTI Losses | -664 | [1] | -6 | [1] |
Tower | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 1,465,039 | 2,075,189 | ||
Gross Unrealized Gains | 56,480 | 141,614 | ||
Gross Unrealized Losses | -21,369 | -7,210 | ||
Investments | 1,500,150 | 2,209,593 | ||
Unrealized OTTI Losses | -664 | [1] | -6 | [1] |
Reciprocal Exchanges | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 252,228 | 269,094 | ||
Gross Unrealized Gains | 7,643 | 17,533 | ||
Gross Unrealized Losses | -4,799 | -501 | ||
Investments | 255,072 | 286,126 | ||
Fixed Maturity Securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 1,613,634 | 2,190,186 | ||
Gross Unrealized Gains | 52,637 | 157,463 | ||
Gross Unrealized Losses | -23,576 | -2,938 | ||
Investments | 1,642,695 | 2,344,711 | ||
Unrealized OTTI Losses | -664 | [1] | -6 | [1] |
Fixed Maturity Securities | U.S. Treasury Securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 370,959 | 183,462 | ||
Gross Unrealized Gains | 729 | 1,500 | ||
Gross Unrealized Losses | -7,726 | -13 | ||
Investments | 363,962 | 184,949 | ||
Fixed Maturity Securities | U.S. Agency securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 110,362 | 98,502 | ||
Gross Unrealized Gains | 1,420 | 4,351 | ||
Gross Unrealized Losses | -561 | -76 | ||
Investments | 111,221 | 102,777 | ||
Fixed Maturity Securities | Municipal Bonds | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 277,382 | 633,373 | ||
Gross Unrealized Gains | 7,981 | 52,914 | ||
Gross Unrealized Losses | -6,257 | -244 | ||
Investments | 279,106 | 686,043 | ||
Fixed Maturity Securities | Corporate Securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Investments | 525,942 | 746,665 | ||
Fixed Maturity Securities | Corporate Securities | Finance | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 148,132 | 233,849 | ||
Gross Unrealized Gains | 9,797 | 21,293 | ||
Gross Unrealized Losses | -1,028 | -1,095 | ||
Investments | 156,901 | 254,047 | ||
Fixed Maturity Securities | Corporate Securities | Industrial | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 316,474 | 412,465 | ||
Gross Unrealized Gains | 8,286 | 26,556 | ||
Gross Unrealized Losses | -3,008 | -868 | ||
Investments | 321,752 | 438,153 | ||
Fixed Maturity Securities | Corporate Securities | Utilities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 47,838 | 51,698 | ||
Gross Unrealized Gains | 1,341 | 2,958 | ||
Gross Unrealized Losses | -1,890 | -191 | ||
Investments | 47,289 | 54,465 | ||
Unrealized OTTI Losses | -17 | [1] | ' | |
Fixed Maturity Securities | Commercial mortgage-backed securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 189,808 | 211,819 | ||
Gross Unrealized Gains | 16,852 | 30,375 | ||
Gross Unrealized Losses | -1,754 | -141 | ||
Investments | 204,906 | 242,053 | ||
Unrealized OTTI Losses | -634 | [1] | ' | |
Fixed Maturity Securities | Residential mortgage-backed securities, Agency backed securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 63,668 | 283,652 | ||
Gross Unrealized Gains | 891 | 12,326 | ||
Gross Unrealized Losses | -1,218 | -262 | ||
Investments | 63,341 | 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 | 30,228 | 38,615 | ||
Gross Unrealized Gains | 4,659 | 3,575 | ||
Gross Unrealized Losses | -31 | -34 | ||
Investments | 34,856 | 42,156 | ||
Unrealized OTTI Losses | -13 | [1] | -6 | [1] |
Fixed Maturity Securities | Asset-Backed Securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 58,783 | 42,751 | ||
Gross Unrealized Gains | 681 | 1,615 | ||
Gross Unrealized Losses | -103 | -14 | ||
Investments | 59,361 | 44,352 | ||
Preferred stocks | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 21,330 | 31,272 | ||
Gross Unrealized Gains | 54 | 730 | ||
Gross Unrealized Losses | -2,536 | -481 | ||
Investments | 18,848 | 31,521 | ||
Common Stocks | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 76,378 | 118,076 | ||
Gross Unrealized Gains | 11,432 | 953 | ||
Gross Unrealized Losses | -28 | -4,292 | ||
Investments | 87,782 | 114,737 | ||
Short-term investments | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 5,925 | 4,749 | ||
Gross Unrealized Gains | ' | 1 | ||
Gross Unrealized Losses | -28 | ' | ||
Investments | $5,897 | $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 $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Investment | |||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Investment, carrying values | $1,717,267,000 | $2,344,283,000 | ' |
Proceeds from sale of equity securities | 1,291,343,000 | 1,442,225,000 | 793,886,000 |
Number of securities in unrealized loss position not deemed OTTI | 511 | ' | ' |
Unrealized losses | 26,168,000 | 7,711,000 | ' |
Unrealized losses related to securities in loss position for more than 12 months | 4,480,000 | 577,000 | ' |
Future funding commitments including not limited to limited partnerships | 45,300,000 | ' | ' |
Fixed Maturity Securities | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Proceeds from sale or maturity of fixed maturity securities | 1,700,000,000 | 1,800,000,000 | 2,000,000,000 |
Number of securities in unrealized loss position not deemed OTTI | 490 | ' | ' |
Unrealized losses | 23,600,000 | ' | ' |
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 | 68 | ' | ' |
Unrealized losses related to securities in loss position for more than 12 months | 4,200,000 | ' | ' |
Common Stocks | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Number of securities in unrealized loss position not deemed OTTI | 20 | ' | ' |
Unrealized losses | 2,600,000 | ' | ' |
Equity securities | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Proceeds from sale of equity securities | 1,300,000,000 | 1,400,000,000 | 793,900,000 |
US Treasury Notes and Other Securities | Deposit to Comply with Insurance Laws | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Investment, carrying values | 398,400,000 | 351,100,000 | ' |
US Treasury Notes and Other Securities | Held by Counterparties | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Investment, carrying values | 248,900,000 | 481,500,000 | ' |
Municipal Bonds Corporate Securities And US Treasury Securities | Fixed Maturity Securities | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Unrealized losses | 19,900,000 | ' | ' |
Tower | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Investment, carrying values | 1,465,039,000 | 2,075,189,000 | ' |
Unrealized losses | 21,369,000 | 7,210,000 | ' |
Unrealized losses related to securities in loss position for more than 12 months | $2,034,000 | $478,000 | ' |
Tower | Other | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Number of securities purchased | 8 | ' | ' |
Summary_of_Major_Categories_of
Summary of Major Categories of Net Investment Income (Detail) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' |
Income | $115,761 | $133,224 | $131,721 |
Investment expenses | -6,553 | -6,059 | -5,247 |
Net investment income | 109,208 | 127,165 | 126,474 |
Consolidation, Eliminations | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' |
Net investment income | -6,679 | -7,317 | -6,455 |
Tower | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' |
Net investment income | 106,309 | 121,907 | 120,083 |
Reciprocal Exchanges | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' |
Net investment income | 9,578 | 12,575 | 12,846 |
Fixed Maturity Securities | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' |
Income | 75,731 | 96,056 | 105,533 |
Equity securities | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' |
Income | 22,912 | 28,989 | 24,576 |
Cash and cash equivalents | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' |
Income | 244 | 1,112 | 695 |
Other Invested Asset | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' |
Income | 16,138 | 6,680 | 274 |
Other | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' |
Income | $736 | $387 | $643 |
Summary_of_Gross_Realized_Gain
Summary of Gross Realized Gains, Losses and Impairment Write-Downs on Investments (Detail) (USD $) | 12 Months Ended | ||||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | ||
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ||
Net realized gains (losses) on investments | $38,463 | $35,109 | $12,639 | ||
Other-than-temporary impairment losses | -13,415 | -9,633 | -3,245 | ||
Total net realized investment gains (losses) | 25,048 | 25,476 | 9,394 | ||
Tower | ' | ' | ' | ||
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ||
Other-than-temporary impairment losses | -13,414 | -9,919 | -3,245 | ||
Total net realized investment gains (losses) | 22,894 | 12,245 | 6,980 | ||
Reciprocal Exchanges | ' | ' | ' | ||
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ||
Other-than-temporary impairment losses | -1 | 286 | ' | ||
Total net realized investment gains (losses) | 2,154 | 13,231 | 2,414 | ||
Fixed Maturity Securities | ' | ' | ' | ||
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ||
Gross realized gains | 51,598 | 59,319 | 44,550 | ||
Gross realized losses | -9,760 | -2,780 | -11,101 | ||
Net realized gains (losses) on investments | 41,838 | 56,539 | 33,449 | ||
Other-than-temporary impairment losses | -6,682 | -1,320 | -580 | ||
Equity securities | ' | ' | ' | ||
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ||
Gross realized gains | 18,004 | 13,090 | 8,328 | ||
Gross realized losses | -28,649 | -31,404 | -29,138 | ||
Net realized gains (losses) on investments | -10,645 | -18,314 | -20,810 | ||
Other-than-temporary impairment losses | -6,733 | -8,313 | -2,665 | ||
Other | ' | ' | ' | ||
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ||
Gross realized gains | 12,946 | [1] | 3,432 | [1] | ' |
Gross realized losses | -5,676 | [1] | -6,548 | [1] | ' |
Net realized gains (losses) on investments | $7,270 | ($3,116) | ' | ||
[1] | Other gross realized gains and losses consists primarily of foreign exchange and "debt and equity securities sold, not yet purchased," which are reported in Other liabilities. The Company recorded a $4.3 million gain from translation of foreign currency transactions to the functional currency. |
Summary_of_Gross_Realized_Gain1
Summary of Gross Realized Gains, Losses and Impairment Write-Downs on Investments (Parenthetical) (Detail) (USD $) | 12 Months Ended |
In Millions, unless otherwise specified | Dec. 31, 2013 |
Gain (Loss) on Investments [Line Items] | ' |
Gain from foreign currency translation | $4.30 |
Amount_of_FixedMaturity_and_Eq
Amount of Fixed-Maturity and Equity Securities that were Other-Than-Temporary Impairment (Detail) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' |
Other-than-temporary impairments | ($14,396) | ($9,919) | ($3,509) |
Portion of loss recognized in accumulated other comprehensive income (loss) | 981 | 286 | 264 |
Other-than-temporary impairment losses | -13,415 | -9,633 | -3,245 |
Tower | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' |
Other-than-temporary impairment losses | -13,414 | -9,919 | -3,245 |
Reciprocal Exchanges | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' |
Other-than-temporary impairment losses | -1 | 286 | ' |
U.S. Treasury Securities | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' |
Other-than-temporary impairments | -801 | ' | ' |
U.S. Agency securities | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' |
Other-than-temporary impairments | -572 | ' | ' |
Municipal Bonds | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' |
Other-than-temporary impairments | -367 | -113 | ' |
Corporate Securities | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' |
Other-than-temporary impairments | -4,271 | -1,029 | ' |
Commercial mortgage-backed securities | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' |
Other-than-temporary impairments | -1,176 | -430 | -219 |
Residential mortgage-backed securities | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' |
Other-than-temporary impairments | -423 | -34 | -235 |
Asset-Backed Securities | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' |
Other-than-temporary impairments | -53 | ' | -391 |
Equity securities | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' |
Other-than-temporary impairments | ($6,733) | ($8,313) | ($2,664) |
Rollforward_of_Cumulative_Amou
Rollforward of Cumulative Amount of Other-Than-Temporary Impairment for Securities Held Showing Amounts that have been Included in Earnings on Pretax Basis (Detail) (Tower, USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Tower | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' |
Balance at beginning of period | $4,492 | $12,666 | $18,075 |
Additional credit losses recognized during the period, related to securities for which no OTTI has been previously recognized | 6,252 | 1,259 | 44 |
Additional credit losses recognized during the period, related to securities for which OTTI has been previously recognized | 430 | 61 | 537 |
Reductions due to Securities sold during the period (realized) | -3,357 | -9,494 | -5,990 |
Balance at end of period | $7,817 | $4,492 | $12,666 |
Information_Regarding_Invested
Information Regarding Invested Assets that were in Unrealized Loss Position (Detail) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | $743,925 | $328,618 |
Less than 12 Months, Unrealized Losses | -21,688 | -7,134 |
12 Months or Longer, Fair Value | 53,817 | 15,110 |
12 Months or Longer, Unrealized Losses | -4,480 | -577 |
Total, Aggregate Fair Value | 797,742 | 343,728 |
Total, Unrealized Losses | -26,168 | -7,711 |
Tower | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 663,127 | 270,609 |
Less than 12 Months, Unrealized Losses | -19,335 | -6,732 |
12 Months or Longer, Fair Value | 23,096 | 13,338 |
12 Months or Longer, Unrealized Losses | -2,034 | -478 |
Total, Aggregate Fair Value | 686,223 | 283,947 |
Total, Unrealized Losses | -21,369 | -7,210 |
Reciprocal Exchanges | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 80,798 | 58,009 |
Less than 12 Months, Unrealized Losses | -2,353 | -402 |
12 Months or Longer, Fair Value | 30,721 | 1,772 |
12 Months or Longer, Unrealized Losses | -2,446 | -99 |
Total, Aggregate Fair Value | 111,519 | 59,781 |
Total, Unrealized Losses | -4,799 | -501 |
Fixed Maturity Securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 722,365 | 263,342 |
Less than 12 Months, Unrealized Losses | -19,347 | -2,687 |
12 Months or Longer, Fair Value | 47,663 | 9,386 |
12 Months or Longer, Unrealized Losses | -4,229 | -251 |
Total, Aggregate Fair Value | 770,028 | 272,728 |
Total, Unrealized Losses | -23,576 | -2,938 |
Fixed Maturity Securities | U.S. Treasury Securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 273,217 | 44,347 |
Less than 12 Months, Unrealized Losses | -7,726 | -13 |
Total, Aggregate Fair Value | 273,217 | 44,347 |
Total, Unrealized Losses | -7,726 | -13 |
Fixed Maturity Securities | U.S. Agency securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 51,808 | 22,345 |
Less than 12 Months, Unrealized Losses | -561 | -76 |
Total, Aggregate Fair Value | 51,808 | 22,345 |
Total, Unrealized Losses | -561 | -76 |
Fixed Maturity Securities | Municipal Bonds | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 109,345 | 21,532 |
Less than 12 Months, Unrealized Losses | -5,056 | -235 |
12 Months or Longer, Fair Value | 4,268 | 251 |
12 Months or Longer, Unrealized Losses | -1,201 | -9 |
Total, Aggregate Fair Value | 113,613 | 21,783 |
Total, Unrealized Losses | -6,257 | -244 |
Fixed Maturity Securities | Corporate Securities | Finance | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 37,811 | 16,853 |
Less than 12 Months, Unrealized Losses | -1,005 | -1,095 |
12 Months or Longer, Fair Value | 335 | ' |
12 Months or Longer, Unrealized Losses | -23 | ' |
Total, Aggregate Fair Value | 38,146 | 16,853 |
Total, Unrealized Losses | -1,028 | -1,095 |
Fixed Maturity Securities | Corporate Securities | Industrial | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 124,869 | 53,576 |
Less than 12 Months, Unrealized Losses | -2,550 | -667 |
12 Months or Longer, Fair Value | 10,023 | 4,188 |
12 Months or Longer, Unrealized Losses | -458 | -201 |
Total, Aggregate Fair Value | 134,892 | 57,764 |
Total, Unrealized Losses | -3,008 | -868 |
Fixed Maturity Securities | Corporate Securities | Utilities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 27,698 | 20,143 |
Less than 12 Months, Unrealized Losses | -805 | -191 |
12 Months or Longer, Fair Value | 7,292 | 7 |
12 Months or Longer, Unrealized Losses | -1,085 | ' |
Total, Aggregate Fair Value | 34,990 | 20,150 |
Total, Unrealized Losses | -1,890 | -191 |
Fixed Maturity Securities | Commercial mortgage-backed securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 26,469 | 23,223 |
Less than 12 Months, Unrealized Losses | -597 | -141 |
12 Months or Longer, Fair Value | 20,397 | 95 |
12 Months or Longer, Unrealized Losses | -1,157 | ' |
Total, Aggregate Fair Value | 46,866 | 23,318 |
Total, Unrealized Losses | -1,754 | -141 |
Fixed Maturity Securities | Residential mortgage-backed securities, Agency backed securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 37,660 | 59,009 |
Less than 12 Months, Unrealized Losses | -925 | -261 |
12 Months or Longer, Fair Value | 5,166 | 25 |
12 Months or Longer, Unrealized Losses | -293 | -1 |
Total, Aggregate Fair Value | 42,826 | 59,034 |
Total, Unrealized Losses | -1,218 | -262 |
Fixed Maturity Securities | Residential mortgage-backed securities, Non-agency backed securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 1,027 | 815 |
Less than 12 Months, Unrealized Losses | -19 | -6 |
12 Months or Longer, Fair Value | 182 | 588 |
12 Months or Longer, Unrealized Losses | -12 | -28 |
Total, Aggregate Fair Value | 1,209 | 1,403 |
Total, Unrealized Losses | -31 | -34 |
Fixed Maturity Securities | Asset-Backed Securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 32,461 | 1,499 |
Less than 12 Months, Unrealized Losses | -103 | -2 |
12 Months or Longer, Fair Value | ' | 4,232 |
12 Months or Longer, Unrealized Losses | ' | -12 |
Total, Aggregate Fair Value | 32,461 | 5,731 |
Total, Unrealized Losses | -103 | -14 |
Preferred stocks | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 10,538 | 9,716 |
Less than 12 Months, Unrealized Losses | -2,285 | -155 |
12 Months or Longer, Fair Value | 6,154 | 5,724 |
12 Months or Longer, Unrealized Losses | -251 | -326 |
Total, Aggregate Fair Value | 16,692 | 15,440 |
Total, Unrealized Losses | -2,536 | -481 |
Common Stocks | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 7,125 | 55,560 |
Less than 12 Months, Unrealized Losses | -28 | -4,292 |
Total, Aggregate Fair Value | 7,125 | 55,560 |
Total, Unrealized Losses | -28 | -4,292 |
Short-term investments | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 3,897 | ' |
Less than 12 Months, Unrealized Losses | -28 | ' |
Total, Aggregate Fair Value | 3,897 | ' |
Total, Unrealized Losses | ($28) | ' |
Composition_of_FixedMaturity_P
Composition of Fixed-Maturity Portfolio by Remaining Time to Maturity (Detail) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Less than one year, amortized cost | $41,171 | $32,760 |
One to five years, amortized cost | 546,857 | 535,515 |
Five to ten years, amortized cost | 541,073 | 641,036 |
More than 10 years, amortized cost | 142,046 | 404,038 |
Mortgage and asset-backed securities, amortized cost | 342,487 | 576,837 |
Total at end of period, amortized cost | 1,613,634 | 2,190,186 |
Less than one year, fair value | 41,748 | 33,329 |
One to five years, fair value | 555,222 | 557,798 |
Five to ten years, fair value | 540,766 | 687,720 |
More than 10 years, fair value | 142,494 | 441,587 |
Mortgage and asset-backed securities, fair value | 362,465 | 624,277 |
Total at end of period, fair value | 1,642,695 | 2,344,711 |
Tower | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Less than one year, amortized cost | 33,305 | 30,082 |
One to five years, amortized cost | 507,388 | 489,939 |
Five to ten years, amortized cost | 459,070 | 564,556 |
More than 10 years, amortized cost | 100,977 | 346,410 |
Mortgage and asset-backed securities, amortized cost | 263,417 | 495,249 |
Total at end of period, amortized cost | 1,364,157 | 1,926,236 |
Less than one year, fair value | 33,727 | 30,614 |
One to five years, fair value | 513,841 | 510,523 |
Five to ten years, fair value | 459,251 | 607,711 |
More than 10 years, fair value | 102,801 | 379,045 |
Mortgage and asset-backed securities, fair value | 280,526 | 536,255 |
Total at end of period, fair value | 1,390,146 | 2,064,148 |
Reciprocal Exchanges | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Less than one year, amortized cost | 7,866 | 2,678 |
One to five years, amortized cost | 39,469 | 45,576 |
Five to ten years, amortized cost | 82,003 | 76,480 |
More than 10 years, amortized cost | 41,069 | 57,628 |
Mortgage and asset-backed securities, amortized cost | 79,070 | 81,588 |
Total at end of period, amortized cost | 249,477 | 263,950 |
Less than one year, fair value | 8,021 | 2,715 |
One to five years, fair value | 41,381 | 47,275 |
Five to ten years, fair value | 81,515 | 80,009 |
More than 10 years, fair value | 39,693 | 62,542 |
Mortgage and asset-backed securities, fair value | 81,939 | 88,022 |
Total at end of period, fair value | $252,549 | $280,563 |
Composition_of_Other_Invested_
Composition of Other Invested Assets (Detail) (Tower, USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Schedule of Investments [Line Items] | ' | ' |
Other invested assets | $96,155 | $57,786 |
Limited partnerships, equity method | ' | ' |
Schedule of Investments [Line Items] | ' | ' |
Other invested assets | 46,521 | 23,864 |
Real estate, amortized cost | ' | ' |
Schedule of Investments [Line Items] | ' | ' |
Other invested assets | 6,054 | 7,422 |
Securities reported under the fair value option | ' | ' |
Schedule of Investments [Line Items] | ' | ' |
Other invested assets | 43,580 | 25,000 |
Other | ' | ' |
Schedule of Investments [Line Items] | ' | ' |
Other invested assets | ' | $1,500 |
Financial_Instruments_at_Fair_
Financial Instruments at Fair Value among Levels (Detail) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | ||
In Thousands, unless otherwise specified | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | $1,755,222 | $2,495,719 | ||
Other invested assets | 43,580 | [1] | 25,000 | [2] |
Additional Payment derivative | 9,343 | ' | ||
Other liabilities | ' | ' | ||
Interest rate swap contracts | -6,066 | -9,016 | ||
Debt and equity securities sold, not yet purchased | -11,099 | -17,101 | ||
Total investments and Other liabilities | 1,790,980 | 2,494,602 | ||
Tower | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 1,500,150 | 2,209,593 | ||
Total investments and Other liabilities | 1,535,908 | 2,208,475 | ||
Reciprocal Exchanges | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 255,072 | 286,126 | ||
Total investments and Other liabilities | 255,072 | 286,127 | ||
Level 1 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 106,630 | 146,258 | ||
Other liabilities | ' | ' | ||
Total investments and Other liabilities | 106,630 | 146,258 | ||
Level 1 | Tower | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Total investments and Other liabilities | 104,107 | 140,695 | ||
Level 1 | Reciprocal Exchanges | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Total investments and Other liabilities | 2,523 | 5,563 | ||
Level 2 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 1,645,166 | 2,349,461 | ||
Other liabilities | ' | ' | ||
Interest rate swap contracts | -6,066 | -9,016 | ||
Debt and equity securities sold, not yet purchased | -11,099 | -17,101 | ||
Total investments and Other liabilities | 1,628,001 | 2,323,344 | ||
Level 2 | Tower | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Total investments and Other liabilities | 1,375,452 | 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 | 252,549 | 280,564 | ||
Level 3 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 3,426 | ' | ||
Other invested assets | 43,580 | [1] | 25,000 | [2] |
Additional Payment derivative | 9,343 | ' | ||
Other liabilities | ' | ' | ||
Total investments and Other liabilities | 56,349 | 25,000 | ||
Level 3 | Tower | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Total investments and Other liabilities | 56,349 | 25,000 | ||
Fixed Maturity Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 1,642,695 | 2,344,711 | ||
Fixed Maturity Securities | U.S. Treasury Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 363,962 | 184,949 | ||
Fixed Maturity Securities | U.S. Agency securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 111,221 | 102,777 | ||
Fixed Maturity Securities | Municipal Bonds | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 279,106 | 686,043 | ||
Fixed Maturity Securities | Corporate Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 525,942 | 746,665 | ||
Fixed Maturity Securities | Commercial mortgage-backed securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 204,906 | 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 | 63,341 | 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 | 34,856 | 42,156 | ||
Fixed Maturity Securities | Asset-Backed Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 59,361 | 44,352 | ||
Fixed Maturity Securities | Level 2 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 1,639,269 | 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 | 363,962 | 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 | 111,221 | 102,777 | ||
Fixed Maturity Securities | Level 2 | Municipal Bonds | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 279,106 | 686,043 | ||
Fixed Maturity Securities | Level 2 | Corporate Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 522,516 | 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 | 204,906 | 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 | 63,341 | 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 | 34,856 | 42,156 | ||
Fixed Maturity Securities | Level 2 | Asset-Backed Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 59,361 | 44,352 | ||
Fixed Maturity Securities | Level 3 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 3,426 | ' | ||
Fixed Maturity Securities | Level 3 | Corporate Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 3,426 | ' | ||
Equity securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 106,630 | 146,258 | ||
Equity securities | Level 1 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 106,630 | 146,258 | ||
Short-term investments | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 5,897 | 4,750 | ||
Short-term investments | Level 2 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | $5,897 | $4,750 | ||
[1] | $43.6 million of the $96.2 million Other invested assets reported on the consolidated balance sheet at December 31, 2013 is reported at fair value. The remaining $52.6 million of Other invested assets is reported under the equity method of accounting. | |||
[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 $) | Dec. 31, 2013 | Dec. 31, 2012 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Other invested assets, fair value | $43,580,000 | [1] | $25,000,000 | [2] |
Other invested assets, amortized cost | 52,600,000 | 32,800,000 | ||
Tower | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Other invested asset | $96,155,000 | $57,786,000 | ||
[1] | $43.6 million of the $96.2 million Other invested assets reported on the consolidated balance sheet at December 31, 2013 is reported at fair value. The remaining $52.6 million of Other invested assets is reported under the equity method of accounting. | |||
[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 $) | 12 Months Ended | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | |
Investment | Private Convertible Bond | Private Convertible Bond | Tower | Tower | ||
Other | Other | |||||
Investment | Level 3 | |||||
Investment | ||||||
Fair Value [Line Items] | ' | ' | ' | ' | ' | ' |
Gross transfers between Level 2 and Level 3 | 1 | ' | ' | ' | ' | ' |
Gross transfers out of Level 3 | ' | $0 | ' | ' | ' | ' |
Gross transfers out of Level 1 into Level 2 | 0 | 0 | ' | ' | ' | ' |
Gross transfers out of Level 2 into Level 1 | 0 | 0 | ' | ' | ' | ' |
Net realized gains from fair value of debt and equity securities sold, not yet purchased | 600,000 | ' | ' | ' | ' | ' |
Number of securities purchased | ' | ' | ' | ' | 8 | 7 |
Fair value of convertible bonds transferred from level 2 to level 3 | ' | ' | ' | 3,400,000 | ' | ' |
Other than temporary impairment loss realized | ' | ' | $3,600,000 | ' | ' | ' |
Summary_of_Changes_in_Level_Th
Summary of Changes in Level Three Assets Measured at Fair Value (Detail) (USD $) | 12 Months Ended | |||||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ' | ' | ' | |||
Beginning balance | $25,000 | [1] | $25,000 | [1] | $2,058 | [1] |
Total gains (losses)-realized / unrealized included in net income | -670 | ' | -1,067 | [1] | ||
Total gains (losses)-realized / unrealized included in other comprehensive income (loss) | ' | ' | [1] | ' | [1] | |
Purchases | 28,593 | ' | 25,000 | [1] | ||
Issuances | ' | ' | [1] | ' | [1] | |
Settlements | ' | ' | [1] | ' | [1] | |
Net transfers into (out of) Level 3 | 3,426 | ' | -991 | [1] | ||
Ending balance | 56,349 | 25,000 | [1] | 25,000 | [1] | |
Other Invested Asset | ' | ' | ' | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ' | ' | ' | |||
Beginning balance | 25,000 | ' | ' | |||
Total gains (losses)-realized / unrealized included in net income | -670 | ' | ' | |||
Total gains (losses)-realized / unrealized included in other comprehensive income (loss) | ' | ' | ' | |||
Purchases | 19,250 | ' | ' | |||
Issuances | ' | ' | ' | |||
Settlements | ' | ' | ' | |||
Ending balance | 43,580 | ' | ' | |||
Fixed Maturity Securities | ' | ' | ' | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ' | ' | ' | |||
Total gains (losses)-realized / unrealized included in other comprehensive income (loss) | ' | [2] | ' | ' | ||
Issuances | ' | [2] | ' | ' | ||
Settlements | ' | [2] | ' | ' | ||
Net transfers into (out of) Level 3 | 3,426 | [2] | ' | ' | ||
Ending balance | 3,426 | [2] | ' | ' | ||
Additional Payment Derivatives | ' | ' | ' | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ' | ' | ' | |||
Total gains (losses)-realized / unrealized included in net income | 2,081 | ' | ' | |||
Total gains (losses)-realized / unrealized included in other comprehensive income (loss) | ' | ' | ' | |||
Purchases | 7,262 | ' | ' | |||
Issuances | ' | ' | ' | |||
Settlements | ' | ' | ' | |||
Ending balance | $9,343 | ' | ' | |||
[1] | All activity for years ended December 31, 2012 and 2011 is comprised of other invested assets | |||||
[2] | Comprised of corporate and other bonds |
Goodwill_Intangible_and_Fixed_2
Goodwill, Intangible and Fixed Assets Impairments - Additional Information (Detail) (USD $) | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | 9 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | ||||||||||||
Mar. 13, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2013 | Jun. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Sep. 30, 2013 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | |
Segment | Minimum | Maximum | Personal Insurance | Personal Insurance | Personal Insurance | Personal Insurance | Personal Insurance | Personal Insurance | Marine Energy Acquisition | Marine Energy Acquisition | Customer relationships | Customer relationships | Customer relationships | Customer relationships | Customer relationships | Management Contract | |||||||
Intangible Assets And Goodwill [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Goodwill from Merger Transaction | $28,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $1,853,000 | ' | ' | ' | ' | ' | ' |
Number of business segments | ' | ' | ' | ' | 3 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Goodwill impairment charge | ' | ' | 214,000,000 | 214,000,000 | 271,442,000 | ' | ' | ' | ' | 55,500,000 | 55,500,000 | 55,540,000 | ' | ' | ' | 1,900,000 | ' | ' | ' | ' | ' | ' | ' |
Goodwill | ' | ' | ' | ' | 0 | 241,458,000 | 241,458,000 | ' | ' | ' | ' | ' | 55,500,000 | 55,540,000 | 55,540,000 | 1,900,000 | ' | ' | ' | ' | ' | ' | ' |
Impairment of intangible assets | ' | ' | ' | ' | 21,917,000 | 0 | 0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 18,100,000 | 3,800,000 | 21,900,000 | 0 | 0 | ' |
Intangible assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 4,900,000 | ' | ' | 54,600,000 |
Amortization expense related to intangibles | ' | ' | ' | ' | 4,915,000 | 8,152,000 | 8,900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 4,359,000 | 7,327,000 | ' | ' |
Gross fixed assets and capital leases | ' | ' | ' | ' | 194,000,000 | 194,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Accumulated depreciation | ' | ' | ' | ' | 54,700,000 | 54,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net fixed assets and capital leases | ' | ' | ' | ' | ' | 139,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Liquidation value analysis range, description | ' | '(ii) performing an orderly liquidation value analysis ranging from 0%-15% for furniture, leasehold improvements and computer equipment, and concluded the fixed assets were impaired as of September 30, 2013. | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fixed assets impairment charge | ' | 125,800,000 | ' | ' | 125,800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Other assets | ' | ' | ' | ' | $19,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage Of Liquidation Preference on fixed assets | ' | ' | ' | ' | ' | ' | ' | 0.00% | 15.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Summary_of_Goodwill_by_Reporti
Summary of Goodwill by Reporting Units (Detail) (USD $) | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | 12 Months Ended | 9 Months Ended | 12 Months Ended | 12 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||
In Thousands, unless otherwise specified | Mar. 13, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2011 | Dec. 31, 2013 | Sep. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2011 |
Canopius Group Limited | Marine Energy Acquisition | Marine Energy Acquisition | Commercial Insurance | Commercial Insurance | Commercial Insurance | Commercial Insurance | Personal Insurance | Personal Insurance | Personal Insurance | Personal Insurance | ||||||
Canopius Group Limited | Marine Energy Acquisition | |||||||||||||||
Goodwill [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Opening balance | ' | ' | $241,458 | $241,458 | $241,458 | ' | ' | ' | $185,918 | $185,918 | ' | ' | $55,500 | $55,540 | $55,540 | $55,540 |
Goodwill acquired | 28,100 | ' | ' | ' | ' | 28,131 | ' | 1,853 | ' | ' | 28,131 | 1,853 | ' | ' | ' | ' |
Goodwill impairment | ' | -214,000 | -214,000 | -271,442 | ' | ' | -1,900 | ' | -215,902 | ' | ' | ' | -55,500 | -55,500 | -55,540 | ' |
Closing balance | ' | ' | ' | $0 | $241,458 | $28,131 | $1,900 | ' | ' | $185,918 | ' | ' | ' | ' | ' | $55,540 |
Components_of_Intangible_Asset
Components of Intangible Assets and their Useful Lives, Accumulated Amortization, and Net Carrying Value (Detail) (USD $) | 12 Months Ended | |||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Gross Carrying Amount | $136,783 | $136,783 | ' | |
Accumulated Amortization | -56,847 | -30,015 | ' | |
Net Carrying Amount | 79,936 | 106,768 | 114,920 | |
Tower | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Gross Carrying Amount | 128,283 | 128,283 | ' | |
Accumulated Amortization | -54,684 | -28,369 | ' | |
Net Carrying Amount | 73,599 | 99,914 | ' | |
Reciprocal Exchanges | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Net Carrying Amount | 6,337 | 6,854 | [1] | ' |
Reciprocal Exchanges | Intangible Assets | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Gross Carrying Amount | 8,500 | 8,500 | ' | |
Accumulated Amortization | -2,163 | -1,646 | ' | |
Net Carrying Amount | 6,337 | 6,854 | ' | |
Insurance licenses | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Gross Carrying Amount | 19,003 | 19,003 | ' | |
Net Carrying Amount | 19,003 | 19,003 | 19,003 | |
Intangible asset, useful life | '0 years | ' | ' | |
Insurance licenses | Tower | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Net Carrying Amount | 16,003 | 16,003 | ' | |
Insurance licenses | Reciprocal Exchanges | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Net Carrying Amount | 3,000 | 3,000 | [1] | ' |
Management Contract | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Intangible asset, useful life | '0 years | ' | ' | |
Customer relationships | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Gross Carrying Amount | 57,890 | 57,890 | ' | |
Accumulated Amortization | -53,030 | -26,754 | ' | |
Net Carrying Amount | 4,860 | 31,136 | 38,463 | |
Customer relationships | Tower | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Net Carrying Amount | 2,608 | 28,600 | ' | |
Customer relationships | Reciprocal Exchanges | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Net Carrying Amount | 2,252 | 2,536 | [1] | ' |
Customer relationships | Minimum | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Intangible asset, useful life | '10 years | ' | ' | |
Customer relationships | Maximum | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Intangible asset, useful life | '25 years | ' | ' | |
Trademarks | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Gross Carrying Amount | 5,290 | 5,290 | ' | |
Accumulated Amortization | -3,817 | -3,261 | ' | |
Net Carrying Amount | 1,473 | 2,029 | 2,854 | |
Intangible asset, useful life | '5 years | ' | ' | |
Trademarks | Tower | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Net Carrying Amount | 388 | 711 | ' | |
Trademarks | Reciprocal Exchanges | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Net Carrying Amount | 1,085 | 1,318 | [1] | ' |
Management contracts | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Gross Carrying Amount | 54,600 | 54,600 | ' | |
Net Carrying Amount | 54,600 | 54,600 | 54,600 | |
Management contracts | Tower | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Net Carrying Amount | $54,600 | $54,600 | ' | |
[1] | In 2012, Tower transferred a licensed insurance subsidiary shell to the Reciprocal Exchanges, as discussed in Note 2-Accounting Policies and Procedures. This resulted in classifying $2.6 million insurance licenses out of Tower and into the Reciprocal Exchange. |
Activity_in_Components_of_Inta
Activity in Components of Intangible Assets Consisted of Intangible Assets Acquired from Business Combinations and Amortization Expense (Detail) (USD $) | 12 Months Ended | |||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Beginning balance, intangible assets | $106,768 | $114,920 | ' | |
Additions | ' | ' | ' | |
Amortization | -4,915 | -8,152 | -8,900 | |
Ending balance, intangible assets | 79,936 | 106,768 | 114,920 | |
Impairment | -21,917 | ' | ' | |
Tower | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Ending balance, intangible assets | 73,599 | 99,914 | ' | |
Reciprocal Exchanges | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Ending balance, intangible assets | 6,337 | 6,854 | [1] | ' |
Insurance licenses | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Beginning balance, intangible assets | 19,003 | 19,003 | ' | |
Additions | ' | ' | ' | |
Ending balance, intangible assets | 19,003 | 19,003 | ' | |
Insurance licenses | Tower | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Ending balance, intangible assets | 16,003 | 16,003 | ' | |
Insurance licenses | Reciprocal Exchanges | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Ending balance, intangible assets | 3,000 | 3,000 | [1] | ' |
Management contracts | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Beginning balance, intangible assets | 54,600 | 54,600 | ' | |
Additions | ' | ' | ' | |
Ending balance, intangible assets | 54,600 | 54,600 | ' | |
Management contracts | Tower | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Ending balance, intangible assets | 54,600 | 54,600 | ' | |
Customer relationships | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Beginning balance, intangible assets | 31,136 | 38,463 | ' | |
Additions | ' | ' | ' | |
Amortization | -4,359 | -7,327 | ' | |
Ending balance, intangible assets | 4,860 | 31,136 | ' | |
Impairment | -21,917 | ' | ' | |
Customer relationships | Tower | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Ending balance, intangible assets | 2,608 | 28,600 | ' | |
Customer relationships | Reciprocal Exchanges | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Ending balance, intangible assets | 2,252 | 2,536 | [1] | ' |
Trademarks | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Beginning balance, intangible assets | 2,029 | 2,854 | ' | |
Additions | ' | ' | ' | |
Amortization | -556 | -825 | ' | |
Ending balance, intangible assets | 1,473 | 2,029 | ' | |
Trademarks | Tower | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Ending balance, intangible assets | 388 | 711 | ' | |
Trademarks | Reciprocal Exchanges | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Ending balance, intangible assets | $1,085 | $1,318 | [1] | ' |
[1] | In 2012, Tower transferred a licensed insurance subsidiary shell to the Reciprocal Exchanges, as discussed in Note 2-Accounting Policies and Procedures. This resulted in classifying $2.6 million insurance licenses out of Tower and into the Reciprocal Exchange. |
Activity_in_Components_of_Inta1
Activity in Components of Intangible Assets Consisted of Intangible Assets Acquired from Business Combinations and Amortization Expense (Parenthetical) (Detail) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
In Thousands, unless otherwise specified | ||||
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Intangible assets | $79,936 | $106,768 | $114,920 | |
Insurance licenses | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Intangible assets | 19,003 | 19,003 | 19,003 | |
Reciprocal Exchanges | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Intangible assets | 6,337 | 6,854 | [1] | ' |
Reciprocal Exchanges | Insurance licenses | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Intangible assets | 3,000 | 3,000 | [1] | ' |
Reciprocal Exchanges | Insurance licenses | Transferred from Tower to Reciprocal Exchange | ' | ' | ' | |
Intangible Assets by Major Class [Line Items] | ' | ' | ' | |
Intangible assets | ' | $2,600 | ' | |
[1] | In 2012, Tower transferred a licensed insurance subsidiary shell to the Reciprocal Exchanges, as discussed in Note 2-Accounting Policies and Procedures. This resulted in classifying $2.6 million insurance licenses out of Tower and into the Reciprocal Exchange. |
Estimated_Amortization_Expense
Estimated Amortization Expense for Each of Next Five Years (Detail) (USD $) | Dec. 31, 2013 |
In Thousands, unless otherwise specified | |
Expected Amortization Expense [Line Items] | ' |
2014 | $1,010 |
2015 | 708 |
2016 | 545 |
2017 | 482 |
2018 | 431 |
Tower | ' |
Expected Amortization Expense [Line Items] | ' |
2014 | 544 |
2015 | 303 |
2016 | 191 |
2017 | 171 |
2018 | 155 |
Reciprocal Exchanges | ' |
Expected Amortization Expense [Line Items] | ' |
2014 | 466 |
2015 | 405 |
2016 | 354 |
2017 | 311 |
2018 | $276 |
Acquisition_Costs_Incurred_and
Acquisition Costs Incurred and Policy-Related Ceding Commission Revenue Deferred and Amortized to Income on Property and Casualty Business (Detail) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Line Items] | ' | ' | ' |
Deferred acquisition costs, Beginning Balance | $181,198 | $168,858 | $164,123 |
Cost incurred and deferred: | ' | ' | ' |
Commissions and brokerage | 299,412 | 329,967 | 311,536 |
Other underwriting and acquisition costs | 66,473 | 75,705 | 70,312 |
Ceding commission revenue | -120,627 | -40,930 | -31,528 |
Net costs incurred and deferred | 245,258 | 364,742 | 350,320 |
Amortization | -331,360 | -352,402 | -345,585 |
Deferred acquisition costs, Ending Balance | 95,096 | 181,198 | 168,858 |
Tower | ' | ' | ' |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Line Items] | ' | ' | ' |
Deferred acquisition costs, Beginning Balance | 169,834 | 156,992 | 145,917 |
Cost incurred and deferred: | ' | ' | ' |
Commissions and brokerage | 266,987 | 298,701 | 279,699 |
Other underwriting and acquisition costs | 58,846 | 68,238 | 64,416 |
Ceding commission revenue | -101,640 | -25,052 | -20,082 |
Net costs incurred and deferred | 224,193 | 341,887 | 324,033 |
Amortization | -308,542 | -329,045 | -312,958 |
Deferred acquisition costs, Ending Balance | 85,485 | 169,834 | 156,992 |
Reciprocal Exchanges | ' | ' | ' |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Line Items] | ' | ' | ' |
Deferred acquisition costs, Beginning Balance | 11,364 | 11,866 | 18,206 |
Cost incurred and deferred: | ' | ' | ' |
Commissions and brokerage | 32,425 | 31,266 | 31,837 |
Other underwriting and acquisition costs | 7,627 | 7,467 | 5,896 |
Ceding commission revenue | -18,987 | -15,878 | -11,446 |
Net costs incurred and deferred | 21,065 | 22,855 | 26,287 |
Amortization | -22,818 | -23,357 | -32,627 |
Deferred acquisition costs, Ending Balance | $9,611 | $11,364 | $11,866 |
Reinsurance_Additional_Informa
Reinsurance - Additional Information (Detail) (USD $) | 1 Months Ended | 12 Months Ended | 1 Months Ended | 1 Months Ended | 1 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nov. 22, 2013 | Jul. 02, 2013 | Jul. 02, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Sep. 30, 2013 | Dec. 31, 2010 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Nov. 01, 2013 | Dec. 31, 2013 | Nov. 01, 2013 | Nov. 01, 2013 | Jul. 02, 2013 | Jul. 02, 2013 | Jul. 02, 2013 | Dec. 31, 2013 | Feb. 14, 2014 | Jan. 03, 2014 | Jan. 03, 2014 | Jul. 02, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Jul. 02, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Jul. 02, 2013 | Jul. 02, 2013 | Jul. 02, 2013 | Jul. 02, 2012 | Dec. 31, 2011 | Jul. 02, 2012 | Dec. 31, 2011 | Jul. 02, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 | Dec. 31, 2013 | |
Agreement | Reciprocal Exchanges | Reciprocal Exchanges | Maximum | Minimum | Reinsurers Rated A- or Higher | Reinsurers Rated A- or Higher | Stockholders' Equity | Stockholders' Equity | Homeowners | Homeowners | Homeowners | Homeowners | Arch | Hannover | Southport Re | Southport Re | Subsequent Event | Subsequent Event | Subsequent Event | Next $925 million of loss above the $75 million | liability quota share reinsurance agreements written in 2010 and prior years | liability quota share reinsurance agreements written in 2010 and prior years | Other tower companies | Property Risks | Property Risks | Property Risks | Property Risks | Property Risks | Property Risks | Workers' Compensation | Workers' Compensation | Workers' Compensation | Workers' Compensation | Workers' Compensation | Workers' Compensation | Workers' Compensation | Umbrella Liability | Umbrella Liability | Umbrella Liability | Umbrella Liability | Umbrella Liability | Umbrella Liability | Pcs Events Risk | Auto Liability, Other Liability and Commercial Package Liability | Commercial Package Property | Next 75 million of loss above 75 million | Next 75 million of loss above 75 million | Next 75 million of loss over 150 million | Next 75 million of loss over 150 million | Next 700 million of loss in excess of 225 million | $150 million in excess of $10 million retention | $150 million in excess of $10 million retention | $150 million in excess of $10 million retention | $170 million in excess of $10 million | ||||||||
Maximum | Minimum | Southport Re | Subsidiary of AmTrust and a subsidiary of NGHC | Subsidiary of AmTrust and a subsidiary of NGHC | Homeowners | Maximum | Maximum | Maximum | Maximum | Maximum | Maximum | Hannover | Maximum | Maximum | Maximum | Hannover | Hannover | Hannover | Reciprocal Exchanges | Reciprocal Exchanges | Reciprocal Exchanges | Reciprocal Exchanges | ||||||||||||||||||||||||||||||||||||||||
Agreement | Maximum | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Loss exposure limits | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $5,000,000 | $5,000,000 | $5,000,000 | ' | ' | ' | $3,500,000 | $3,500,000 | $2,500,000 | ' | ' | ' | ' | $2,500,000 | $2,500,000 | $2,500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Reinsurance coverage capacity | ' | ' | ' | ' | 3,900,000 | 3,600,000 | ' | 2,700,000 | ' | ' | 0.04 | 0.025 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 30,000,000 | 30,000,000 | 30,000,000 | ' | ' | ' | 60,000,000 | 60,000,000 | 50,000,000 | ' | ' | ' | ' | 5,000,000 | 5,000,000 | 5,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Clash coverage insurance limit | ' | ' | ' | 5,000,000 | 5,000,000 | 5,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Quota share reinsurance cede, percentage | ' | ' | ' | ' | 35.50% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 40.00% | 135.00% | 35.00% | 17.50% | 14.00% | 30.00% | ' | ' | 100.00% | ' | ' | ' | ' | 30.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 40.00% |
Quota share reinsurance cedes, coverage per occurrence cap | ' | ' | ' | ' | 288,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 250,000,000 | ' | ' | 25,000,000 | ' | 1,500,000 | ' | ' | ' | ' | ' | ' | ' | 230,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,000,000 | ' | ' | ' | ' | ' | ' | 10,000,000 | 5,000,000 | 5,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Quota share reinsurance ceded coverage, expiration | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 31-May-14 | ' | ' | ' | 31-Dec-13 | 31-Dec-13 | 14-Feb-14 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Reinsurance policy, loss ratio cap | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 120.00% | 110.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Deposit assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 28,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Gain from termination of agreement | 21,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 6,400,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Property catastrophe program retention, per catastrophe | ' | 75,000,000 | 75,000,000 | ' | ' | 75,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 10,000,000 | 10,000,000 | 10,000,000 | 10,000,000 |
Property catastrophe program coverage per catastrophe, percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 100.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 100.00% | 60.00% | 70.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% |
Number of reinsurers | ' | ' | ' | ' | ' | ' | 3 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Reinsurance recoverables, percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 53.00% | 91.70% | 364.20% | 8.60% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 60.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Ceding commission on cut through reinsurance agreements percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 20.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Funds held under reinsurance agreements | ' | ' | ' | 222,159,000 | 98,581,000 | ' | ' | ' | 22,000 | 500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 222,100,000 | 98,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Reinsurance recoverables and ceded unearned premiums | ' | ' | ' | 639,823,000 | 477,066,000 | ' | ' | ' | 15,392,000 | 53,071,000 | ' | ' | 440,400,000 | 495,900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Collateralized reinsuarnce balance | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 96.10% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Collateral held to secure performance of reinsurers | ' | ' | ' | 540,700,000 | 189,600,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Decrease in estimated ceding commission income relating to prior years recorded | ' | ' | ' | $9,800,000 | $4,200,000 | $100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Premiums_Written_Ceded_and_Ear
Premiums Written, Ceded and Earned (Detail) (USD $) | 3 Months Ended | 12 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items] | ' | ' | ' | ' |
Premiums written | ' | $1,606,249 | $1,755,157 | $1,692,282 |
Change in unearned premiums | ' | 111,252 | 3,969 | -8,262 |
Premiums earned, Direct | ' | 1,717,501 | 1,759,126 | 1,684,020 |
Premiums written, Assumed | ' | 121,411 | 215,915 | 118,642 |
Change in unearned premiums, Assumed | ' | 187,520 | -31,370 | -12,890 |
Premiums earned, Assumed | ' | 308,931 | 184,545 | 105,752 |
Premiums written, Ceded | ' | 495,045 | 231,691 | 172,333 |
Change in unearned premiums, Ceded | ' | 18,472 | -9,884 | 23,589 |
Premiums earned, Ceded | ' | 513,517 | 221,807 | 195,922 |
Premiums written, Net | ' | 1,232,615 | 1,739,381 | 1,638,591 |
Change in unearned premiums, Net | ' | 280,300 | -17,517 | -44,741 |
Premiums earned, Net | $46,100 | $1,512,915 | $1,721,864 | $1,593,850 |
Components_of_Liability_for_Lo
Components of Liability for Loss and Loss Adjustment Expenses and Related Reinsurance Recoverables (Detail) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 |
In Thousands, unless otherwise specified | ||||
Gross Liability | ' | ' | ' | ' |
Case-basis reserves | $999,949 | $976,876 | ' | ' |
IBNR reserves | 1,081,336 | 918,803 | ' | ' |
Total | 2,081,285 | 1,895,679 | 1,632,113 | 1,610,421 |
Reinsurance recoverable | ' | ' | ' | ' |
Case-basis reserves | 296,025 | 90,071 | ' | ' |
IBNR reserves | 274,835 | 369,386 | ' | ' |
Recoverable on paid losses | 68,963 | 17,609 | ' | ' |
Total | 639,823 | 477,066 | ' | ' |
Unpaid Losses and Loss Adjustment Expenses | ' | ' | ' | ' |
Gross Liability | ' | ' | ' | ' |
Total | 2,081,285 | ' | ' | ' |
Tower | ' | ' | ' | ' |
Gross Liability | ' | ' | ' | ' |
Case-basis reserves | 936,751 | 913,411 | ' | ' |
IBNR reserves | 1,037,220 | 846,477 | ' | ' |
Total | ' | 1,759,888 | 1,495,839 | 1,439,106 |
Reinsurance recoverable | ' | ' | ' | ' |
Case-basis reserves | 290,080 | 79,911 | ' | ' |
IBNR reserves | 267,377 | 327,157 | ' | ' |
Recoverable on paid losses | 66,974 | 16,927 | ' | ' |
Total | 624,431 | 423,995 | ' | ' |
Tower | Unpaid Losses and Loss Adjustment Expenses | ' | ' | ' | ' |
Gross Liability | ' | ' | ' | ' |
Total | 1,973,971 | ' | ' | ' |
Reciprocal Exchanges | ' | ' | ' | ' |
Gross Liability | ' | ' | ' | ' |
Case-basis reserves | 63,198 | 63,465 | ' | ' |
IBNR reserves | 44,116 | 72,326 | ' | ' |
Total | 107,315 | 135,791 | 136,274 | 171,315 |
Reinsurance recoverable | ' | ' | ' | ' |
Case-basis reserves | 5,945 | 10,160 | ' | ' |
IBNR reserves | 7,458 | 42,229 | ' | ' |
Recoverable on paid losses | 1,989 | 682 | ' | ' |
Total | 15,392 | 53,071 | ' | ' |
Reciprocal Exchanges | Unpaid Losses and Loss Adjustment Expenses | ' | ' | ' | ' |
Gross Liability | ' | ' | ' | ' |
Total | $107,314 | ' | ' | ' |
Reconciliation_of_Beginning_an
Reconciliation of Beginning and Ending Consolidated Balances for Unpaid Losses and Loss Adjustment Expense (Detail) (USD $) | 3 Months Ended | 12 Months Ended | |||
In Thousands, unless otherwise specified | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
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 | $1,610,421 | |
Less reinsurance recoverables on unpaid losses | ' | -459,457 | -292,221 | -276,976 | |
Liability for Unpaid Claims and Claims Adjustment Expense, Net | ' | 1,436,222 | 1,339,892 | 1,333,445 | |
Net reserves, at fair value, of acquired entities | ' | 166,868 | ' | ' | |
Reduction in net reserves for the Southport Re agreements | ' | -306,833 | [1] | ' | ' |
Incurred related to: | ' | ' | ' | ' | |
Current year | ' | 981,713 | 1,184,510 | 1,076,045 | |
Prior years unfavorable/(favorable) development | ' | 538,121 | 79,248 | 941 | |
Total incurred | ' | 1,519,834 | 1,263,758 | 1,076,986 | |
Paid related to: | ' | ' | ' | ' | |
Current year | ' | 576,562 | 530,119 | 396,346 | |
Prior years | ' | 729,104 | 637,309 | 674,193 | |
Total paid | ' | 1,305,666 | 1,167,428 | 1,070,539 | |
Net balance at end of period | ' | 1,510,425 | 1,436,222 | 1,339,892 | |
Add reinsurance recoverables on unpaid losses | ' | 570,860 | 459,457 | 292,221 | |
Net balance at end of year | ' | 2,081,285 | 1,895,679 | 1,632,113 | |
Loss on loss adjustment expense | ' | ' | ' | ' | |
Paid related to: | ' | ' | ' | ' | |
Net balance at end of year | ' | 2,081,285 | 1,895,679 | ' | |
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 | 1,439,106 | |
Less reinsurance recoverables on unpaid losses | ' | -407,068 | -280,968 | -265,592 | |
Liability for Unpaid Claims and Claims Adjustment Expense, Net | ' | 1,352,820 | 1,214,871 | 1,173,514 | |
Net reserves, at fair value, of acquired entities | ' | 166,868 | ' | ' | |
Reduction in net reserves for the Southport Re agreements | ' | -306,833 | [1] | ' | ' |
Incurred related to: | ' | ' | ' | ' | |
Current year | ' | 871,767 | 1,066,411 | 933,791 | |
Prior years unfavorable/(favorable) development | 325,600 | 533,038 | 88,129 | 38,776 | |
Total incurred | ' | 1,404,805 | 1,154,540 | 972,567 | |
Paid related to: | ' | ' | ' | ' | |
Current year | ' | 502,791 | 431,437 | 337,268 | |
Prior years | ' | 696,365 | 585,154 | 593,942 | |
Total paid | ' | 1,199,156 | 1,016,591 | 931,210 | |
Net balance at end of period | ' | 1,418,504 | 1,352,820 | 1,214,871 | |
Add reinsurance recoverables on unpaid losses | ' | 555,468 | 407,068 | 280,968 | |
Net balance at end of year | ' | ' | 1,759,888 | 1,495,839 | |
Tower | Loss on loss adjustment expense | ' | ' | ' | ' | |
Paid related to: | ' | ' | ' | ' | |
Net balance at end of year | ' | 1,973,972 | 1,759,888 | ' | |
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 | 171,315 | |
Less reinsurance recoverables on unpaid losses | ' | -52,389 | -11,253 | -11,384 | |
Liability for Unpaid Claims and Claims Adjustment Expense, Net | ' | 83,402 | 125,021 | 159,931 | |
Incurred related to: | ' | ' | ' | ' | |
Current year | ' | 109,946 | 118,099 | 142,254 | |
Prior years unfavorable/(favorable) development | ' | 5,083 | -8,881 | -37,835 | |
Total incurred | ' | 115,029 | 109,218 | 104,419 | |
Paid related to: | ' | ' | ' | ' | |
Current year | ' | 73,771 | 98,682 | 59,078 | |
Prior years | ' | 32,739 | 52,155 | 80,251 | |
Total paid | ' | 106,510 | 150,837 | 139,329 | |
Net balance at end of period | ' | 91,921 | 83,402 | 125,021 | |
Add reinsurance recoverables on unpaid losses | ' | 15,392 | 52,389 | 11,253 | |
Net balance at end of year | ' | 107,315 | 135,791 | 136,274 | |
Reciprocal Exchanges | Loss on loss adjustment expense | ' | ' | ' | ' | |
Paid related to: | ' | ' | ' | ' | |
Net balance at end of year | ' | $107,313 | $135,791 | ' | |
[1] | In the third quarter of 2013, Tower executed the Southport Re ADCs (see "Note 1 - Nature of the Business" for further description). The Southport Re ADCs resulted in a direct reduction to net loss reserves. A deferred gain of $12.5 million was recorded on the Southport Re ADCs and is reported in Other Liabilities. In addition, Tower executed the Southport Re Quota Share in the third quarter of 2013. This treaty is accounted for using deposit accounting and reduced the net reserves by $7.2 million. |
Reconciliation_of_Beginning_an1
Reconciliation of Beginning and Ending Consolidated Balances for Unpaid Losses and Loss Adjustment Expense (Parenthetical) (Detail) (USD $) | 12 Months Ended | 3 Months Ended | ||
Dec. 31, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | ||
Southport Re | Other liability | |||
Southport Re | ||||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | |
Deferred gain | ' | ' | $12,500,000 | |
Reduction in net reserves for the Southport Re agreements | $306,833,000 | [1] | $7,200,000 | ' |
[1] | In the third quarter of 2013, Tower executed the Southport Re ADCs (see "Note 1 - Nature of the Business" for further description). The Southport Re ADCs resulted in a direct reduction to net loss reserves. A deferred gain of $12.5 million was recorded on the Southport Re ADCs and is reported in Other Liabilities. In addition, Tower executed the Southport Re Quota Share in the third quarter of 2013. This treaty is accounted for using deposit accounting and reduced the net reserves by $7.2 million. |
Loss_and_Loss_Adjustment_Expen2
Loss and Loss Adjustment Expense - Additional Information (Detail) (USD $) | 3 Months Ended | 12 Months Ended | ||
Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | $538,121,000 | $79,248,000 | $941,000 |
Loss and loss adjustment expenses ratio | ' | 100.50% | 73.40% | ' |
Changes in ceding commissions on reinsuarnce treaties | ' | 9,800,000 | ' | ' |
Allocated Loss Adjustment Expenses | Claims Opened | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' |
Allocation percentage of fixed fee per in-house litigation claim | ' | 50.00% | ' | ' |
Allocated Loss Adjustment Expenses | Claims Closed | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' |
Allocation percentage of fixed fee per in-house litigation claim | ' | 50.00% | ' | ' |
Prior Year | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | 538,100,000 | ' | ' |
Tower | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | 325,600,000 | 533,038,000 | 88,129,000 | 38,776,000 |
Loss and loss adjustment expenses ratio | ' | 103.90% | 74.10% | ' |
Amortization of reserve risk premium on loss reserves relating to acquisition | ' | 19,100,000 | 7,200,000 | ' |
Tower | General Liability Claim | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | 533,000,000 | ' | ' |
Tower | Personal Insurance | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | 1,400,000 | ' | ' |
Tower | Assumed Reinsurance Segment | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | 5,400,000 | ' | ' |
Tower | Commercial Insurance | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | 539,800,000 | ' | ' |
Tower | Prior Year | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | 533,000,000 | ' | ' |
Reciprocal Exchanges | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | 5,083,000 | -8,881,000 | -37,835,000 |
Loss and loss adjustment expenses ratio | ' | 71.30% | 66.70% | ' |
Amortization of reserve risk premium on loss reserves relating to acquisition | ' | ' | $2,500,000 | ' |
Shareholders_Equity_Additional
Shareholders' Equity - Additional Information (Detail) (USD $) | 1 Months Ended | 12 Months Ended | 1 Months Ended | 12 Months Ended | ||||||||
Sep. 20, 2013 | Jun. 21, 2013 | Feb. 28, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Feb. 26, 2010 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Mar. 13, 2013 | |
Share Repurchase Program, 2011 | Share Repurchase Program, 2010 | Restricted Stock | Restricted Stock | Restricted Stock | Canopius Bermuda | |||||||
Stockholders Equity Note [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Conversion ratio | ' | ' | ' | 1.133 | 1.133 | 1.133 | ' | ' | ' | ' | ' | ' |
Common shares, outstanding | ' | ' | ' | 57,381,686 | 43,513,678 | ' | ' | ' | ' | ' | ' | 14,025,737 |
Employee stock option exercises | ' | ' | ' | 2,674 | 0 | 39,215 | ' | ' | ' | ' | ' | ' |
Number of option, grants | ' | ' | ' | ' | ' | ' | ' | ' | 242,626 | 422,176 | 741,185 | ' |
Common stock purchased from employees to pay expected amount of tax liability | ' | ' | ' | ' | ' | ' | ' | ' | 345,946 | 117,377 | ' | ' |
Number of shares, forfeitures | ' | ' | ' | ' | ' | ' | ' | ' | 57,080 | 28,513 | 21,346 | ' |
Treasury stock held | ' | ' | ' | 55,471 | 9,534,333 | ' | ' | ' | ' | ' | ' | ' |
Stock repurchase program authorized amount | ' | ' | ' | $50,000,000 | ' | ' | $100,000,000 | $100,000,000 | ' | ' | ' | ' |
Share repurchase program authorization date | ' | ' | ' | 7-May-13 | ' | ' | 3-Mar-11 | 26-Feb-10 | ' | ' | ' | ' |
Repurchase of common stock, shares | ' | ' | ' | 0 | 1,200,000 | ' | ' | ' | ' | ' | ' | ' |
Repurchase of common stock | ' | ' | ' | ' | $20,987,000 | $64,572,000 | ' | ' | ' | ' | ' | ' |
Share repurchase program termination date | ' | ' | ' | 'March 2013 | ' | ' | ' | ' | ' | ' | ' | ' |
Dividend per share | $0.17 | $0.17 | $0.17 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Summary_of_Changes_in_Accumula
Summary of Changes in Accumulated Other Comprehensive Income, by Component (Detail) (USD $) | 12 Months Ended |
In Thousands, unless otherwise specified | Dec. 31, 2013 |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ' |
Beginning Balance | $87,412 |
Other comprehensive income before reclassifications, net of tax | -80,046 |
Amounts reclassified from accumulated other comprehensive income, net of tax | -22,894 |
Net current period other comprehensive income | -102,940 |
Ending Balance | -15,528 |
Beginning Balance | -5,860 |
Other comprehensive income before reclassifications, net of tax | -1,496 |
Amounts reclassified from accumulated other comprehensive income, net of tax | 3,377 |
Net current period other comprehensive income | 1,881 |
Ending Balance | -3,979 |
Beginning Balance | 1,204 |
Other comprehensive income before reclassifications, net of tax | -1,204 |
Amounts reclassified from accumulated other comprehensive income, net of tax | ' |
Net current period other comprehensive income | -1,204 |
Beginning Balance | 82,756 |
Other comprehensive income before reclassifications, net of tax | -82,746 |
Amounts reclassified from accumulated other comprehensive income, net of tax | -19,517 |
Net current period other comprehensive income | -102,263 |
Ending Balance | ($19,507) |
Reclassified_from_Accumulated_
Reclassified from Accumulated Other Comprehensive Income to Net Income (Detail) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ' | ' | ' |
Unrealized gains (losses) on available for sale securities, before income tax | $25,048 | $25,476 | $9,394 |
Unrealized gains (losses) on available for sale securities, Income tax expense | ' | 8,917 | 1,742 |
Unrealized gains (losses) on available for sale securities, net income tax | -22,894 | ' | ' |
Gains (losses) on cash flow hedges interest rate swaps, net of income taxes | -3,377 | ' | ' |
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 | -22,894 | ' | ' |
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 | 3,377 | ' | ' |
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 | $3,377 | ' | ' |
Borrowings_Detail
Borrowings (Detail) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Debt Instrument [Line Items] | ' | ' |
Credit facility | ' | $70,000 |
Subordinated debentures | 235,058 | 235,058 |
Total | 382,770 | 449,731 |
Credit facility | ' | 70,000 |
Subordinated debentures | 114,900 | 232,678 |
Total | 244,425 | 454,741 |
Convertible Senior Notes | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Convertible senior notes | 147,712 | 144,673 |
Convertible senior notes | $129,525 | $152,063 |
Aggregate_Scheduled_Maturities
Aggregate Scheduled Maturities of Borrowings (Detail) (USD $) | Dec. 31, 2013 | |
In Thousands, unless otherwise specified | ||
Debt Instrument [Line Items] | ' | |
Borrowings | $385,058 | |
Scheduled Maturities of Debt in 2014 | ' | |
Debt Instrument [Line Items] | ' | |
Borrowings | 150,000 | [1] |
Scheduled Maturities of Debt in 2033 | ' | |
Debt Instrument [Line Items] | ' | |
Borrowings | 20,620 | |
Scheduled Maturities of Debt in 2034 | ' | |
Debt Instrument [Line Items] | ' | |
Borrowings | 25,775 | |
Scheduled Maturities of Debt in 2035 | ' | |
Debt Instrument [Line Items] | ' | |
Borrowings | 13,403 | |
Scheduled Maturities of Debt in 2036 | ' | |
Debt Instrument [Line Items] | ' | |
Borrowings | 123,713 | |
Scheduled Maturities of Debt in 2037 | ' | |
Debt Instrument [Line Items] | ' | |
Borrowings | $51,547 | |
[1] | Amount reflected in balance sheet for convertible senior notes is net of unamortized original issue discount of $2.3 million |
Aggregate_Scheduled_Maturities1
Aggregate Scheduled Maturities of Borrowings (Parenthetical) (Detail) (Convertible Senior Notes, USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2010 |
In Thousands, unless otherwise specified | |||
Convertible Senior Notes | ' | ' | ' |
Debt Instrument [Line Items] | ' | ' | ' |
Unamortized OID | $2,288 | $5,327 | $11,500 |
Debt_Additional_Information_De
Debt - Additional Information (Detail) (USD $) | 1 Months Ended | 3 Months Ended | 12 Months Ended | 12 Months Ended | 1 Months Ended | 1 Months Ended | 12 Months Ended | |||||||||
Dec. 13, 2013 | Mar. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Apr. 03, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Oct. 31, 2010 | Oct. 31, 2010 | Sep. 30, 2010 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | |
Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges | Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges | Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges | Interest Rate Swaps | Interest Rate Swaps | Convertible Senior Notes | Convertible Senior Notes | Convertible Senior Notes | Other liability | Other liability | |||||||
Cash Flow Hedging | Interest Rate Swaps | Interest Rate Swaps | ||||||||||||||
Debt Instrument [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest expense | ' | ' | $33,594,000 | $32,630,000 | $34,290,000 | ' | ' | ' | ' | ' | ' | ' | $11,900,000 | ' | ' | ' |
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 | ' | ' | 6,066,000 | 9,016,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 6,100,000 | 9,000,000 |
Gain (loss) on Swaps designated as cash flow hedges reclassified from AOCI to interest expense | ' | ' | ' | ' | ' | ' | 3,400,000 | 1,600,000 | 400,000 | ' | ' | ' | ' | ' | ' | ' |
Collateral on deposit with the counterparty | ' | ' | 6,300,000 | 9,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility agreement, borrowing capacity | ' | ' | ' | ' | ' | 220,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Payment of outstanding credit facility amount | 70,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
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 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 41.4269 | ' | ' | ' |
Principal amount of Notes | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,000 | ' | ' | ' |
Initial conversion price | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $24.14 | ' | ' | ' |
Debt conversion term | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 'The adjusted conversion rate at December 31, 2013 is 41.4269 shares of common stock per $1,000 principal amount of the Notes (equivalent to a conversion price of $24.14 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. | ' | ' | ' |
Unamortized OID | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 11,500,000 | 2,288,000 | 5,327,000 | ' | ' |
Deferred origination costs relating to liability component | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5,000,000 | ' | ' | ' |
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 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Principal_Terms_of_Subordinate
Principal Terms of Subordinated Debentures (Detail) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 |
Tower Group Statutory Trust I | Tower Group Statutory Trust II | Preserver Capital Trust I | Tower Group Statutory Trust III | Tower Group Statutory Trust IV | Tower Group Statutory Trust V | Tower Group Statutory Trust VI | CastlePoint Bermuda Capital Trust I | CastlePoint Management Statutory Trust II | CastlePoint Management Statutory Trust I | |||
Debt Instrument [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Issue Date | ' | ' | '2003-05 | '2003-09 | '2004-05 | '2004-12 | '2004-12 | '2006-03 | '2007-01 | '2007-09 | '2006-12 | '2006-12 |
Maturity Date | ' | ' | '2033-05 | '2033-09 | '2034-05 | '2034-12 | '2035-03 | '2036-04 | '2037-03 | '2037-12 | '2036-12 | '2036-12 |
Early Redemption | ' | ' | 'At our option at par on or after May 15, 2008 | 'At our option at par on or after September 30, 2008 | 'At our option at par on or after May 24, 2009 | 'At our option at par on or after December 15, 2009 | 'At our option at par on or after March 15, 2010 | 'At our option at par on or after April 7, 2011 | 'At our option at par on or after March 15, 2012 | 'At our option at par on or after December 15, 2012 | 'At our option at par on or after December 15, 2011 | 'At our option at par on or after December 15, 2011 |
Interest Rate | ' | ' | 'Three-month LIBOR plus 410 basis points | 'Three-month LIBOR plus 400 basis points | 'Three-month LIBOR plus 425 basis points | 'Three-month LIBOR plus 340 basis points | 'Three-month LIBOR plus 340 basis points | 'Three-month LIBOR plus 330 basis points | '8.16% until March 14, 2012; three-month LIBOR plus 300 basis points thereafter | '8.39% until December 14, 2012; three-month LIBOR plus 350 basis points thereafter. | 'Three-month LIBOR plus 350 basis points | 'Three-month LIBOR plus 350 basis points |
Amount of Investment in Common Securities of Trust | $7,100,000 | ' | $300,000 | $300,000 | $400,000 | $400,000 | $400,000 | $600,000 | $600,000 | $900,000 | $1,600,000 | $1,600,000 |
Principal Amount of Junior Subordinated Debenture Issued to Trust | $235,058,000 | $235,058,000 | $10,300,000 | $10,300,000 | $12,400,000 | $13,400,000 | $13,400,000 | $20,600,000 | $20,600,000 | $30,900,000 | $51,600,000 | $51,600,000 |
Principal_Terms_of_Subordinate1
Principal Terms of Subordinated Debentures (Parenthetical) (Detail) | 12 Months Ended |
Dec. 31, 2013 | |
Tower Group Statutory Trust I | ' |
Debt Instrument [Line Items] | ' |
Early redemption date | 15-May-08 |
Interest rate basis point above LIBOR | 4.10% |
Tower Group Statutory Trust II | ' |
Debt Instrument [Line Items] | ' |
Early redemption date | 30-Sep-08 |
Interest rate basis point above LIBOR | 4.00% |
Preserver Capital Trust I | ' |
Debt Instrument [Line Items] | ' |
Early redemption date | 24-May-09 |
Interest rate basis point above LIBOR | 4.25% |
Tower Group Statutory Trust III | ' |
Debt Instrument [Line Items] | ' |
Early redemption date | 15-Dec-09 |
Interest rate basis point above LIBOR | 3.40% |
Tower Group Statutory Trust IV | ' |
Debt Instrument [Line Items] | ' |
Early redemption date | 15-Mar-10 |
Interest rate basis point above LIBOR | 3.40% |
Tower Group Statutory Trust V | ' |
Debt Instrument [Line Items] | ' |
Early redemption date | 7-Apr-11 |
Interest rate basis point above LIBOR | 3.30% |
Tower Group Statutory Trust VI | ' |
Debt Instrument [Line Items] | ' |
Early redemption date | 15-Mar-12 |
Tower Group Statutory Trust VI | Interest Rate Thereafter | ' |
Debt Instrument [Line Items] | ' |
Interest rate basis point above LIBOR | 3.00% |
Tower Group Statutory Trust VI | Interest Rate until March 14th, 2012 | ' |
Debt Instrument [Line Items] | ' |
Interest rate, percentage | 8.16% |
CastlePoint Bermuda Capital Trust I | ' |
Debt Instrument [Line Items] | ' |
Early redemption date | 15-Dec-12 |
CastlePoint Bermuda Capital Trust I | Interest Rate Thereafter | ' |
Debt Instrument [Line Items] | ' |
Interest rate basis point above LIBOR | 3.50% |
CastlePoint Bermuda Capital Trust I | Interest Rate until December 14th, 2012 | ' |
Debt Instrument [Line Items] | ' |
Interest rate, percentage | 8.39% |
CastlePoint Management Statutory Trust II | ' |
Debt Instrument [Line Items] | ' |
Early redemption date | 15-Dec-11 |
Interest rate basis point above LIBOR | 3.50% |
CastlePoint Management Statutory Trust I | ' |
Debt Instrument [Line Items] | ' |
Early redemption date | 15-Dec-11 |
Interest rate basis point above LIBOR | 3.50% |
Amounts_Recorded_for_Notes_Det
Amounts Recorded for Notes (Detail) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Feb. 15, 2012 | Sep. 30, 2010 |
In Thousands, unless otherwise specified | ||||
Liability component | ' | ' | ' | ' |
Outstanding principal | $385,058 | ' | ' | ' |
Convertible Senior Notes | ' | ' | ' | ' |
Liability component | ' | ' | ' | ' |
Outstanding principal | 150,000 | 150,000 | 150,000 | ' |
Unamortized OID | -2,288 | -5,327 | ' | -11,500 |
Liability component | 147,712 | 144,673 | ' | ' |
Equity component, net of tax | $7,469 | $7,469 | ' | ' |
Stock_Based_Compensation_Addit
Stock Based Compensation - Additional Information (Detail) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Mar. 13, 2013 | Feb. 05, 2009 | Feb. 05, 2009 | Feb. 05, 2009 | Nov. 13, 2009 | Dec. 31, 2013 | Dec. 31, 2013 |
Canopius Group Limited | Stock Options | Stock Options | Stock Options | Stock Options | 2008 LTEP | 2013 LTIP | ||||
CastlePoint Holding, Ltd. | CastlePoint Holding, Ltd. | CastlePoint Holding, Ltd. | Specialty Underwriters' Alliance, Inc. | |||||||
Minimum | Maximum | |||||||||
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 | ' | ' | ' | ' | ' | ' | ' | ' | 73,441 | 2,147,531 |
Number of Shares, Vested | ' | ' | ' | 525,548 | ' | ' | ' | ' | ' | ' |
Conversion ratio | 1.133 | 1.133 | 1.133 | ' | ' | ' | ' | ' | ' | ' |
Risk free interest rate, minimum | ' | ' | ' | ' | 1.46% | ' | ' | ' | ' | ' |
Risk free interest rate, maximum | ' | ' | ' | ' | 1.83% | ' | ' | ' | ' | ' |
Dividend yield | ' | ' | ' | ' | 0.80% | ' | ' | 1.20% | ' | ' |
Volatility factors, minimum | ' | ' | ' | ' | 43.80% | ' | ' | ' | ' | ' |
Volatility factors, maximum | ' | ' | ' | ' | 45.30% | ' | ' | ' | ' | ' |
Weighted average expected life | ' | ' | ' | ' | ' | '3 years 3 months 18 days | '5 years 3 months 18 days | '1 year 4 months 24 days | ' | ' |
Risk free interest rate | ' | ' | ' | ' | ' | ' | ' | 1.66% | ' | ' |
Volatility factors | ' | ' | ' | ' | ' | ' | ' | 43.80% | ' | ' |
Analysis_of_Restricted_Stock_A
Analysis of Restricted Stock Activity (Detail) (Restricted Stock, USD $) | 12 Months Ended | |||||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 | |
Share Based Awards | Share Based Awards | Share Based Awards | ||||
Number of Shares | ' | ' | ' | ' | ' | ' |
Number of Shares, Beginning Balance | 1,015,902 | 1,120,090 | 670,366 | ' | ' | ' |
Number of Shares, Granted | 242,626 | 422,176 | 741,185 | ' | ' | ' |
Number of Shares, Vested | -965,862 | -497,851 | -270,115 | ' | ' | ' |
Number of Shares, Forfeitures | -57,080 | -28,513 | -21,346 | ' | ' | ' |
Number of Shares, Ending Balance | 235,586 | 1,015,902 | 1,120,090 | ' | ' | ' |
Weighted Average Grant Date Fair Value | ' | ' | ' | ' | ' | ' |
Weighted Average Grant Date Fair Value, Beginning Balance | $20.38 | $20.69 | ' | $20.38 | $20.69 | $20.39 |
Weighted Average Grant Date Fair Value, Granted | $18.09 | $19.77 | $21.01 | ' | ' | ' |
Weighted Average Grant Date Fair Value, Vested | $20.38 | $20.94 | $20.79 | ' | ' | ' |
Weighted Average Grant Date Fair Value, Forfeitures | $17.22 | $20.69 | $20.84 | ' | ' | ' |
Weighted Average Grant Date Fair Value, Ending Balance | $17.98 | $20.38 | $20.69 | $20.38 | $20.69 | $20.39 |
Analysis_of_Stock_Option_Activ
Analysis of Stock Option Activity (Detail) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Number of Shares | ' | ' | ' |
Number of Shares Outstanding, Beginning Balance | 969,307 | 969,307 | 1,039,127 |
Number of Shares, Exercised | -2,674 | 0 | -39,215 |
Number of Shares, Forfeitures and expirations | -10,829 | ' | -30,605 |
Number of Shares Outstanding, Ending Balance | 955,804 | 969,307 | 969,307 |
Number of Shares Exercisable, Ending Balance | 955,804 | 969,307 | 969,307 |
Average Exercise Price | ' | ' | ' |
Average Exercise Price Outstanding, Beginning Balance | $17.78 | $17.78 | $17.66 |
Average Exercise Price, Exercised | $16.48 | ' | $9.48 |
Average Exercise Price, Forfeitures and expirations | $20.19 | ' | $24.35 |
Average Exercise Price Outstanding, Ending Balance | $17.75 | $17.78 | $17.78 |
Average Exercise Price Exercisable, Ending Balance | $17.75 | $17.78 | $17.78 |
Options_Outstanding_and_Exerci
Options Outstanding and Exercisable (Detail) (USD $) | 12 Months Ended | |||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 | |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ' | ' | ' | ' |
Number of Shares | 955,804 | 969,307 | 969,307 | 1,039,127 |
Options Outstanding Average Remaining Contractual Life (Years) | '2 years 10 months 24 days | ' | ' | ' |
Options Outstanding, Average Exercise Price | $17.75 | $17.78 | $17.78 | $17.66 |
Option Exercisable Number of Shares | 955,804 | 969,307 | 969,307 | ' |
Options Exercisable, Average Exercise Price | $17.75 | $17.78 | $17.78 | ' |
$10.01 - $20.00 | ' | ' | ' | ' |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ' | ' | ' | ' |
Range of Exercise Price, Lower Limit | $10.01 | ' | ' | ' |
Range of Exercise Price, Upper Limit | $20 | ' | ' | ' |
Number of Shares | 769,833 | ' | ' | ' |
Options Outstanding Average Remaining Contractual Life (Years) | '2 years 7 months 6 days | ' | ' | ' |
Options Outstanding, Average Exercise Price | $16.32 | ' | ' | ' |
Option Exercisable Number of Shares | 769,833 | ' | ' | ' |
Options Exercisable, Average Exercise Price | $16.32 | ' | ' | ' |
$20.01 - $30.00 | ' | ' | ' | ' |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ' | ' | ' | ' |
Range of Exercise Price, Lower Limit | $20.01 | ' | ' | ' |
Range of Exercise Price, Upper Limit | $30 | ' | ' | ' |
Number of Shares | 183,857 | ' | ' | ' |
Options Outstanding Average Remaining Contractual Life (Years) | '4 years 1 month 6 days | ' | ' | ' |
Options Outstanding, Average Exercise Price | $23.60 | ' | ' | ' |
Option Exercisable Number of Shares | 183,857 | ' | ' | ' |
Options Exercisable, Average Exercise Price | $23.60 | ' | ' | ' |
$30.01 - $40.00 | ' | ' | ' | ' |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ' | ' | ' | ' |
Range of Exercise Price, Lower Limit | $30.01 | ' | ' | ' |
Range of Exercise Price, Upper Limit | $40 | ' | ' | ' |
Number of Shares | 2,114 | ' | ' | ' |
Options Outstanding Average Remaining Contractual Life (Years) | '1 year 1 month 6 days | ' | ' | ' |
Options Outstanding, Average Exercise Price | $30.35 | ' | ' | ' |
Option Exercisable Number of Shares | 2,114 | ' | ' | ' |
Options Exercisable, Average Exercise Price | $30.35 | ' | ' | ' |
Analysis_of_Stock_Based_Compen
Analysis of Stock Based Compensation Expense (Detail) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' |
Weighted average years expense will be recognized | '3 years 2 months 12 days | '2 years 1 month 6 days | '2 years 3 months 18 days |
Restricted Stock | ' | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' |
Expense, net of tax | 8,577 | 6,043 | 6,126 |
Value of shares vested | 21,278 | 9,485 | 5,622 |
Value of unvested shares | 796 | 15,967 | 19,940 |
Unrecognized compensation expense | 851 | 8,262 | 9,617 |
Employee Stock Option | ' | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' |
Expense, net of tax | ' | ' | 105 |
Intrinsic value of outstanding options | ' | 1,149 | 1,150 |
Intrinsic value of vested outstanding options | ' | 1,149 | 1,150 |
Provision_for_Federal_State_an
Provision for Federal, State and Local Income Taxes (Detail) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Reconciliation of Provision of Income Taxes [Line Items] | ' | ' | ' |
Current Federal income tax expense (benefit) | $3,132 | ($16,807) | $8,461 |
Current state income tax expense (benefit) | 553 | 200 | -257 |
Deferred Federal and state income tax (benefit) | 4,747 | -12,492 | 5,847 |
Provision for income taxes | 8,431 | -29,099 | 14,051 |
Income tax expense (benefit) | ' | ' | ' |
Reconciliation of Provision of Income Taxes [Line Items] | ' | ' | ' |
Provision for income taxes | 8,431 | -29,099 | 14,051 |
Tower | ' | ' | ' |
Reconciliation of Provision of Income Taxes [Line Items] | ' | ' | ' |
Current Federal income tax expense (benefit) | 3,000 | -17,400 | 6,951 |
Current state income tax expense (benefit) | 553 | 200 | -257 |
Deferred Federal and state income tax (benefit) | 5,285 | -9,872 | 4,175 |
Tower | Income tax expense (benefit) | ' | ' | ' |
Reconciliation of Provision of Income Taxes [Line Items] | ' | ' | ' |
Provision for income taxes | 8,838 | -27,072 | 10,869 |
Reciprocal Exchanges | ' | ' | ' |
Reconciliation of Provision of Income Taxes [Line Items] | ' | ' | ' |
Current Federal income tax expense (benefit) | 132 | 593 | 1,510 |
Deferred Federal and state income tax (benefit) | -539 | -2,620 | 1,672 |
Reciprocal Exchanges | Income tax expense (benefit) | ' | ' | ' |
Reconciliation of Provision of Income Taxes [Line Items] | ' | ' | ' |
Provision for income taxes | ($407) | ($2,027) | $3,182 |
Significant_Components_of_Defe
Significant Components of Deferred Tax Assets and Liabilities (Detail) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Deferred tax assets: | ' | ' |
Claims reserve discount | $28,548 | $46,275 |
Unearned premium | 28,433 | 61,062 |
Equity compensation plans | 3,627 | 6,072 |
Net operating loss carryforwards | 173,059 | 37,414 |
Convertible senior note and note hedge OID | 2,163 | 618 |
AMT credits | 2,619 | 2,354 |
Fair value of interest rate swap | 2,123 | 3,155 |
Bad debt reserves | 6,058 | 5,815 |
Deferred rent | 1,977 | 1,905 |
Accrued interest from foreign affiliate | 2,199 | 3,710 |
Depreciation and amortization | 18,574 | ' |
Other | 3,806 | 1,008 |
Total gross deferred tax assets | 313,905 | 169,388 |
Less: valuation allowance | 292,925 | 6,984 |
Total deferred tax assets | 20,980 | 162,404 |
Deferred tax liabilities: | ' | ' |
Deferred acquisition costs net of deferred ceding commission revenue | 14,329 | 63,251 |
Convertible senior note and note hedge OID | 2,163 | 618 |
Depreciation and amortization | 2,155 | 48,382 |
Net unrealized appreciation of securities | 12,997 | 52,744 |
Surplus notes | 18,844 | 18,824 |
Unconsolidated affiliate | ' | 3,843 |
Other | ' | 123 |
Total deferred tax liabilities | 50,488 | 187,167 |
Net deferred income tax asset (liability) | -29,508 | -24,763 |
Net deferred income tax asset (liability) | ' | ' |
Deferred tax liabilities: | ' | ' |
Net deferred income tax asset (liability) | -29,508 | -24,763 |
Scenario One | ' | ' |
Deferred tax assets: | ' | ' |
Adjustment on Retroactive Reinsurance | 42,882 | ' |
Tower | ' | ' |
Deferred tax assets: | ' | ' |
Claims reserve discount | 26,994 | 44,528 |
Unearned premium | 22,614 | 55,134 |
Equity compensation plans | 3,627 | 6,072 |
Net operating loss carryforwards | 161,884 | 32,584 |
Convertible senior note and note hedge OID | 2,163 | 618 |
AMT credits | 2,008 | 1,846 |
Fair value of interest rate swap | 2,123 | 3,155 |
Bad debt reserves | 5,793 | 5,793 |
Deferred rent | 1,977 | 1,905 |
Accrued interest from foreign affiliate | 2,199 | 3,710 |
Depreciation and amortization | 18,574 | ' |
Other | 2,052 | ' |
Total gross deferred tax assets | 292,727 | 155,345 |
Less: valuation allowance | 275,332 | 2,258 |
Total deferred tax assets | 17,395 | 153,087 |
Deferred tax liabilities: | ' | ' |
Deferred acquisition costs net of deferred ceding commission revenue | 11,010 | 59,387 |
Convertible senior note and note hedge OID | 2,163 | 618 |
Depreciation and amortization | ' | 46,025 |
Net unrealized appreciation of securities | 12,030 | 46,953 |
Surplus notes | 2,519 | 1,800 |
Unconsolidated affiliate | ' | 3,843 |
Other | ' | 123 |
Total deferred tax liabilities | 27,722 | 158,131 |
Tower | Net deferred income tax asset (liability) | ' | ' |
Deferred tax liabilities: | ' | ' |
Net deferred income tax asset (liability) | -10,327 | -5,044 |
Tower | Scenario One | ' | ' |
Deferred tax assets: | ' | ' |
Adjustment on Retroactive Reinsurance | 42,882 | ' |
Reciprocal Exchanges | ' | ' |
Deferred tax assets: | ' | ' |
Claims reserve discount | 1,554 | 1,747 |
Unearned premium | 5,819 | 5,928 |
Net operating loss carryforwards | 11,175 | 4,830 |
AMT credits | 611 | 508 |
Bad debt reserves | 265 | 22 |
Other | 1,754 | 1,008 |
Total gross deferred tax assets | 21,178 | 14,043 |
Less: valuation allowance | 17,593 | 4,726 |
Total deferred tax assets | 3,585 | 9,317 |
Deferred tax liabilities: | ' | ' |
Deferred acquisition costs net of deferred ceding commission revenue | 3,319 | 3,864 |
Depreciation and amortization | 2,155 | 2,357 |
Net unrealized appreciation of securities | 967 | 5,791 |
Surplus notes | 16,325 | 17,024 |
Total deferred tax liabilities | 22,766 | 29,036 |
Net deferred income tax asset (liability) | -19,181 | -19,719 |
Reciprocal Exchanges | Net deferred income tax asset (liability) | ' | ' |
Deferred tax liabilities: | ' | ' |
Net deferred income tax asset (liability) | ($19,181) | ($19,719) |
Income_Taxes_Additional_Inform
Income Taxes - Additional Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | 12 Months Ended | ||||||||||||||||||||||
Jun. 30, 2013 | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Jun. 30, 2013 | Jun. 30, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2007 | Dec. 31, 2013 | Dec. 31, 2009 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | |
Carried over Indefinitely | Tower | Tower | Tower | Tower | U.S. | U.S. | U.S. | U.S. | U.S. | Income tax expense (benefit) | Other Comprehensive Income (Loss) | Other Comprehensive Income (Loss) | Other Comprehensive Income (Loss) | Net Operating Loss Carryforwards | Preserver Group, Inc. | Preserver Group, Inc. | CastlePoint Holding, Ltd. | CastlePoint Holding, Ltd. | Acquired Companies | Non Life Insurance Premiums | Life Insurance and Reinsurance Premiums | Federal | Federal | State | ||||||
Tower | Tower | Tower | Tower | Accumulated Other Comprehensive Income (loss) | Additional Paid-in Capital | U.S. | Tower | Net Operating Loss Carryforwards | Net Operating Loss Carryforwards | |||||||||||||||||||||
Tower | U.S. | U.S. | ||||||||||||||||||||||||||||
Tower | Tower | |||||||||||||||||||||||||||||
Income Taxes [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Income (loss) before income taxes | ' | ' | ($952,921,000) | ($61,016,000) | $69,481,000 | ' | ' | ' | ' | ' | ' | ' | ($61,300,000) | $901,400,000 | ($61,000,000) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Deferred tax inventory | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 161,900,000 | ' | ' | ' | ' | ' | ' | ' | ' | 161,200,000 | 700,000 |
Net deferred tax asset | ' | ' | 20,980,000 | 162,404,000 | ' | ' | ' | 17,395,000 | 153,087,000 | ' | 263,400,000 | ' | ' | 265,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Deferred tax assets, valuation allowance | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 240,600,000 | 32,500,000 | 33,700,000 | -1,200,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | ' | 538,121,000 | 79,248,000 | 941,000 | ' | 325,600,000 | 533,038,000 | 88,129,000 | 38,776,000 | ' | 149,700,000 | ' | 149,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Goodwill impairment charge | 214,000,000 | 214,000,000 | 271,442,000 | ' | ' | ' | 214,000,000 | ' | ' | ' | ' | 185,900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of excise tax rate | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 4.00% | 1.00% | ' | ' | ' |
Excise tax | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 8,300,000 | ' | ' |
Net operating loss carryforwards | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,800,000 | ' | 11,100,000 | ' | 460,600,000 | ' | ' | ' | ' | ' |
Net operating loss carryforwards, expiration term | ' | ' | 'The PGI and CastlePoint NOLs will expire in years 2025 through 2029. | ' | ' | ' | ' | 'The NOLs will expire in years 2019 through 2032. | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net operating loss carryforwards at the time of acquisition | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 43,700,000 | ' | 17,400,000 | ' | ' | ' | ' | ' | ' |
AMT credits | ' | ' | $2,619,000 | $2,354,000 | ' | $2,600,000 | ' | $2,008,000 | $1,846,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Items_Causing_Provision_for_Fe
Items Causing Provision for Federal Income Taxes Incurred Different from that which would be Obtained by Applying Federal Income Tax Rate to Net Income Before Taxes (Detail) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Reconciliation of Provision of Income Taxes [Line Items] | ' | ' | ' |
Federal income tax expense at U.S. statutory rate | ($333,314) | ($21,359) | $23,981 |
Rate differential on Non U.S. Operations | 10,746 | ' | ' |
Tax exempt interest | -4,873 | -8,275 | -7,241 |
State income taxes net of Federal benefit | ' | 130 | 488 |
Goodwill Impairment | 78,465 | ' | ' |
Acquisition related transaction costs | 1,801 | 2,261 | 100 |
Prior period adjustment | 624 | -781 | 207 |
Valuation Allowance | 250,133 | -1,072 | -1,757 |
Other | 4,490 | -3 | -1,727 |
Provision for income taxes | 8,431 | -29,099 | 14,051 |
Provision for income taxes | ' | ' | ' |
Reconciliation of Provision of Income Taxes [Line Items] | ' | ' | ' |
Provision for income taxes | 8,431 | -29,099 | 14,051 |
Tower | ' | ' | ' |
Reconciliation of Provision of Income Taxes [Line Items] | ' | ' | ' |
Federal income tax expense at U.S. statutory rate | -326,239 | -21,458 | 19,161 |
Rate differential on Non U.S. Operations | 10,746 | ' | ' |
Tax exempt interest | -4,476 | -7,374 | -6,823 |
State income taxes net of Federal benefit | 359 | 130 | 488 |
Goodwill Impairment | 78,465 | ' | ' |
Acquisition related transaction costs | 1,801 | 2,261 | 100 |
Prior period adjustment | 1,408 | -619 | 207 |
Valuation Allowance | 242,189 | ' | ' |
Other | 4,585 | -12 | -2,264 |
Tower | Provision for income taxes | ' | ' | ' |
Reconciliation of Provision of Income Taxes [Line Items] | ' | ' | ' |
Provision for income taxes | 8,838 | -27,072 | 10,869 |
Reciprocal Exchanges | ' | ' | ' |
Reconciliation of Provision of Income Taxes [Line Items] | ' | ' | ' |
Federal income tax expense at U.S. statutory rate | -7,075 | 99 | 4,820 |
Tax exempt interest | -397 | -901 | -418 |
Prior period adjustment | -784 | -162 | ' |
Valuation Allowance | 7,944 | -1,072 | -1,757 |
Other | -95 | 9 | 537 |
Reciprocal Exchanges | Provision for income taxes | ' | ' | ' |
Reconciliation of Provision of Income Taxes [Line Items] | ' | ' | ' |
Provision for income taxes | ($407) | ($2,027) | $3,182 |
Employee_Benefit_Plans_Additio
Employee Benefit Plans - Additional Information (Detail) (USD $) | 12 Months Ended | ||
In Millions, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ' | ' | ' |
Employee Pretax Savings Plan (401(k) Plan), Employer matching contribution to employee | 50.00% | ' | ' |
Employee Pretax Savings Plan (401(k) Plan), Employer matching contribution to employee up to participant's eligible contribution | 8.00% | ' | ' |
Employee Pretax Savings Plan (401(k) Plan), Expense incurred related to defined contribution employee pretax savings plan | $3.90 | $3.60 | $3.20 |
Supplemental Executive Retirement Plan (SERP), Required number of years | '10 years | ' | ' |
Senior vice presidents | ' | ' | ' |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ' | ' | ' |
Supplemental Executive Retirement Plan (SERP), Required number of years of service | '3 years | ' | ' |
Key Employees | ' | ' | ' |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ' | ' | ' |
Supplemental Executive Retirement Plan (SERP), Vesting period | '10 years | ' | ' |
Supplemental Executive Retirement Plan (SERP), Percentage of annual cash compensation | 5.00% | ' | ' |
Key Employees | Minimum | ' | ' | ' |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ' | ' | ' |
Supplemental Executive Retirement Plan (SERP), Required number of years of service | '5 years | ' | ' |
Key Employees | Maximum | ' | ' | ' |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ' | ' | ' |
Supplemental Executive Retirement Plan (SERP), Required number of years of service | '10 years | ' | ' |
Contingencies_Additional_Infor
Contingencies - Additional Information (Detail) (USD $) | 1 Months Ended | 12 Months Ended | ||
Oct. 18, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Loss Contingencies [Line Items] | ' | ' | ' | ' |
Contingencies, damages sought | $150,000,000 | ' | ' | ' |
Rental expense | ' | 10,400,000 | 9,700,000 | 11,100,000 |
Difference due to actual assessment with respect to original assessment made based on permitted surcharges | ' | ' | ' | 1,100,000 |
Liability for workers compensation funds | ' | 10,300,000 | 7,500,000 | ' |
New York Insurance Department | ' | ' | ' | ' |
Loss Contingencies [Line Items] | ' | ' | ' | ' |
Operating expense | ' | $4,900,000 | $4,800,000 | $5,100,000 |
Future_Minimum_Lease_Payments_
Future Minimum Lease Payments (Detail) (USD $) | Dec. 31, 2013 |
In Thousands, unless otherwise specified | |
Operating Leases | ' |
2014 | $10,463 |
2015 | 10,397 |
2016 | 10,398 |
2017 | 9,142 |
2018 | 8,850 |
Thereafter | 26,761 |
Operating Leases, Future Minimum Payments Due, Total | 76,011 |
Capital Leases | ' |
2014 | 12,557 |
2015 | 14,823 |
2016 | 3,371 |
2017 | 1,787 |
2018 | 640 |
Thereafter | ' |
Capital Leases, Future Minimum Payments Due, Total | 33,178 |
Total | ' |
2014 | 23,020 |
2015 | 25,220 |
2016 | 13,769 |
2017 | 10,929 |
2018 | 9,490 |
Thereafter | 26,761 |
Contractual Obligation, Total | $109,189 |
Statutory_Financial_Informatio1
Statutory Financial Information and Accounting Policies - Additional Information (Detail) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Statutory Accounting Practices [Line Items] | ' | ' | ' |
Amount required to be collateralized against adverse loss reserve development | $222,159,000 | $98,581,000 | ' |
Unencumbered liquid assets approved to be transferred | 30,300,000 | ' | ' |
Deferred gain associated with intercompany reinsurance agreement | -109,700,000 | ' | ' |
Reciprocal Exchanges | ' | ' | ' |
Statutory Accounting Practices [Line Items] | ' | ' | ' |
Statutory net income (loss) | -8,800,000 | 7,400,000 | 16,500,000 |
Statutory capital and surplus regards to policyholders | 81,200,000 | 91,400,000 | ' |
Dividends paid | 0 | ' | ' |
Amount required to be collateralized against adverse loss reserve development | 22,000 | 500,000 | ' |
Reciprocal Exchanges | Adirondack | ' | ' | ' |
Statutory Accounting Practices [Line Items] | ' | ' | ' |
Statutory capital and surplus requirements | 34,500,000 | 38,100,000 | ' |
Reciprocal Exchanges | New Jersey Skylands | ' | ' | ' |
Statutory Accounting Practices [Line Items] | ' | ' | ' |
Statutory capital and surplus requirements | 11,200,000 | 10,200,000 | ' |
CastlePoint Re | ' | ' | ' |
Statutory Accounting Practices [Line Items] | ' | ' | ' |
Funds held by reinsured companies | 581,700,000 | ' | ' |
TRL | ' | ' | ' |
Statutory Accounting Practices [Line Items] | ' | ' | ' |
Amount required to be collateralized against adverse loss reserve development | 648,900,000 | ' | ' |
Unencumbered liquid assets approved to be transferred | 167,300,000 | ' | ' |
Canopius Bermuda | CastlePoint Re | ' | ' | ' |
Statutory Accounting Practices [Line Items] | ' | ' | ' |
Statutory net income (loss) | -198,600,000 | ' | ' |
Statutory capital and surplus regards to policyholders | -37,200,000 | ' | ' |
Dividends paid | 22,000,000 | 2,500,000 | 20,000,000 |
Net statutory assets held | 0 | ' | ' |
Canopius Bermuda | CastlePoint Re | All Insurance Subsidiaries | ' | ' | ' |
Statutory Accounting Practices [Line Items] | ' | ' | ' |
Statutory capital and surplus regards to policyholders | 60,300,000 | ' | ' |
Canopius Bermuda | CastlePoint Re | Us Subsidiaries | ' | ' | ' |
Statutory Accounting Practices [Line Items] | ' | ' | ' |
Statutory capital and surplus regards to policyholders | 26,500,000 | ' | ' |
Canopius Bermuda | TRL | ' | ' | ' |
Statutory Accounting Practices [Line Items] | ' | ' | ' |
Statutory capital and surplus regards to policyholders | 14,400,000 | ' | ' |
UNITED STATES | Subsidiaries | ' | ' | ' |
Statutory Accounting Practices [Line Items] | ' | ' | ' |
Statutory net income (loss) | -402,400,000 | -42,300,000 | 52,000,000 |
Statutory capital and surplus regards to policyholders | 172,900,000 | 594,200,000 | ' |
Dividends paid | 0 | 10,200,000 | 15,000,000 |
Net statutory assets held | $0 | ' | ' |
Earnings_loss_per_Share_Additi
Earnings (loss) per Share - Additional Information (Detail) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Earnings Per Share Disclosure [Line Items] | ' | ' | ' |
Conversion ratio | 1.133 | 1.133 | 1.133 |
Options and other common stock equivalents excluded from computation of diluted earnings per share | 955,800 | 0 | 166,700 |
Computation_of_Earnings_Per_Sh
Computation of Earnings Per Share (Detail) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||||||||||||
In Thousands, except Per Share data, unless otherwise specified | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | ||||||||||
Numerator | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||
Net income (loss) attributable to Tower Group International, Ltd. | ($91,633) | ($348,053) | [1],[2] | ($515,847) | [1] | $12,917 | ($58,220) | $21,629 | ($16,809) | $19,166 | ($942,616) | ($34,234) | $44,435 | ||||||||
Less: Allocation of income for unvested participating restricted stock | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -370 | ||||||||||
Less: Dividends on unvested participating restricted stock | ' | ' | ' | ' | ' | ' | ' | ' | -262 | -686 | -679 | ||||||||||
Net income available to common shareholders - Basic | ' | ' | ' | ' | ' | ' | ' | ' | -942,878 | -34,920 | 43,386 | ||||||||||
Reallocation of income for unvested participating restricted stock | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -1 | ||||||||||
Net income (loss) available to common shareholders - Diluted | ' | ' | ' | ' | ' | ' | ' | ' | ($942,878) | ($34,920) | $43,385 | ||||||||||
Denominator | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||
Basic earnings per share denominator | ' | ' | ' | ' | ' | ' | ' | ' | 54,297 | 42,902 | 45,226 | ||||||||||
Effect of dilutive securities: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 111 | ||||||||||
Diluted earnings per share denominator | ' | ' | ' | ' | ' | ' | ' | ' | 54,297 | 42,902 | 45,337 | ||||||||||
Common stock: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||
Distributed earnings | ' | ' | ' | ' | ' | ' | ' | ' | $0.50 | $0.66 | $0.61 | ||||||||||
Undistributed earnings | ' | ' | ' | ' | ' | ' | ' | ' | ($17.86) | ($1.47) | $0.35 | ||||||||||
Total - Basic | ($1.60) | [3] | ($6.09) | [1],[2],[3] | ($9.03) | [1],[3] | $0.28 | [3] | ($1.38) | [3] | $0.50 | [3] | ($0.39) | [3] | $0.43 | [3] | ($17.37) | [3] | ($0.81) | [3] | $0.96 |
Earnings (loss) per share attributable to Tower shareholders - Diluted | ($1.60) | [3] | ($6.09) | [1],[2],[3] | ($9.03) | [1],[3] | $0.28 | [3] | ($1.38) | [3] | $0.50 | [3] | ($0.39) | [3] | $0.43 | [3] | ($17.37) | [3] | ($0.81) | [3] | $0.96 |
[1] | Net Income (loss) attributable to Tower Group International, Ltd. and per share amounts have been revised from amounts previously reported to adjust for a correction in income tax expenses by $8.5 million in the second quarter of 2013 and $0.4 million in the third quarter of 2013. The Company adjusted the valuation allowance recorded on its deferred taxes. Management concluded these revisions were not material to the previously reported financial statements. | ||||||||||||||||||||
[2] | Revenues have been revised from amounts previously reported to adjust for a correction in accounting for the Southport Quota Share. In the third quarter of 2013, management should have used deposit accounting. This correction resulted in lower net earned premiums of $46.1 million and lower ceded commission revenue of $10.1 million, offset by $36.0 million higher loss and loss adjustment expense. This correction had no impact to net income (loss). This correction also resulted in an adjustment to decrease total assets and total liabilities by $23.9 million. Cash flows provided by (used in) operating activities increased and Cash flows provided by (used in) financing activities decreased by $35.1 million in the third quarter of 2013. Management concluded these revisions were not material to the previously reported financial statements. | ||||||||||||||||||||
[3] | Since the weighted-average shares for the quarters are calculated independently of the weighted-average shares for the year, quarterly earnings (loss) per share may not total to annual earnings per share. Earnings (loss) per share has been calculated using weighted-average shares that have been adjusted for the 1.1330 share conversion ratio resulting from the Canopius Merger Transaction. |
Business_Segments_Results_Deta
Business Segments Results (Detail) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | ||
Revenues | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Premiums earned | ' | $46,100 | ' | ' | ' | ' | ' | ' | $1,512,915 | $1,721,864 | $1,593,850 | ||
Ceding commission revenue | ' | 10,100 | ' | ' | ' | ' | ' | ' | 81,382 | 32,335 | 33,968 | ||
Policy billing fees | ' | ' | ' | ' | ' | ' | ' | ' | 12,299 | 12,615 | 10,534 | ||
Total revenues | 326,120 | 478,881 | [1],[2] | 460,518 | [1] | 476,483 | 475,369 | 474,891 | 506,392 | 466,223 | 1,742,002 | 1,922,875 | 1,775,790 |
Expenses | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Loss and loss adjustment expenses | ' | 36,000 | ' | ' | ' | ' | ' | ' | 1,519,834 | 1,263,758 | 1,076,986 | ||
Total expenses | ' | ' | ' | ' | ' | ' | ' | ' | 2,309,674 | 1,982,421 | 1,706,309 | ||
Reciprocal Exchanges | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Revenues | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Total revenues | ' | ' | ' | ' | ' | ' | ' | ' | 190,200 | 204,700 | ' | ||
Expenses | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Total expenses | ' | ' | ' | ' | ' | ' | ' | ' | 211,000 | 202,400 | ' | ||
Commercial Insurance | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Revenues | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 931,693 | 1,104,551 | 1,052,050 | ||
Expenses | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Loss and loss adjustment expenses | ' | ' | ' | ' | ' | ' | ' | ' | 1,185,627 | 859,707 | 740,754 | ||
Underwriting expenses | ' | ' | ' | ' | ' | ' | ' | ' | 406,908 | 388,511 | 352,832 | ||
Total expenses | ' | ' | ' | ' | ' | ' | ' | ' | 1,592,535 | 1,248,218 | 1,093,586 | ||
Underwriting profit (loss) | ' | ' | ' | ' | ' | ' | ' | ' | -625,090 | -130,498 | -22,405 | ||
Assumed Reinsurance Segment | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Revenues | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | ' | 120,015 | 35,861 | ||
Expenses | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Loss and loss adjustment expenses | ' | ' | ' | ' | ' | ' | ' | ' | 41,474 | 52,975 | 17,456 | ||
Underwriting expenses | ' | ' | ' | ' | ' | ' | ' | ' | 57,506 | 44,124 | 11,859 | ||
Total expenses | ' | ' | ' | ' | ' | ' | ' | ' | 98,980 | 97,099 | 29,315 | ||
Underwriting profit (loss) | ' | ' | ' | ' | ' | ' | ' | ' | 17,437 | 22,916 | -6,546 | ||
Personal Insurance | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Revenues | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 464,805 | 497,298 | 505,939 | ||
Expenses | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Loss and loss adjustment expenses | ' | ' | ' | ' | ' | ' | ' | ' | 292,733 | 351,076 | 318,775 | ||
Underwriting expenses | ' | ' | ' | ' | ' | ' | ' | ' | 249,779 | 228,289 | 218,463 | ||
Total expenses | ' | ' | ' | ' | ' | ' | ' | ' | 542,512 | 579,365 | 537,238 | ||
Underwriting profit (loss) | ' | ' | ' | ' | ' | ' | ' | ' | -19,778 | -50,286 | -5,928 | ||
Personal Insurance | Tower | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Expenses | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Underwriting profit (loss) | ' | ' | ' | ' | ' | ' | ' | ' | 6,083 | -31,450 | -11,308 | ||
Personal Insurance | Reciprocal Exchanges | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Expenses | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Underwriting profit (loss) | ' | ' | ' | ' | ' | ' | ' | ' | -25,861 | -18,836 | 5,380 | ||
Operating Segments | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Revenues | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Total revenues | ' | ' | ' | ' | ' | ' | ' | ' | 1,606,596 | 1,766,814 | 1,638,352 | ||
Operating Segments | Commercial Insurance | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Revenues | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 931,693 | 1,104,551 | 1,052,050 | ||
Ceding commission revenue | ' | ' | ' | ' | ' | ' | ' | ' | 30,115 | 7,702 | 14,786 | ||
Policy billing fees | ' | ' | ' | ' | ' | ' | ' | ' | 5,637 | 5,467 | 4,345 | ||
Total revenues | ' | ' | ' | ' | ' | ' | ' | ' | 967,445 | 1,117,720 | 1,071,181 | ||
Operating Segments | Assumed Reinsurance Segment | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Revenues | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 116,417 | 120,015 | 35,861 | ||
Total revenues | ' | ' | ' | ' | ' | ' | ' | ' | 116,417 | 120,015 | 35,861 | ||
Operating Segments | Personal Insurance | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Revenues | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 464,805 | 497,298 | 505,939 | ||
Ceding commission revenue | ' | ' | ' | ' | ' | ' | ' | ' | 51,267 | 24,633 | 19,182 | ||
Policy billing fees | ' | ' | ' | ' | ' | ' | ' | ' | 6,662 | 7,148 | 6,189 | ||
Total revenues | ' | ' | ' | ' | ' | ' | ' | ' | $522,734 | $529,079 | $531,310 | ||
[1] | Net Income (loss) attributable to Tower Group International, Ltd. and per share amounts have been revised from amounts previously reported to adjust for a correction in income tax expenses by $8.5 million in the second quarter of 2013 and $0.4 million in the third quarter of 2013. The Company adjusted the valuation allowance recorded on its deferred taxes. Management concluded these revisions were not material to the previously reported financial statements. | ||||||||||||
[2] | Revenues have been revised from amounts previously reported to adjust for a correction in accounting for the Southport Quota Share. In the third quarter of 2013, management should have used deposit accounting. This correction resulted in lower net earned premiums of $46.1 million and lower ceded commission revenue of $10.1 million, offset by $36.0 million higher loss and loss adjustment expense. This correction had no impact to net income (loss). This correction also resulted in an adjustment to decrease total assets and total liabilities by $23.9 million. Cash flows provided by (used in) operating activities increased and Cash flows provided by (used in) financing activities decreased by $35.1 million in the third quarter of 2013. Management concluded these revisions were not material to the previously reported financial statements. |
Reconciliation_of_Revenue_by_S
Reconciliation of Revenue by Segment to Consolidated Revenues (Detail) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Net investment income | ' | ' | ' | ' | ' | ' | ' | ' | $109,208 | $127,165 | $126,474 | ||
Net realized gains (losses) on investments, including other-than-temporary impairments | ' | ' | ' | ' | ' | ' | ' | ' | 25,048 | 25,476 | 9,394 | ||
Insurance services revenue | ' | ' | ' | ' | ' | ' | ' | ' | 1,150 | 3,420 | 1,570 | ||
Revenues | 326,120 | 478,881 | [1],[2] | 460,518 | [1] | 476,483 | 475,369 | 474,891 | 506,392 | 466,223 | 1,742,002 | 1,922,875 | 1,775,790 |
Operating Segments | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Revenues | ' | ' | ' | ' | ' | ' | ' | ' | 1,606,596 | 1,766,814 | 1,638,352 | ||
Operating Segments | Commercial Insurance | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Revenues | ' | ' | ' | ' | ' | ' | ' | ' | 967,445 | 1,117,720 | 1,071,181 | ||
Operating Segments | Assumed Reinsurance Segment | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Revenues | ' | ' | ' | ' | ' | ' | ' | ' | 116,417 | 120,015 | 35,861 | ||
Operating Segments | Personal Insurance | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Revenues | ' | ' | ' | ' | ' | ' | ' | ' | $522,734 | $529,079 | $531,310 | ||
[1] | Net Income (loss) attributable to Tower Group International, Ltd. and per share amounts have been revised from amounts previously reported to adjust for a correction in income tax expenses by $8.5 million in the second quarter of 2013 and $0.4 million in the third quarter of 2013. The Company adjusted the valuation allowance recorded on its deferred taxes. Management concluded these revisions were not material to the previously reported financial statements. | ||||||||||||
[2] | Revenues have been revised from amounts previously reported to adjust for a correction in accounting for the Southport Quota Share. In the third quarter of 2013, management should have used deposit accounting. This correction resulted in lower net earned premiums of $46.1 million and lower ceded commission revenue of $10.1 million, offset by $36.0 million higher loss and loss adjustment expense. This correction had no impact to net income (loss). This correction also resulted in an adjustment to decrease total assets and total liabilities by $23.9 million. Cash flows provided by (used in) operating activities increased and Cash flows provided by (used in) financing activities decreased by $35.1 million in the third quarter of 2013. Management concluded these revisions were not material to the previously reported financial statements. |
Reconciliation_of_Results_of_I
Reconciliation of Results of Individual Segments to Consolidated Income Before Income Taxes (Detail) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ' | ' | ' |
Net investment income | $109,208 | $127,165 | $126,474 |
Net realized gains (loss) on investments, including other-than-temporary impairments | 25,048 | 25,476 | 9,394 |
Corporate expenses, and other income | -14,581 | -12,460 | -9,950 |
Acquisition-related transaction costs | -21,322 | -9,229 | -360 |
Interest expense | -33,594 | -32,630 | -34,290 |
Goodwill and fixed asset impairment | -397,211 | ' | ' |
Equity income in unconsolidated affiliate | 6,962 | -1,470 | ' |
Income (loss) before income taxes | -952,921 | -61,016 | 69,481 |
Commercial Insurance | ' | ' | ' |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ' | ' | ' |
Underwriting profit (loss) | -625,090 | -130,498 | -22,405 |
Assumed Reinsurance Segment | ' | ' | ' |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ' | ' | ' |
Underwriting profit (loss) | 17,437 | 22,916 | -6,546 |
Personal Insurance | ' | ' | ' |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ' | ' | ' |
Underwriting profit (loss) | ($19,778) | ($50,286) | ($5,928) |
Unaudited_Quarterly_Financial_2
Unaudited Quarterly Financial Information (Detail) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||||||||||||
In Thousands, except Per Share data, unless otherwise specified | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | ||||||||||
Quarterly Financial Information [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||
Revenues | $326,120 | $478,881 | [1],[2] | $460,518 | [1] | $476,483 | $475,369 | $474,891 | $506,392 | $466,223 | $1,742,002 | $1,922,875 | $1,775,790 | ||||||||
Net income (loss) attributable to Tower Group International, Ltd. | ($91,633) | ($348,053) | [1],[2] | ($515,847) | [1] | $12,917 | ($58,220) | $21,629 | ($16,809) | $19,166 | ($942,616) | ($34,234) | $44,435 | ||||||||
Net income (loss) per share attributable to Tower shareholders: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||
Basic | ($1.60) | [3] | ($6.09) | [1],[2],[3] | ($9.03) | [1],[3] | $0.28 | [3] | ($1.38) | [3] | $0.50 | [3] | ($0.39) | [3] | $0.43 | [3] | ($17.37) | [3] | ($0.81) | [3] | $0.96 |
Diluted | ($1.60) | [3] | ($6.09) | [1],[2],[3] | ($9.03) | [1],[3] | $0.28 | [3] | ($1.38) | [3] | $0.50 | [3] | ($0.39) | [3] | $0.43 | [3] | ($17.37) | [3] | ($0.81) | [3] | $0.96 |
[1] | Net Income (loss) attributable to Tower Group International, Ltd. and per share amounts have been revised from amounts previously reported to adjust for a correction in income tax expenses by $8.5 million in the second quarter of 2013 and $0.4 million in the third quarter of 2013. The Company adjusted the valuation allowance recorded on its deferred taxes. Management concluded these revisions were not material to the previously reported financial statements. | ||||||||||||||||||||
[2] | Revenues have been revised from amounts previously reported to adjust for a correction in accounting for the Southport Quota Share. In the third quarter of 2013, management should have used deposit accounting. This correction resulted in lower net earned premiums of $46.1 million and lower ceded commission revenue of $10.1 million, offset by $36.0 million higher loss and loss adjustment expense. This correction had no impact to net income (loss). This correction also resulted in an adjustment to decrease total assets and total liabilities by $23.9 million. Cash flows provided by (used in) operating activities increased and Cash flows provided by (used in) financing activities decreased by $35.1 million in the third quarter of 2013. Management concluded these revisions were not material to the previously reported financial statements. | ||||||||||||||||||||
[3] | Since the weighted-average shares for the quarters are calculated independently of the weighted-average shares for the year, quarterly earnings (loss) per share may not total to annual earnings per share. Earnings (loss) per share has been calculated using weighted-average shares that have been adjusted for the 1.1330 share conversion ratio resulting from the Canopius Merger Transaction. |
Unaudited_Quarterly_Financial_3
Unaudited Quarterly Financial Information (Parenthetical) (Detail) (USD $) | 3 Months Ended | 12 Months Ended | 3 Months Ended | |||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Sep. 30, 2013 | Jun. 30, 2013 |
Revised Amount | Revised Amount | |||||
Quarterly Financial Information [Line Items] | ' | ' | ' | ' | ' | ' |
Conversion ratio | ' | 1.133 | 1.133 | 1.133 | ' | ' |
Income tax expense (benefit) | ' | $8,431 | ($29,099) | $14,051 | $400 | $8,500 |
Total liabilities | 23,900 | 3,854,825 | 3,728,297 | ' | 8,900 | 8,500 |
Shareholders' equity | ' | 95,551 | 950,058 | ' | 8,500 | ' |
Net earned premiums | 46,100 | 1,512,915 | 1,721,864 | 1,593,850 | ' | ' |
Ceded commission revenue | 10,100 | 81,382 | 32,335 | 33,968 | ' | ' |
Loss and loss adjustment expense | 36,000 | 1,519,834 | 1,263,758 | 1,076,986 | ' | ' |
Total assets | 23,900 | 3,955,545 | 4,712,515 | ' | ' | ' |
Cash flows provided by (used in) financing activities | $35,100 | ($141,165) | ($31,980) | ($3,927) | ' | ' |
Subsequent_Events_Additional_I
Subsequent Events - Additional Information (Detail) (USD $) | 1 Months Ended | 12 Months Ended | 0 Months Ended | 1 Months Ended | 0 Months Ended | 1 Months Ended | 0 Months Ended | 1 Months Ended | 0 Months Ended | 1 Months Ended | 0 Months Ended | 1 Months Ended | |||||||||||
Nov. 22, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Jan. 03, 2014 | Apr. 07, 2014 | Mar. 31, 2014 | Jan. 03, 2014 | Jan. 03, 2014 | Jan. 03, 2014 | Jan. 03, 2014 | Jan. 03, 2014 | Jan. 03, 2014 | Jan. 03, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Jan. 03, 2014 | Jan. 03, 2014 | Jan. 03, 2014 | Jan. 03, 2014 | |
Assumed Reinsurance Segment | Tower | Tower | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | |||||
AmTrust | NGHC | Tower | Tower | Tower | Tower | Tower | Tower | Tower | Tower | Acp Re Ltd | Acp Re Ltd | Acp Re Ltd | Acp Re Ltd | ||||||||||
Minimum | Maximum | 2014 Ceded Premiums | 2014 Ceded Premiums | AmTrust | NGHC | Maximum | Maximum | ||||||||||||||||
Subsequent Event [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock, par value | ' | $0.01 | $0.01 | ' | ' | ' | ' | $0.01 | ' | ' | $0.01 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Equity awards settlement in cash | ' | ' | ' | ' | ' | ' | ' | $3 | ' | ' | $3 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Outstanding equity awards, aggregate value | ' | ' | ' | ' | ' | ' | ' | $172,100,000 | ' | ' | $172,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unearned premium reserve percentage | ' | ' | ' | ' | ' | 65.70% | 100.00% | ' | ' | ' | ' | ' | ' | 60.00% | ' | ' | ' | 65.70% | 100.00% | ' | ' | ' | ' |
Commission percentage on premium | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 20.00% | 20.00% | ' | ' | 22.00% | 22.00% | ' | ' | ' | ' | ' | ' |
Quota share reinsurance percentage | ' | ' | 35.50% | ' | ' | ' | ' | ' | ' | ' | ' | 100.00% | 100.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of common stockholders dissenting to the merger | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 15.00% | ' | ' | ' | ' | ' | ' | ' | ' |
Reimburse transaction expense | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,000,000 | 2,000,000 |
Termination fee, net of any transaction expenses | 21,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -8,180,000 | -8,180,000 | ' | ' |
President and Chief Executive Officer of Tower,who beneficially owns percentage of issued and outstanding common stock | ' | ' | ' | ' | ' | ' | ' | 4.20% | ' | ' | 4.20% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Direct written premiums | ' | 1,606,249,000 | 1,755,157,000 | 1,692,282,000 | 1,606,200,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Severance payment to President and Chief Executive Officer of Tower | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cost of terminating a lease agreement | ' | ' | ' | ' | ' | ' | ' | ' | $10,400,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Summary_of_Investments_Other_T1
Summary of Investments Other Than Investments in Related Parties (Detail) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' |
Cost | $1,813,422 | $2,402,069 |
Fair Value | 1,851,377 | 2,553,505 |
Amount Reflected on Balance Sheet | 1,851,377 | 2,553,505 |
Fixed Maturity Securities | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' |
Cost | 1,613,634 | 2,190,186 |
Fair Value | 1,642,695 | 2,344,711 |
Amount Reflected on Balance Sheet | 1,642,695 | 2,344,711 |
Fixed Maturity Securities | U.S. Treasury securities and obligations of U.S. Government agencies | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' |
Cost | 481,321 | 281,964 |
Fair Value | 475,183 | 287,726 |
Amount Reflected on Balance Sheet | 475,183 | 287,726 |
Fixed Maturity Securities | Corporate Securities | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' |
Cost | 512,444 | 698,012 |
Fair Value | 525,942 | 746,665 |
Amount Reflected on Balance Sheet | 525,942 | 746,665 |
Fixed Maturity Securities | Mortgage-backed securities | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' |
Cost | 342,487 | 576,837 |
Fair Value | 362,464 | 624,277 |
Amount Reflected on Balance Sheet | 362,464 | 624,277 |
Fixed Maturity Securities | Municipal Bonds | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' |
Cost | 277,382 | 633,373 |
Fair Value | 279,106 | 686,043 |
Amount Reflected on Balance Sheet | 279,106 | 686,043 |
Equity securities | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' |
Cost | 97,708 | 149,348 |
Fair Value | 106,630 | 146,258 |
Amount Reflected on Balance Sheet | 106,630 | 146,258 |
Equity securities | Preferred stocks | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' |
Cost | 21,330 | 31,272 |
Fair Value | 18,848 | 31,521 |
Amount Reflected on Balance Sheet | 18,848 | 31,521 |
Equity securities | Common Stocks | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' |
Cost | 76,378 | 118,076 |
Fair Value | 87,782 | 114,737 |
Amount Reflected on Balance Sheet | 87,782 | 114,737 |
Short-term investments | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' |
Cost | 5,925 | 4,749 |
Fair Value | 5,897 | 4,750 |
Amount Reflected on Balance Sheet | 5,897 | 4,750 |
Other | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' |
Cost | 96,155 | 57,786 |
Fair Value | 96,155 | 57,786 |
Amount Reflected on Balance Sheet | $96,155 | $57,786 |
Condensed_Balance_Sheets_Detai
Condensed Balance Sheets (Detail) (USD $) | Dec. 31, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 |
In Thousands, unless otherwise specified | |||||
Assets | ' | ' | ' | ' | ' |
Fixed-maturity securities | $1,642,695 | ' | $2,344,711 | ' | ' |
Cash and cash equivalents | 293,898 | ' | 83,800 | 107,101 | 140,221 |
Investment in subsidiaries | ' | ' | 71,894 | ' | ' |
Deferred income taxes | -29,508 | ' | -24,763 | ' | ' |
Other assets | 383,131 | ' | 357,981 | ' | ' |
Total assets | 3,955,545 | 23,900 | 4,712,515 | ' | ' |
Liabilities | ' | ' | ' | ' | ' |
Debt | 382,770 | ' | 449,731 | ' | ' |
Total liabilities | 3,854,825 | 23,900 | 3,728,297 | ' | ' |
Shareholders' equity | 95,551 | ' | 950,058 | ' | ' |
Total liabilities and shareholders' equity | 3,955,545 | ' | 4,712,515 | ' | ' |
Tower Group International, Ltd. | ' | ' | ' | ' | ' |
Assets | ' | ' | ' | ' | ' |
Cash and cash equivalents | 438 | ' | 17,130 | 12,882 | 3,390 |
Successor | Tower Group International, Ltd. | ' | ' | ' | ' | ' |
Assets | ' | ' | ' | ' | ' |
Equity securities, cost | ' | ' | ' | ' | ' |
Cash and cash equivalents | 438 | ' | ' | ' | ' |
Investment in subsidiaries | 108,961 | ' | ' | ' | ' |
Federal and state taxes recoverable | ' | ' | ' | ' | ' |
Due from affiliate | ' | ' | ' | ' | ' |
Other assets | 3,317 | ' | ' | ' | ' |
Total assets | 112,716 | ' | ' | ' | ' |
Liabilities | ' | ' | ' | ' | ' |
Accounts payable and accrued expenses | 1,826 | ' | ' | ' | ' |
Due to affiliates | 15,339 | ' | ' | ' | ' |
Federal and state income taxes payable | ' | ' | ' | ' | ' |
Total liabilities | 17,165 | ' | ' | ' | ' |
Shareholders' equity | 95,551 | ' | ' | ' | ' |
Total liabilities and shareholders' equity | 112,716 | ' | ' | ' | ' |
Predecessor | Tower Group International, Ltd. | ' | ' | ' | ' | ' |
Assets | ' | ' | ' | ' | ' |
Fixed-maturity securities | ' | ' | 8,121 | ' | ' |
Equity securities, cost | ' | ' | ' | ' | ' |
Other invested assets | ' | ' | 2,045 | ' | ' |
Cash and cash equivalents | ' | ' | 17,130 | ' | ' |
Investment in subsidiaries | ' | ' | 1,250,436 | ' | ' |
Federal and state taxes recoverable | ' | ' | ' | ' | ' |
Deferred income taxes | ' | ' | 15,879 | ' | ' |
Investment in statutory business trusts, equity method | ' | ' | 2,664 | ' | ' |
Due from affiliate | ' | ' | ' | ' | ' |
Other assets | ' | ' | 69,172 | ' | ' |
Total assets | ' | ' | 1,437,341 | ' | ' |
Liabilities | ' | ' | ' | ' | ' |
Accounts payable and accrued expenses | ' | ' | 25,622 | ' | ' |
Due to affiliates | ' | ' | 75,823 | ' | ' |
Deferred rent liability | ' | ' | 4,537 | ' | ' |
Federal and state income taxes payable | ' | ' | ' | ' | ' |
Debt | ' | ' | 381,301 | ' | ' |
Total liabilities | ' | ' | 487,283 | ' | ' |
Shareholders' equity | ' | ' | 950,058 | ' | ' |
Total liabilities and shareholders' equity | ' | ' | 1,437,341 | ' | ' |
Predecessor | Unconsolidated affiliate | Tower Group International, Ltd. | ' | ' | ' | ' | ' |
Assets | ' | ' | ' | ' | ' |
Investment in unconsolidated affiliate | ' | ' | $71,894 | ' | ' |
Condensed_Balance_Sheets_Paren
Condensed Balance Sheets (Parenthetical) (Detail) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Condensed Financial Statements, Captions [Line Items] | ' | ' |
Fixed-maturity securities, amortized cost | $1,613,634 | $2,190,186 |
Tower Group International, Ltd. | Successor | ' | ' |
Condensed Financial Statements, Captions [Line Items] | ' | ' |
Fixed-maturity securities, amortized cost | 0 | ' |
Equity securities, cost | 0 | ' |
Tower Group International, Ltd. | Predecessor | ' | ' |
Condensed Financial Statements, Captions [Line Items] | ' | ' |
Fixed-maturity securities, amortized cost | ' | 7,656 |
Equity securities, cost | ' | $0 |
Condensed_Statements_of_Operat
Condensed Statements of Operations and Comprehensive Income (Detail) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | ||
Revenues | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Total revenues | $326,120 | $478,881 | [1],[2] | $460,518 | [1] | $476,483 | $475,369 | $474,891 | $506,392 | $466,223 | $1,742,002 | $1,922,875 | $1,775,790 |
Expenses | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Other operating expenses | ' | ' | ' | ' | ' | ' | ' | ' | 369,893 | 317,497 | 284,847 | ||
Interest expense | ' | ' | ' | ' | ' | ' | ' | ' | 33,594 | 32,630 | 34,290 | ||
Total expenses | ' | ' | ' | ' | ' | ' | ' | ' | 2,309,674 | 1,982,421 | 1,706,309 | ||
Other Income | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Equity income in unconsolidated affiliate | ' | ' | ' | ' | ' | ' | ' | ' | 6,962 | -1,470 | ' | ||
Acquisition related transaction costs | ' | ' | ' | ' | ' | ' | ' | ' | -21,322 | -9,229 | -360 | ||
Income (loss) before income taxes | ' | ' | ' | ' | ' | ' | ' | ' | -952,921 | -61,016 | 69,481 | ||
Provision/(benefit) for income taxes | ' | ' | ' | ' | ' | ' | ' | ' | 8,431 | -29,099 | 14,051 | ||
Net income (loss) attributable to Tower Group International, Ltd. | -91,633 | -348,053 | [1],[2] | -515,847 | [1] | 12,917 | -58,220 | 21,629 | -16,809 | 19,166 | -942,616 | -34,234 | 44,435 |
Other comprehensive income (loss) net of tax | ' | ' | ' | ' | ' | ' | ' | ' | -114,768 | 22,388 | 24,968 | ||
Comprehensive income (loss) | ' | ' | ' | ' | ' | ' | ' | ' | -1,076,120 | -9,529 | 80,398 | ||
Tower Group International, Ltd. | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Revenues | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Net realized gains (losses) on investments | ' | ' | ' | ' | ' | ' | ' | ' | 221 | -1,570 | -264 | ||
Investment income | ' | ' | ' | ' | ' | ' | ' | ' | 8,667 | 815 | 1,394 | ||
Equity in net earnings of subsidiaries | ' | ' | ' | ' | ' | ' | ' | ' | -923,809 | -6,254 | 61,681 | ||
Total revenues | ' | ' | ' | ' | ' | ' | ' | ' | -914,921 | -7,009 | 62,811 | ||
Expenses | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Other operating expenses | ' | ' | ' | ' | ' | ' | ' | ' | 7,786 | 11,754 | 10,067 | ||
Interest expense | ' | ' | ' | ' | ' | ' | ' | ' | 4,887 | 18,782 | 17,843 | ||
Total expenses | ' | ' | ' | ' | ' | ' | ' | ' | 12,673 | 30,536 | 27,910 | ||
Other Income | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Equity income in unconsolidated affiliate | ' | ' | ' | ' | ' | ' | ' | ' | 954 | -1,470 | ' | ||
Gain on investment in acquired unconsolidated affiliate | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Acquisition related transaction costs | ' | ' | ' | ' | ' | ' | ' | ' | -17,261 | -9,229 | -360 | ||
Income (loss) before income taxes | ' | ' | ' | ' | ' | ' | ' | ' | -943,901 | -48,244 | 34,541 | ||
Provision/(benefit) for income taxes | ' | ' | ' | ' | ' | ' | ' | ' | -1,285 | -14,010 | -9,894 | ||
Net income (loss) attributable to Tower Group International, Ltd. | ' | ' | ' | ' | ' | ' | ' | ' | -942,616 | -34,234 | 44,435 | ||
Other comprehensive income (loss) net of tax | ' | ' | ' | ' | ' | ' | ' | ' | -102,262 | 19,704 | 14,774 | ||
Comprehensive income (loss) | ' | ' | ' | ' | ' | ' | ' | ' | ($1,044,878) | ($14,530) | $59,209 | ||
[1] | Net Income (loss) attributable to Tower Group International, Ltd. and per share amounts have been revised from amounts previously reported to adjust for a correction in income tax expenses by $8.5 million in the second quarter of 2013 and $0.4 million in the third quarter of 2013. The Company adjusted the valuation allowance recorded on its deferred taxes. Management concluded these revisions were not material to the previously reported financial statements. | ||||||||||||
[2] | Revenues have been revised from amounts previously reported to adjust for a correction in accounting for the Southport Quota Share. In the third quarter of 2013, management should have used deposit accounting. This correction resulted in lower net earned premiums of $46.1 million and lower ceded commission revenue of $10.1 million, offset by $36.0 million higher loss and loss adjustment expense. This correction had no impact to net income (loss). This correction also resulted in an adjustment to decrease total assets and total liabilities by $23.9 million. Cash flows provided by (used in) operating activities increased and Cash flows provided by (used in) financing activities decreased by $35.1 million in the third quarter of 2013. Management concluded these revisions were not material to the previously reported financial statements. |
Condensed_Statements_of_Cash_F
Condensed Statements of Cash Flows (Detail) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Condensed Financial Statements, Captions [Line Items] | ' | ' | ' |
Cash and cash equivalents, end of year | $293,898 | $83,800 | $107,101 |
Cash flows provided by (used in) operating activities: | ' | ' | ' |
Net income | -942,616 | -34,234 | 44,435 |
Adjustments to reconcile net income to net cash provided by (used) in operations: | ' | ' | ' |
Depreciation and amortization | 29,704 | 33,609 | 30,940 |
Amortization of restricted stock | 13,195 | 8,247 | 10,292 |
Deferred income tax | 4,745 | -14,935 | 5,847 |
Change in operating assets and liabilities | ' | ' | ' |
Investment income receivable | 7,839 | 1,450 | -2,912 |
Equity loss (income) in unconsolidated affiliate | -6,962 | -1,064 | ' |
Other assets | 94,528 | -43,048 | 15,371 |
Accounts payable and accrued expenses | -31,173 | 99,066 | 21,568 |
Net cash flows provided by (used in) operations | -350,043 | 109,333 | 82,754 |
Cash flows provided by (used in) investing activities: | ' | ' | ' |
Purchase - fixed-maturity securities | -1,273,710 | -1,855,590 | -2,019,603 |
Purchase - equity securities | -1,258,780 | -1,525,206 | -819,180 |
Purchase of other invested assets | -39,039 | -13,440 | -42,346 |
Sale - equity securities | 1,291,343 | 1,442,225 | 793,886 |
Net cash flows provided by (used in) investing activities | 701,306 | -100,654 | -111,947 |
Cash flows provided by (used in) financing activities: | ' | ' | ' |
Repayment of credit facility borrowings | -70,000 | ' | -17,000 |
Proceeds from convertible senior notes hedge termination | 2,380 | ' | ' |
Payments for warrants termination | -1,000 | ' | ' |
Treasury stock acquired-net employee share-based compensation | -5,892 | -2,263 | -1,834 |
Repurchase of Common Stock | ' | -20,987 | -64,572 |
Dividends paid | -26,151 | -29,075 | -27,894 |
Net cash flows provided by (used in) financing activities | -141,165 | -31,980 | -3,927 |
Increase (decrease) in cash and cash equivalents | 210,098 | -23,301 | -33,120 |
Cash and cash equivalents, beginning of period | 83,800 | 107,101 | 140,221 |
Cash and cash equivalents, end of period | 293,898 | 83,800 | 107,101 |
Tower Group International, Ltd. | ' | ' | ' |
Condensed Financial Statements, Captions [Line Items] | ' | ' | ' |
Cash and cash equivalents, end of year | 438 | 17,130 | 12,882 |
Cash flows provided by (used in) operating activities: | ' | ' | ' |
Net income | -942,616 | -34,234 | 44,435 |
Adjustments to reconcile net income to net cash provided by (used) in operations: | ' | ' | ' |
(Gain) loss on sale of investments | -221 | 1,570 | 264 |
Dividends received from consolidated subsidiaries | ' | 22,954 | 55,400 |
Equity in undistributed net income of subsidiaries | 923,809 | 2,088 | -62,189 |
Depreciation and amortization | ' | 4,388 | 3,362 |
Amortization of debt issuance costs | ' | 2,830 | 2,635 |
Amortization of restricted stock | ' | 9,283 | 10,292 |
Deferred income tax | ' | -13,165 | -3,836 |
Excess tax benefits from share-based payment arrangements | ' | -345 | -162 |
Change in operating assets and liabilities | ' | ' | ' |
Investment income receivable | ' | ' | 173 |
Federal and state income tax recoverable | ' | -18,409 | 15,998 |
Equity loss (income) in unconsolidated affiliate | ' | 1,746 | ' |
Other assets | ' | -20,639 | -16,763 |
Accounts payable and accrued expenses | 17,166 | 57,610 | 6,089 |
Deferred rent | ' | -534 | -581 |
Net cash flows provided by (used in) operations | -4,958 | 15,143 | 55,117 |
Cash flows provided by (used in) investing activities: | ' | ' | ' |
Net change in cash from reverse acquisition | -7,683 | ' | ' |
Investment in unconsolidated affiliate | ' | -71,512 | ' |
Principal pay-down received on promissory note | 14,500 | ' | ' |
Sale or maturity - fixed-maturity securities | ' | 3,947 | 58,367 |
Purchase - fixed-maturity securities | ' | -6,117 | -46,848 |
Purchase - equity securities | ' | ' | -4,224 |
Purchase of other invested assets | ' | 8,413 | -10,458 |
Sale - equity securities | ' | 8,390 | 1,304 |
Net cash flows provided by (used in) investing activities | 6,817 | -56,879 | -1,859 |
Cash flows provided by (used in) financing activities: | ' | ' | ' |
Proceeds from credit facility borrowings | ' | 20,000 | 67,000 |
Repayment of credit facility borrowings | ' | ' | -17,000 |
Proceeds from intercompany borrowings | ' | 77,968 | ' |
Proceeds from convertible senior notes hedge termination | ' | ' | ' |
Payments for warrants termination | ' | ' | ' |
Exercise of stock options and warrants | ' | -2,263 | 373 |
Excess tax benefits from share-based payment arrangements | ' | 345 | 161 |
Treasury stock acquired-net employee share-based compensation | ' | -4 | -1,834 |
Repurchase of Common Stock | ' | -20,987 | -64,572 |
Dividends paid | -18,551 | -29,075 | -27,894 |
Net cash flows provided by (used in) financing activities | -18,551 | 45,984 | -43,766 |
Increase (decrease) in cash and cash equivalents | -16,692 | 4,248 | 9,492 |
Cash and cash equivalents, beginning of period | 17,130 | 12,882 | 3,390 |
Cash and cash equivalents, end of period | $438 | $17,130 | $12,882 |
Schedule_II_Condensed_Financia
Schedule II - Condensed Financial Information of the Registrant - Additional Information (Detail) (Investments In Affiliates Subsidiaries Associates And Joint Ventures, USD $) | Dec. 31, 2013 |
In Millions, unless otherwise specified | |
Investments In Affiliates Subsidiaries Associates And Joint Ventures | ' |
Supplementary Insurance Information, by Segment [Line Items] | ' |
Investment in subsidiaries | $335.50 |
Supplementary_Insurance_Inform1
Supplementary Insurance Information (Detail) (USD $) | 3 Months Ended | 12 Months Ended | |||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 |
Supplementary Insurance Information, by Segment [Line Items] | ' | ' | ' | ' | ' |
Deferred Acquisition Cost, Net of Deferred Ceding Commission Revenue | ' | $95,096 | $181,198 | $168,858 | $164,123 |
Gross Future Policy Benefits, Losses and Loss Expenses | ' | 2,081,285 | 1,895,679 | 1,632,113 | 1,610,421 |
Gross Unearned Premiums | ' | 763,112 | 921,271 | ' | ' |
Net earned premiums | 46,100 | 1,512,915 | 1,721,864 | 1,593,850 | ' |
Benefits, Losses and Loss Expenses | ' | 1,519,834 | 1,263,758 | 1,076,986 | ' |
Net Premiums Written | ' | 1,232,615 | 1,739,381 | 1,638,591 | ' |
Premiums written | ' | ' | ' | ' | ' |
Supplementary Insurance Information, by Segment [Line Items] | ' | ' | ' | ' | ' |
Deferred Acquisition Cost, Net of Deferred Ceding Commission Revenue | ' | ' | 181,198 | 168,858 | ' |
Gross Future Policy Benefits, Losses and Loss Expenses | ' | ' | 1,895,679 | 1,632,113 | ' |
Gross Unearned Premiums | ' | ' | 921,271 | 893,176 | ' |
Net earned premiums | ' | ' | 1,721,864 | 1,593,850 | ' |
Benefits, Losses and Loss Expenses | ' | ' | 1,263,758 | 1,076,986 | ' |
Amortization of DAC | ' | ' | -352,402 | -345,585 | ' |
Operating Expenses | ' | ' | 301,617 | 273,328 | ' |
Net Premiums Written | ' | ' | 1,739,440 | 1,638,590 | ' |
Unearned | ' | ' | ' | ' | ' |
Supplementary Insurance Information, by Segment [Line Items] | ' | ' | ' | ' | ' |
Deferred Acquisition Cost, Net of Deferred Ceding Commission Revenue | ' | 95,096 | ' | ' | ' |
Gross Future Policy Benefits, Losses and Loss Expenses | ' | 2,081,285 | ' | ' | ' |
Gross Unearned Premiums | ' | 763,112 | ' | ' | ' |
Net earned premiums | ' | 1,512,915 | ' | ' | ' |
Benefits, Losses and Loss Expenses | ' | 1,519,834 | ' | ' | ' |
Amortization of DAC | ' | -331,361 | ' | ' | ' |
Operating Expenses | ' | 349,162 | ' | ' | ' |
Net Premiums Written | ' | 1,232,616 | ' | ' | ' |
Commercial Insurance | ' | ' | ' | ' | ' |
Supplementary Insurance Information, by Segment [Line Items] | ' | ' | ' | ' | ' |
Deferred Acquisition Cost, Net of Deferred Ceding Commission Revenue | ' | 60,879 | 112,334 | 111,649 | ' |
Gross Future Policy Benefits, Losses and Loss Expenses | ' | 1,102,533 | 838,656 | 1,192,540 | ' |
Gross Unearned Premiums | ' | 417,475 | 529,414 | 551,674 | ' |
Net earned premiums | ' | 931,693 | 1,104,551 | 1,052,050 | ' |
Benefits, Losses and Loss Expenses | ' | 1,185,627 | 859,707 | 740,755 | ' |
Amortization of DAC | ' | -197,980 | -207,208 | -232,922 | ' |
Operating Expenses | ' | 204,131 | 182,891 | 155,576 | ' |
Net Premiums Written | ' | 751,698 | 1,077,225 | 1,079,676 | ' |
Assumed Reinsurance Segment | ' | ' | ' | ' | ' |
Supplementary Insurance Information, by Segment [Line Items] | ' | ' | ' | ' | ' |
Deferred Acquisition Cost, Net of Deferred Ceding Commission Revenue | ' | ' | 16,831 | 9,006 | ' |
Gross Future Policy Benefits, Losses and Loss Expenses | ' | ' | 619,309 | 26,141 | ' |
Gross Unearned Premiums | ' | ' | 65,146 | 36,762 | ' |
Net earned premiums | ' | ' | 120,015 | 35,861 | ' |
Benefits, Losses and Loss Expenses | ' | ' | 52,975 | 17,456 | ' |
Amortization of DAC | ' | ' | -42,582 | -9,490 | ' |
Operating Expenses | ' | ' | 1,542 | 439 | ' |
Net Premiums Written | ' | ' | 148,399 | 72,623 | ' |
Assumed Reinsurance Segment | Premiums written | ' | ' | ' | ' | ' |
Supplementary Insurance Information, by Segment [Line Items] | ' | ' | ' | ' | ' |
Deferred Acquisition Cost, Net of Deferred Ceding Commission Revenue | ' | 10,140 | ' | ' | ' |
Gross Future Policy Benefits, Losses and Loss Expenses | ' | 603,380 | ' | ' | ' |
Gross Unearned Premiums | ' | 22,837 | ' | ' | ' |
Net earned premiums | ' | 116,417 | ' | ' | ' |
Benefits, Losses and Loss Expenses | ' | 41,474 | ' | ' | ' |
Amortization of DAC | ' | -40,576 | ' | ' | ' |
Operating Expenses | ' | 7,879 | ' | ' | ' |
Net Premiums Written | ' | 82,530 | ' | ' | ' |
Personal Insurance | ' | ' | ' | ' | ' |
Supplementary Insurance Information, by Segment [Line Items] | ' | ' | ' | ' | ' |
Deferred Acquisition Cost, Net of Deferred Ceding Commission Revenue | ' | 24,077 | 52,033 | 48,203 | ' |
Gross Future Policy Benefits, Losses and Loss Expenses | ' | 375,372 | 437,714 | 413,432 | ' |
Gross Unearned Premiums | ' | 322,800 | 326,711 | 304,740 | ' |
Net earned premiums | ' | 464,805 | 497,298 | 505,939 | ' |
Benefits, Losses and Loss Expenses | ' | 292,733 | 351,076 | 318,775 | ' |
Amortization of DAC | ' | -92,805 | -102,612 | -103,173 | ' |
Operating Expenses | ' | 137,152 | 117,184 | 117,313 | ' |
Net Premiums Written | ' | $398,388 | $513,816 | $486,291 | ' |
Reinsurance_Detail
Reinsurance (Detail) (USD $) | 3 Months Ended | 12 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items] | ' | ' | ' | ' |
Premiums, Direct | ' | $1,606,249 | $1,755,157 | $1,692,282 |
Premiums, Ceded | ' | 495,045 | 231,691 | 172,333 |
Total Premiums, Direct | ' | 1,717,501 | 1,759,126 | 1,684,020 |
Premiums, Assumed | ' | 121,411 | 215,915 | 118,642 |
Total Premiums, Ceded | ' | 513,517 | 221,807 | 195,922 |
Premiums, Net | ' | 1,232,615 | 1,739,381 | 1,638,591 |
Total Premiums, Assumed | ' | 308,931 | 184,545 | 105,752 |
Percentage of amount assumed to net | ' | 20.40% | 10.70% | 6.60% |
Total Premiums, Net | 46,100 | 1,512,915 | 1,721,864 | 1,593,850 |
Property and casualty insurance | ' | ' | ' | ' |
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items] | ' | ' | ' | ' |
Premiums, Direct | ' | 1,717,501 | 1,759,126 | 1,684,020 |
Premiums, Ceded | ' | 513,517 | 221,807 | 195,922 |
Premiums, Assumed | ' | 308,931 | 184,545 | 105,752 |
Premiums, Net | ' | $1,512,915 | $1,721,864 | $1,593,850 |
Percentage of amount assumed to net | ' | 20.40% | 10.70% | 6.60% |
Valuation_and_Qualifying_Accou1
Valuation and Qualifying Accounts (Detail) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Premiums receivable | ' | ' | ' |
Valuation and Qualifying Accounts Disclosure [Line Items] | ' | ' | ' |
Balance, Beginning of Period | $16,509,000 | $14,383,000 | $7,719,000 |
Additions | 13,144,000 | 6,916,000 | 9,669,000 |
Deletions | -12,060,000 | -4,790,000 | -3,005,000 |
Balance, End of Period | 17,593,000 | 16,509,000 | 14,383,000 |
Deferred income taxes, net | ' | ' | ' |
Valuation and Qualifying Accounts Disclosure [Line Items] | ' | ' | ' |
Balance, Beginning of Period | 6,984,000 | 6,961,000 | 11,824,000 |
Additions | 285,941,000 | 23,000 | ' |
Deletions | ' | ' | -4,863,000 |
Balance, End of Period | $292,925,000 | $6,984,000 | $6,961,000 |
Supplemental_Information_Conce1
Supplemental Information Concerning Insurance Operations (Detail) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Supplemental Information for Property, Casualty Insurance Underwriters [Line Items] | ' | ' | ' |
Deferred Acquisition Cost | $95,096 | $181,198 | $168,858 |
Reserves For Unpaid Claims and Claim Adjustment Expenses | 2,081,285 | 1,895,679 | 1,632,113 |
Discount on Reserves | 7,192 | 8,354 | 3,674 |
Unearned Premium | 763,112 | 921,271 | 893,176 |
Earned Premium | 1,512,915 | 1,721,864 | 1,593,850 |
Net Investment Income | 109,208 | 127,165 | 126,474 |
Claims and Claims Adjustment Expenses Incurred and Related to Current Year | 981,713 | 1,184,510 | 1,076,045 |
Claims and Claims Adjustment Expenses Incurred and Related to Prior Years | 538,121 | 79,248 | 941 |
Amortization of DAC | -331,360 | -352,402 | -345,585 |
Paid Claims and Claim Adjustment Expenses | 1,305,666 | 1,167,428 | 1,070,539 |
Net Premiums Written | $1,232,615 | $1,739,382 | $1,638,591 |