Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Jun. 30, 2014 | Aug. 19, 2014 | |
Document Information [Line Items] | ' | ' |
Document Type | '10-Q | ' |
Amendment Flag | 'false | ' |
Document Period End Date | 30-Jun-14 | ' |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q2 | ' |
Trading Symbol | 'TWGP | ' |
Entity Registrant Name | 'Tower Group International, Ltd. | ' |
Entity Central Index Key | '0001289592 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Filer Category | 'Large Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 57,292,302 |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Available-for-sale investments, at fair value: | ' | ' |
Fixed-maturity securities | $1,434,379 | $1,642,695 |
Total investments | 1,507,559 | 1,851,377 |
Cash and cash equivalents | 264,850 | 293,898 |
Investment income receivable | 9,685 | 17,493 |
Premiums receivable | 266,720 | 309,499 |
Reinsurance recoverable on paid losses | 51,281 | 68,963 |
Reinsurance recoverable on unpaid losses | 455,472 | 570,860 |
Prepaid reinsurance premiums | 462,688 | 186,476 |
Deferred acquisition costs, net | 10,720 | 95,096 |
Intangible assets | 79,431 | 79,936 |
Funds held by reinsured companies | 77,289 | 98,816 |
Other assets | 265,860 | 383,131 |
Total assets | 3,451,555 | 3,955,545 |
Liabilities | ' | ' |
Loss and loss adjustment expenses | 1,987,558 | 2,081,285 |
Unearned premium | 641,256 | 763,112 |
Reinsurance balances payable | 157,654 | 89,820 |
Funds held under reinsurance agreements | 82,021 | 222,159 |
Other liabilities | 189,390 | 286,171 |
Deferred income taxes | 29,858 | 29,508 |
Debt | 384,373 | 382,770 |
Total liabilities | 3,472,110 | 3,854,825 |
Contingencies (Note 16) | ' | ' |
Shareholders' equity | ' | ' |
Common stock ($0.01 par value; 150,000,000 shares authorized, 57,437,157 and 57,437,157 shares issued, and 57,297,589 and 57,381,686 shares outstanding) | 574 | 574 |
Treasury stock (139,568 and 55,471 shares) | -88 | -39 |
Paid-in-capital | 815,096 | 815,119 |
Accumulated other comprehensive loss | -30,740 | -19,507 |
Retained earnings (accumulated deficit) | -795,816 | -700,596 |
Tower Group International, Ltd. shareholders' equity (deficit) | -10,974 | 95,551 |
Noncontrolling interests | -9,581 | 5,169 |
Total shareholders' equity (deficit) | -20,555 | 100,720 |
Total liabilities and shareholders' equity (deficit) | 3,451,555 | 3,955,545 |
Tower | ' | ' |
Available-for-sale investments, at fair value: | ' | ' |
Fixed-maturity securities | 1,203,335 | 1,390,146 |
Equity securities | 12,791 | 104,107 |
Short-term investments | 2,000 | 5,897 |
Other invested assets | 55,617 | 96,155 |
Liabilities | ' | ' |
Loss and loss adjustment expenses | 1,887,301 | ' |
Reciprocal Exchanges | ' | ' |
Available-for-sale investments, at fair value: | ' | ' |
Fixed-maturity securities | 231,044 | 252,549 |
Equity securities | 2,772 | 2,523 |
Cash and cash equivalents | 17,366 | 5,684 |
Investment income receivable | 1,980 | 2,325 |
Premiums receivable | 43,132 | 42,348 |
Reinsurance recoverable on paid losses | 2,858 | 1,989 |
Reinsurance recoverable on unpaid losses | 14,259 | 15,392 |
Prepaid reinsurance premiums | 22,495 | 22,226 |
Deferred acquisition costs, net | 10,841 | 9,611 |
Intangible assets | 6,104 | 6,337 |
Other assets | 1,307 | 1,395 |
Liabilities | ' | ' |
Loss and loss adjustment expenses | 100,257 | 107,315 |
Unearned premium | 107,484 | 106,067 |
Reinsurance balances payable | 5,556 | 4,872 |
Funds held under reinsurance agreements | 22 | 22 |
Other liabilities | 19,401 | 17,234 |
Deferred income taxes | $19,181 | $19,181 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, except Share data, unless otherwise specified | ||
Fixed-maturity securities, amortized cost | $1,408,545 | $1,613,634 |
Cash and cash equivalents | 264,850 | 293,898 |
Investment income receivable | 9,685 | 17,493 |
Premiums receivable | 266,720 | 309,499 |
Reinsurance recoverable on paid losses | 51,281 | 68,963 |
Reinsurance recoverable on unpaid losses | 455,472 | 570,860 |
Prepaid reinsurance premiums | 462,688 | 186,476 |
Deferred acquisition costs, net | 10,720 | 95,096 |
Intangible assets | 79,431 | 79,936 |
Other assets | 265,860 | 383,131 |
Loss and loss adjustment expenses | 1,987,558 | 2,081,285 |
Unearned premium | 641,256 | 763,112 |
Reinsurance balances payable | 157,654 | 89,820 |
Funds held under reinsurance agreements | 82,021 | 222,159 |
Other liabilities | 189,390 | 286,171 |
Deferred income taxes | 29,858 | 29,508 |
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 | 57,437,157 |
Common stock, shares outstanding | 57,297,589 | 57,381,686 |
Treasury stock, shares | 139,568 | 55,471 |
Tower | ' | ' |
Fixed-maturity securities, amortized cost | 1,184,119 | 1,364,157 |
Equity securities, cost | 13,369 | 94,957 |
Short-term investments, cost | 2,000 | 5,925 |
Loss and loss adjustment expenses | 1,887,301 | ' |
Reciprocal Exchanges | ' | ' |
Fixed-maturity securities, amortized cost | 224,426 | 249,477 |
Equity securities, cost | 2,751 | 2,751 |
Cash and cash equivalents | 17,366 | 5,684 |
Investment income receivable | 1,980 | 2,325 |
Premiums receivable | 43,132 | 42,348 |
Reinsurance recoverable on paid losses | 2,858 | 1,989 |
Reinsurance recoverable on unpaid losses | 14,259 | 15,392 |
Prepaid reinsurance premiums | 22,495 | 22,226 |
Deferred acquisition costs, net | 10,841 | 9,611 |
Intangible assets | 6,104 | 6,337 |
Other assets | 1,307 | 1,395 |
Loss and loss adjustment expenses | 100,257 | 107,315 |
Unearned premium | 107,484 | 106,067 |
Reinsurance balances payable | 5,556 | 4,872 |
Funds held under reinsurance agreements | 22 | 22 |
Other liabilities | 19,401 | 17,234 |
Deferred income taxes | $19,181 | $19,181 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Revenues | ' | ' | ' | ' |
Net premiums earned | $94,667 | $418,364 | $206,211 | $840,250 |
Ceding commission revenue | 17,720 | 2,884 | 28,522 | 8,323 |
Insurance services revenue | 48 | 532 | 613 | 660 |
Policy billing fees | 2,759 | 3,321 | 5,435 | 6,471 |
Net investment income | 10,210 | 28,402 | 25,568 | 58,719 |
Net realized investment gains (losses): | ' | ' | ' | ' |
Other-than-temporary impairments | -1,069 | -4,456 | -2,327 | -5,145 |
Portion of loss recognized in accumulated other comprehensive income (loss) | 20 | ' | 371 | ' |
Other net realized investment gains | 14,487 | 2,422 | 37,657 | 9,962 |
Total net realized investment gains (losses) | 13,438 | -2,034 | 35,701 | 4,817 |
Total revenues | 138,842 | 451,469 | 302,050 | 919,240 |
Expenses | ' | ' | ' | ' |
Loss and loss adjustment expenses | 94,905 | 559,892 | 197,466 | 835,624 |
Commission expense | 36,422 | 98,928 | 61,471 | 181,449 |
Other operating expenses | 51,022 | 86,609 | 129,899 | 169,345 |
Acquisition-related transaction costs | 2,397 | 665 | 3,043 | 19,721 |
Interest expense | 7,322 | 7,635 | 14,332 | 15,443 |
Total expenses | 192,068 | 753,729 | 406,211 | 1,221,582 |
Other income (expense) | ' | ' | ' | ' |
Equity income in unconsolidated affiliate | ' | 7,838 | ' | 7,966 |
Goodwill and fixed asset impairment | ' | -214,049 | ' | -214,049 |
Income (loss) before income taxes | -53,226 | -508,471 | -104,161 | -508,425 |
Income tax expense (benefit) | 766 | -1,930 | 1,729 | -3,520 |
Net income (loss) | -53,992 | -506,541 | -105,890 | -504,905 |
Less: Net income (loss) attributable to Noncontrolling interests | -5,250 | 801 | -10,670 | -10,480 |
Net income (loss) attributable to Tower Group International, Ltd. | ($48,742) | ($507,342) | ($95,220) | ($494,425) |
Earnings (loss) per share attributable to Tower Group International, Ltd. shareholders: | ' | ' | ' | ' |
Basic | ($0.85) | ($8.88) | ($1.67) | ($9.61) |
Diluted | ($0.85) | ($8.88) | ($1.67) | ($9.61) |
Weighted average common shares outstanding: | ' | ' | ' | ' |
Basic | 57,171 | 57,135 | 57,161 | 51,487 |
Diluted | 57,171 | 57,135 | 57,161 | 51,487 |
Dividends declared and paid per common share | ' | $0.17 | ' | $0.34 |
Consolidated_Statements_of_Com
Consolidated Statements of Comprehensive Income (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Net income (loss) | ($53,992) | ($506,541) | ($105,890) | ($504,905) |
Other comprehensive income (loss) before tax | ' | ' | ' | ' |
Gross unrealized investment holding gains (losses) arising during periods | 17,935 | -80,963 | 27,788 | -81,334 |
Less: Reclassification adjustment for investment (gains) losses included in net income | -14,733 | 1,938 | -35,703 | -4,529 |
Portion of other-than-temporary impairment losses recognized in other comprehensive income | -20 | ' | -371 | ' |
Cumulative translation adjustment | ' | -53 | ' | -3,664 |
Deferred gain (loss) on cash flow hedge | 417 | 2,220 | 845 | 3,818 |
Other comprehensive income (loss) before tax | 3,599 | -76,858 | -7,441 | -85,709 |
Income tax benefit (expense) related to items of other comprehensive income (loss) | ' | -2,721 | ' | ' |
Other comprehensive income (loss), net of income tax | 3,599 | -79,579 | -7,441 | -85,709 |
Comprehensive income (loss) | -50,393 | -586,120 | -113,331 | -590,614 |
Less: Comprehensive income (loss) attributable to Noncontrolling interests | -3,109 | -9,526 | -6,878 | -22,492 |
Comprehensive income (loss) attributable to Tower Group International, Ltd. | ($47,284) | ($576,594) | ($106,453) | ($568,122) |
Consolidated_Statements_of_Cha
Consolidated Statements of Changes in Shareholders' Equity (USD $) | Total | Common Stock | Treasury Stock | Paid-in Capital | Accumulated Other Comprehensive Income (loss) | Retained Earnings (Accumulated Deficit) | Noncontrolling Interests |
In Thousands, except Share data | |||||||
Balance at beginning of period at Dec. 31, 2012 | $984,218 | $530 | ($181,435) | $780,036 | $82,756 | $268,171 | $34,160 |
Balance at beginning of period (in shares) at Dec. 31, 2012 | ' | 53,048,000 | ' | ' | ' | ' | ' |
Dividends declared | -16,676 | ' | ' | ' | ' | -16,676 | ' |
Stock based compensation (in shares) | ' | 245,000 | ' | ' | ' | ' | ' |
Stock based compensation | 6,085 | 3 | -5,870 | 11,952 | ' | ' | ' |
Merger Transaction with Canopius Bermuda (in shares) | ' | 14,026,000 | ' | ' | ' | ' | ' |
Merger Transaction with Canopius Bermuda | 207,347 | 140 | ' | 207,207 | ' | ' | ' |
Extinguishment of treasury stock in connection with Merger Transaction (in shares) | ' | -9,882,000 | ' | ' | ' | ' | ' |
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) | -504,905 | ' | ' | ' | ' | -494,425 | -10,480 |
Other comprehensive income (loss) | -85,709 | ' | ' | ' | -73,696 | ' | -12,013 |
Balance at end of period at Jun. 30, 2013 | 590,901 | 574 | -17 | 812,547 | 9,060 | -242,930 | 11,667 |
Balance at end of period (in shares) at Jun. 30, 2013 | ' | 57,437,000 | ' | ' | ' | ' | ' |
Balance at beginning of period at Dec. 31, 2013 | 100,720 | 574 | -39 | 815,119 | -19,507 | -700,596 | 5,169 |
Balance at beginning of period (in shares) at Dec. 31, 2013 | 57,437,157 | 57,437,000 | ' | ' | ' | ' | ' |
Stock based compensation | -72 | ' | -49 | -23 | ' | ' | ' |
Net income (loss) | -105,890 | ' | ' | ' | ' | -95,220 | -10,670 |
Other comprehensive income (loss) | -7,441 | ' | ' | ' | -11,233 | ' | 3,792 |
Ownership change in noncontrolling interest in consolidated partnerships | -7,872 | ' | ' | ' | ' | ' | -7,872 |
Balance at end of period at Jun. 30, 2014 | ($20,555) | $574 | ($88) | $815,096 | ($30,740) | ($795,816) | ($9,581) |
Balance at end of period (in shares) at Jun. 30, 2014 | 57,437,157 | 57,437,000 | ' | ' | ' | ' | ' |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 |
Cash flows provided by (used in) operating activities: | ' | ' |
Net income (loss) | ($105,890) | ($504,905) |
Adjustments to reconcile net income to net cash provided by (used in) operations: | ' | ' |
Gain on investment in acquired unconsolidated affiliate | ' | -7,966 |
Net realized investment (gains) losses | -35,701 | -4,817 |
Depreciation and amortization | 2,576 | 22,080 |
Goodwill and fixed asset impairment | ' | 214,049 |
Amortization of bond premium or discount | 3,235 | 6,124 |
Amortization of debt issuance costs | -730 | -956 |
Amortization of restricted stock | 205 | 12,622 |
Deferred income taxes | 350 | 44,743 |
Excess tax benefits from share-based payment arrangements | ' | -1,108 |
Changes in operating assets and liabilities: | ' | ' |
Investment income receivable | 7,808 | -850 |
Premiums receivable | 42,779 | 19,612 |
Reinsurance recoverable | 133,070 | 228,391 |
Prepaid reinsurance premiums | -276,212 | 90,195 |
Deferred acquisition costs, net | 84,376 | -5,871 |
Funds held by reinsured companies | 21,527 | -53,822 |
Other assets | 45,228 | 36,061 |
Loss and loss adjustment expenses | -93,727 | 26,059 |
Unearned premium | -121,856 | -92,610 |
Reinsurance balances payable | 67,834 | 5,873 |
Funds held under reinsurance agreements | -140,138 | -2,020 |
Other liabilities | -84,972 | -52,376 |
Net cash flows provided by (used in) operations | -450,238 | -21,492 |
Cash flows provided by (used in) investing activities: | ' | ' |
Cash acquired in Canopius Merger Transaction | ' | 134,741 |
Purchase of fixed assets | ' | -15,661 |
Purchase of fixed-maturity securities | -652,324 | -814,924 |
Purchase of equity securities | -57,795 | -796,800 |
Change in short-term investments | 3,947 | 18,309 |
Net sales (purchases) of other invested assets | 37,266 | -19,252 |
Sale of fixed-maturity securities | 869,764 | 664,401 |
Maturity of fixed-maturity securities | 34,589 | 79,230 |
Sale of equity securities | 146,692 | 802,297 |
Change in restricted cash | 11,821 | 5,228 |
Net cash flows provided by (used in) investing activities | 393,960 | 57,569 |
Cash flows provided by (used in) financing activities: | ' | ' |
Decrease in deposit assets | 35,151 | ' |
Noncontrolling interests - change in ownership interest | -7,872 | ' |
Proceeds from convertible senior notes hedge termination | ' | 2,380 |
Payment for warrants termination | ' | -1,000 |
Issuance of common stock under stock-based compensation programs | ' | 2 |
Excess tax benefits from share-based payment arrangements | ' | 1,106 |
Treasury stock acquired-net employee share-based compensation | -49 | -5,870 |
Dividends paid | ' | -16,676 |
Net cash flows provided by (used in) financing activities | 27,230 | -20,058 |
Increase (decrease) in cash and cash equivalents | -29,048 | 16,019 |
Cash and cash equivalents, beginning of period | 293,898 | 83,800 |
Cash and cash equivalents, end of period | 264,850 | 99,819 |
Supplemental disclosures of cash flow information: | ' | ' |
Cash paid for income taxes | ' | ' |
Cash paid for interest | $8,209 | $9,165 |
Nature_of_Business
Nature of Business | 6 Months Ended |
Jun. 30, 2014 | |
Nature of Business | ' |
Note 1—Nature of Business | |
Tower Group International, Ltd. (“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. The Company’s common stock is publicly traded on the NASDAQ Global Select Market under the symbol “TWGP”. | |
Significant Business Developments and Risks and Uncertainties | |
Shareholder Vote on Proposed Merger with ACP Re | |
The Company held its special general meeting of shareholders on August 6, 2014. At that special general meeting, the Company’s shareholders voted to approve and adopt the Agreement and Plan of Merger, dated as of January 3, 2014, as amended pursuant to Amendment No. 1 to the Agreement and Plan of Merger, by and among the Company, ACP Re, Ltd. and London Acquisition Company Limited, and the agreement between the Company, ACP Re, Ltd. and London Acquisition Company Limited required by Section 105 of the Bermuda Companies Act of 1981, as amended, and to approve the merger. | |
The closing of the merger is contingent, among other things, on the satisfaction of the closing conditions discussed below in “Proposed Merger with ACP Re.” Notwithstanding any other statement in this Form 10-Q or any other document, many of the conditions for closing the ACP Re Merger Agreement (as defined below) 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. | |
Proposed Merger with ACP Re | |
On January 3, 2014, Tower entered into an Agreement and Plan of Merger (the “Original ACP Re Merger Agreement”) with ACP Re Ltd. (“ACP Re”), and a wholly-owned subsidiary of ACP Re (“Merger Sub”). Subject to the satisfaction or waiver of the conditions therein, it is expected Merger Sub would merge with and into Tower (the “Merger”), with Tower as the surviving corporation in the Merger and a wholly owned subsidiary of ACP Re. 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. | |
On May 8, 2014, Tower entered into Amendment No. 1 to the Agreement and Plan of Merger (the “ACP Re Amendment”, and, together with the Original ACP Re Merger Agreement, the “ACP Re Merger Agreement”) with ACP Re and Merger Sub. The ACP Re Amendment, among other things, (1) reduces the per share consideration to be received by holders of Tower’s common shares in the Merger from $3.00 per share to $2.50 per share, (2) reduces the termination fee that Tower would, under certain circumstances, be required to pay to ACP Re in the event of a termination of the merger agreement, (3) extends to November 15, 2014 both the date by which Tower must hold its shareholders meeting to vote on the Merger and the deadline for completing the merger before either party can terminate the ACP Re Merger Agreement, (4) excludes from the material adverse effect closing condition any continued adverse results of Tower’s operations or deterioration of its financial condition resulting from (a) losses and loss adjustment expenses incurred under new, renewal or in-force insurance and reinsurance related policies, insurance and reinsurance related contracts, and insurance and reinsurance related binders, (b) operating expenses, including acquisition expenses, associated with the maintenance by Tower of its agency relationships, employees and facilities to operate its business in the ordinary course or (c) the insufficiency of Tower’s loss reserves (including IBNR reserves), (5) also excludes from the material adverse effect closing condition any effect resulting from facts or circumstances disclosed in any of Tower’s previous SEC filings, (6) eliminates the condition in the Original ACP Re Merger Agreement that holders of shares representing more than 15% of Tower’s share capital shall not have exercised dissenter’s rights, (7) provides that the closing condition in the Original ACP Re Merger Agreement requiring that each of Tower’s U.S. insurance subsidiaries shall have risk based capital that is equal to or exceeds its relevant company action level risk based capital will be deemed to have been satisfied if Tower and its subsidiaries have, on a consolidated basis, sufficient capital that could be reallocated among Tower’s insurance subsidiaries so that such condition could be satisfied and (8) provides that all of Tower’s representations and warranties in the ACP Re Merger Agreement will be qualified by disclosures made in Tower’s previous SEC filings. | |
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 $2.50 in cash, with an aggregate value of approximately $143.3 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. (See Shareholder Vote on Proposed Merger with ACP Re) | |
On the same day as the execution of the Original ACP Re Merger Agreement, the controlling shareholder of ACP Re 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, which approval was obtained on August 6, 2014 at a special general meeting of shareholders, (ii) receipt of governmental approvals, including antitrust, insurance regulatory including approvals from the insurance departments of the states of California, Florida, Illinois, Maine, Massachusetts, New Jersey, New Hampshire and New York and Bermuda Monetary Authority approvals, (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. 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. The Company expects that, in accordance with applicable regulatory requirements, the insurance departments in Massachusetts, New Hampshire and New Jersey will conduct hearings as part of approval process in such states. The Maine Bureau of Insurance conducted a hearing on ACP Re’s Form A application on August 11, 2014. 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. | |
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 $6.8 million, net of any transaction expenses it has reimbursed. | |
In addition, on June 26, 2014 the Company delivered a letter to ACP Re which in pertinent part reads as follows: | |
“Various of your representatives have orally suggested to us that an unwaived Insolvency Event has or may have occurred under Section 6.02(f)(i) of the merger agreement in the form of Amended Order of Administrative Supervision of the Massachusetts Insurance Department dated May 20, 2014. We do not believe that any such Insolvency Event has occurred. Tower intends to satisfy all conditions to closing the Merger applicable to Tower. | |
Furthermore, we note that on June 26, 2014, the Company confirmed to the Massachusetts Insurance Department that it would immediately contribute $3 million to its wholly owned subsidiary, Tower National Insurance Company, a Massachusetts domiciled insurance company (“TNIC”). In considerations for such payment, and subject to the approval of the Massachusetts Insurance Department, TNIC will issue a surplus note to the Company in the aggregate principal amount of $3 million. The effect of these transactions will be to increase the policyholders’ surplus of TNIC to a level in excess of the minimum required capital and surplus. | |
Tower by this letter requests that ACP Re, Ltd. unequivocally assure Tower in writing of its commitment to close the Merger on the terms and conditions set forth in the merger agreement and affirm that an Insolvency Event has not occurred. If such assurances are not received by Tower by 5:00 p.m. Monday, June 30, 2014, Tower will conclude that ACP Re will not voluntarily close the merger agreement at the price set forth therein. Tower reserves all of its rights, positions, and remedies under the merger agreement or otherwise, including to make disclosures that may be required under applicable law.” | |
On June 27, 2014, ACP Re’s counsel delivered a letter to the Company which in pertinent part reads as follows: | |
“I am writing on behalf of our client, ACP Re, Ltd., in response to your letter dated June 26, 2014. ACP Re will comply in all respects with its obligations under the parties’ Merger Agreement. ACP Re reserves all its rights under the Merger Agreement, with respect to the matters reference in your letter or otherwise.” | |
On June 27, 2014, the Company contributed $3 million to TNIC in consideration, and subject to the approval of the Massachusetts Insurance Department, for TNIC’s issuance to the Company of a surplus note in the aggregate principal amount of $3 million. | |
Cut-Through Reinsurance Agreements | |
On the same day as the execution of the Original ACP Re Merger Agreement, several subsidiaries of Tower entered into two Cut-Through Reinsurance Agreements, pursuant to which a subsidiary of AmTrust and a subsidiary of NGHC 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 receives 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. | |
As a result of the Cut-Through Reinsurance Agreements, unearned premiums net of reinsurance aggregating $327.7 million at December 31, 2013 (of which $194.0 million and $133.7 million were from the commercial insurance and personal insurance segments, respectively) were transferred to AmTrust and NGHC. The transfer of the unearned premium reserves at December 31, 2013 are recorded as negative written premiums in the first six months of 2014. In the first six months of 2014, net written premiums of $330.8 million were transferred to AmTrust and NGHC for renewal business and new policies issued with policy effective dates in 2014 (of which $227.0 million and $103.8 million were from the commercial insurance and personal insurance segments, respectively). | |
The accompanying financial statements for 2014 reflect the impact of the Cut-Through Reinsurance Agreements, and therefore the trends and relationships of net premiums written, premiums earned, acquisition expenses and losses incurred will differ materially from the same periods in 2013. | |
Managing General Agent Agreements | |
On April 1, 2014, a wholly-owned subsidiary of the Company, Tower Risk Management (“TRM”), entered into managing general agent agreements (the “MGA Agreements”), dated as of January 3, 2014, with AmTrust and NGHC pursuant to which TRM serves as underwriting manager on behalf of AmTrust and NGHC with respect to certain commercial lines business and personal lines business. | |
Under the MGA Agreements, TRM solicits, receives, underwrites, accepts, non-renews and cancels insurance risks for certain commercial lines business and personal lines business of AmTrust and NGHC in return for commissions. | |
The MGA Agreements will terminate on January 2, 2015 unless terminated earlier by TRM, AmTrust or NGHC by mutual agreement or by either of the parties under certain circumstances. With respect to AmTrust and NGHC, they may terminate their respective MGA Agreements if, among other things, the merger as contemplated by the merger agreement is consummated, if TRM or any of its affiliates, including the Company, becomes insolvent or if all or a controlling portion of TRM’s capital stock or all or any portion of its business is sold, transferred or merged into a third party and AmTrust or NGHC believes that such sale, transfer or merger has, or could have, a material adverse impact on AmTrust’s or NGHC’s interests. | |
Other 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. The agreements with Arch and Hannover covered business written from July 1, 2013 to December 31, 2013, as well as unearned premiums at June 30, 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, the 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. | |
A.M. Best, Fitch and Demotech Downgrade the Company’s Financial Strength and Issuer Credit Ratings | |
On May 9, 2014, A.M. Best lowered the financial strength ratings of each of Tower’s insurance subsidiaries from “B” (Fair) to “C++” (Marginal), as well as the issuer credit ratings of each of Tower’s insurance subsidiaries from “bb” to “b”. In addition, on May 9, 2014, A.M. Best downgraded the issuer credit rating of Tower Group, Inc. (“TGI”) as well as the debt rating on its $150 million 5.00% senior convertible notes due 2014 (the “Notes”) to “cc” from “b-”. On the same date, A.M. Best also downgraded the financial strength rating of CastlePoint Reinsurance Company, Ltd. (Bermuda) to “C++” (Marginal) from “B-” (Fair) and its issuer credit rating to “b” from “bb” and downgraded the issuer credit rating of Tower Group International, Ltd. to “cc” from “b-”. TGI and each of its insurance subsidiaries currently are and will continue to be under review with developing implications. In downgrading Tower’s ratings, A.M. Best stated that its actions took “into consideration Tower’s most recent Securities and Exchange Commission 10K filing, which included an additional $63 million of prior year reserve development, further reductions in GAAP shareholders’ equity as well as ongoing declines in statutory policyholders’ surplus and risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). These ratings factors are in addition to the diminished shareholder’s equity and reserves actions already taken by Tower during the year. These rating actions also consider the material adverse impact these changes had on all of Tower’s entities in terms of their ability to operate as going concerns. This action also contemplates the amended merger agreement announced by Tower.” | |
On May 13, 2014, Fitch withdrew all ratings on Tower and its operating subsidiaries due to a lack of robust data to maintain the ratings. Previously, 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 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 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 Tower Insurance Company of New York (“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 believes these rating actions, in combination with other items that have impacted the Company in 2013, may result in a significant decrease in the amount of premiums the insurance subsidiaries are able to write. The Company had gross written premiums of $609.5 million and $1,040.6 million in the six months ended June 30, 2014 and 2013, respectively. The majority of the 2014 written premiums were transferred to AmTrust and NGHC pursuant to the Cut-Through Reinsurance Agreements. | |
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 obligations that CastlePoint Re assumes from the U.S. based insurance subsidiaries are then retroceded to Tower Reinsurance, Ltd. (“TRL”), Tower’s other Bermuda based insurance subsidiary. 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. As of June 30, 2014, CastlePoint Re is required to collateralize $547.6 million of its assumed reserves in a reinsurance trust for the benefit of TICNY, the lead pool company of the U.S. insurance companies. As of June 30, 2014, CastlePoint Re held $532.0 million in its reinsurance trust. | |
Based on RBC calculations as of December 31, 2013, six of Tower’s ten U.S. based insurance subsidiaries had capital and surplus below Company Action Level and did 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 Agreements 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 increased significantly from December 31, 2013 to January 1, 2014, as the U.S. based subsidiaries transferred 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 New York State Department of Financial Services (“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. Tower discussed the risk based capital plan with the NYDFS in June 2014. | |
On May 7, 2014, the Illinois Department of Insurance (the “IDI”) sent a letter to the Company’s Illinois insurance subsidiary instructing such subsidiary to provide a plan to strengthen its risk based capital level as shown in its statutory annual financial statement. The subsidiary submitted such plan to the IDI on June 20, 2014 in accordance with the letter, and on July 18, 2014 the subsidiary received a letter indicating that the plan is satisfactory to the IDI | |
On May 20, 2014, the Massachusetts Department of Insurance (the “MDOI”) entered an amended order of administrative supervision with respect to two of Tower’s insurance subsidiaries (collectively, the “Massachusetts Insurers”). Under the terms of the order, the Massachusetts Insurers are subject to enhanced reporting requirements to the MDOI and are restricted from selling or encumbering assets or incurring debt, making material changes in management, entering into employment agreements, writing any new business other than policies that are 100% reinsured to affiliates of AmTrust and NGHC pursuant to the Cut-Through Reinsurance Agreements that are currently in effect with such entities, declaring or paying dividends, making new investments or changing investment practices, entering into new reinsurance agreements and increasing the compensation of officers or directors, in each case without the consent of the MDOI. Given that substantially all of the new business production of the Massachusetts Insurers is reinsured pursuant to the Cut-Through Reinsurance Agreements referenced above, the Company believes that the order will not have a material impact on the ability of the Massachusetts Insurers to continue to write new business. Also, under the terms of the order, the Company was required to prepare and submit to the MDOI a preliminary operations plan no later than June 1, 2014, including detailed information describing the steps the Company is taking to enable it to repay its convertible senior debt holders and continue operations as a going concern in the event its pending merger with ACP Re does not occur. The Company submitted such plan on May 29, 2014. On June 27, 2014 the Company contributed $3 million to one of the Massachusetts domiciled subsidiaries in consideration for such subsidiary’s issuance to the Company of a surplus note in the aggregate principal amount of $3 million. | |
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. | |
On June 4, 2014, Tower National Insurance Company (“TNIC”), a Massachusetts domiciled insurance subsidiary of the Company, received notice from the Ohio Department of Insurance (“ODOI”) in respect of the decrease in TNIC’s statutory capital below Ohio’s minimum capital requirements. On June 11, 2014, TNIC agreed to enter into a consent agreement with the ODOI, pursuant to which TNIC agreed to cease writing any new or renewal business in Ohio as a result of the shortfall in TNIC’s statutory capital. Pending confirmation that TNIC’s statutory capital deficiency has been resolved to the satisfaction of the ODOI, the Company expects TNIC will be authorized to resume writing new and renewal insurance business in Ohio. For the year ended December 31, 2013, TNIC wrote $843,000 of premium in Ohio. TICNY has a license to write business in Ohio, and there have been no restrictions placed against this license. | |
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 is the obligor under the $150 million Convertible Senior Notes due September 15, 2014. The indebtedness of TGI is guaranteed by TGIL. | |
The Company’s plan to repay the Notes is related to the closing of the ACP Re Merger Agreement. If the Merger with ACP Re does not close prior to September 15, 2014, the maturity date of the Notes, the Company will not have adequate liquidity to pay principal and accrued interest that would be due to holders of the Notes on such date. The Company is evaluating its options with respect to the Notes, including, without limitation, a possible restructuring of the terms of the Notes, the issuance of securities in exchange for the Notes or a possible tender offer for the Notes which tender would be intended to close on or promptly after the closing of the ACP Re merger. No assurances can be given that the Company will attempt to implement any of these options and, even if the Company attempts to implement any of these options, that any such implementation will be successful. | |
As of June 30, 2014, 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. 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. Pursuant to a notice sent to the applicable holders of the subordinated debentures on June 18, 2014, four indirect wholly-owned non-insurance subsidiaries (the “Issuers”) of Tower Group International, Ltd. exercised their respective contractual rights pursuant to an indenture, dated as of December 1, 2006, by and between CastlePoint Management Corp. and Wilmington Trust Company, an indenture, dated as of December 14, 2006, by and between CastlePoint Management Corp. and Wilmington Trust Company, an indenture, dated as of September 27, 2007, by and between CastlePoint Bermuda Holdings, Ltd. and Wilmington Trust Company, an indenture, dated as of January 25, 2007, by and between Tower Group, Inc. and Wilmington Trust Company, an indenture, dated as of May 15, 2003, by and between Tower Group, Inc. and U.S. Bank, an indenture, dated as of December 21, 2004, by and between Tower Group, Inc. and JPMorgan Chase Bank, National Association, an indenture, dated as of December 15, 2004, by and between Tower Group, Inc. and Wilmington Trust Company, an indenture, dated as of March 31, 2006, by and between Tower Group, Inc. and Wells Fargo Bank, National Association, and an indenture, dated as of May 26, 2004, by and between Preserver Group, Inc. and Wilmington Trust Company, to defer the payment of regularly scheduled interest payments on their outstanding junior subordinated debentures issued in connection with outstanding trust preferred securities. Under the terms of such indentures, the Issuers may defer interest payments for twenty consecutive quarterly periods without default or penalty. The interest on these debentures will continue to accrue. | |
The merger with ACP Re is expected to close in the third quarter of 2014, subject to the approval of regulatory authorities in eight states and the Bermuda Monetary Authority, as well as satisfaction or waiver of other conditions of closing set forth in the ACP Re Merger Agreement, 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. | |
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 June 30, 2014, no dividends may be paid to the Holding Company without the approval of the state regulators or BMA, as appropriate. | |
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. | |
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 16 – Contingencies” for additional detail on such litigation. |
Accounting_Policies_and_Basis_
Accounting Policies and Basis of Presentation | 6 Months Ended | |||
Jun. 30, 2014 | ||||
Accounting Policies and Basis of Presentation | ' | |||
Note 2—Accounting Policies and Basis of Presentation | ||||
Basis of Presentation | ||||
The 2013 Canopius Merger Transaction (see “Note 3 – Canopius Merger Transaction” in the Notes to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 filed on May 2, 2014 (“the 2013 Form 10-K”)) was accounted for as a reverse acquisition, under which TGI was identified and treated as the accounting acquirer. As such, the Company’s 2013 unaudited consolidated financial statements include the accounts and operations of TGI and its insurance subsidiaries, managing general agencies and management companies as its historical financial statements, with the results of Tower Group International, Ltd., as accounting acquiree, being included from March 13, 2013, the effective date of the Canopius Merger Transaction. The unaudited consolidated financial statements also include the accounts of Adirondack Insurance Exchange, a New York reciprocal insurer, and New Jersey Skylands Insurance Association, a New Jersey reciprocal insurer (together, the “Reciprocal Exchanges”). The Company does not own the Reciprocal Exchanges but manages their business operations through its wholly-owned management companies. | ||||
The unaudited consolidated financial statements included in this report have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q and Article 10 of SEC Regulation S-X. The principles for condensed interim financial information do not require the inclusion of all the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s consolidated financial statements as of and for the year ended December 31, 2013 and notes thereto included in the Company’s 2013 Form 10-K. The accompanying consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with standards of the Public Company Accounting Oversight Board (United States) but, in the opinion of management, such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Company’s financial position, results of operations and cash flows. All intercompany transactions have been eliminated in consolidation. | ||||
Use of Estimates | ||||
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | ||||
Reclassifications | ||||
Certain reclassifications have been made to prior year’s financial information to conform to the current year presentation. | ||||
Accounting Pronouncements | ||||
Accounting guidance adopted in 2014 | ||||
In March 2013, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standard Codification (“ASC”) update 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 adopted the standard effective January 1, 2014 with no 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. We adopted the standard effective January 1, 2014 with no material effect on our consolidated financial condition, results of operations or cash flows. | ||||
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 apply this guidance if and when it enters into any new hedging relationships. | ||||
Accounting guidance not yet effective | ||||
In April 2014, the FASB issued updated guidance on reporting discontinued operations. Under this updated guidance, a discontinued operation will include a disposal of a major part of an entity’s operations and financial results such as a separate major line of business or a separate major geographical area of operations. The guidance raises the threshold to be a major operation but no longer precludes discontinued operations presentation where there is significant continuing involvement or cash flows with a disposed component of an entity. The guidance expands disclosures to include cash flows where there is significant continuing involvement with a discontinued operation and the pre-tax profit or loss of disposal transactions not reported as discontinued operations. The updated guidance is effective prospectively for years beginning on or after December 15, 2014, with early application permitted. The Company will apply this new guidance in any future disposals and the impacts, if any, on the Company’s consolidated financial condition, results of operations or cash flows will be dependent on the nature of such disposals. | ||||
In May 2014, the FASB issued accounting guidance on the recognition of revenue from customers. The FASB notes that the core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. | ||||
The guidance sets out five steps an entity should undertake to fulfill the core principle of the guidance as follows: | ||||
• | Identify the contract(s) with a customer. | |||
• | Identify the performance obligations in the contract. | |||
• | Determine the transaction price. | |||
• | Allocate the transaction price to the performance obligations in the contract. | |||
• | Recognize revenue when (or as) the entity satisfies a performance obligation. | |||
For a public entity, the amendments in this update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. While the guidance specifically excludes revenues from insurance contracts, investments and financial instruments from the scope of the new guidance, the guidance will be applicable to the Company’s other forms of revenue not specifically exempted from the guidance. The Company is currently evaluating the impact this guidance will have on its consolidated financial condition, results of operations, cash flows and disclosures and is currently unable to estimate the impact of adopting this guidance. |
Investment_in_Canopius_Group_L
Investment in Canopius Group Limited ("Canopius Group") | 6 Months Ended |
Jun. 30, 2014 | |
Investment in Canopius Group Limited ("Canopius Group") | ' |
Note 3—Investment in Canopius Group Limited (“Canopius Group”) | |
See “Note 3 – Canopius Merger Transaction” in the Notes to the consolidated financial statements in the Company’s 2013 Form 10-K for further discussion on the March 13, 2013 Canopius Merger transaction. | |
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 was $69.7 million (£42.5 million), which has been paid in full to Tower. In addition, if Bregal subsequently entered into a legally binding contract for the sale or other transfer of shares representing a majority of the voting power of Canopius Group within six months after the date of Tower’s sale of such stock to 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 May 1, 2014, NKSJ Holdings closed on its acquisition, through its insurance subsidiary Sompo Japan Insurance, Inc. of 100% of the shares of Canopius Group from Bregal. The Additional Payment meets the definition of a derivative. As of December 31, 2013, the fair value of this derivative recorded in other assets was $9.3 million. In the three and six months ended June 30, 2014, Tower recorded net realized gains (losses) of $1.4 million and $(0.1) million, respectively, for changes in fair value of the derivative. In the second quarter of 2014, Tower received $5.8 million relating to the Additional Payment which brought the balance of this asset to $3.4 million at June 30, 2014. In July 2014, the final $3.4 million was received. |
Variable_Interest_Entities_VIE
Variable Interest Entities ("VIEs") | 6 Months Ended |
Jun. 30, 2014 | |
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 three months ended June 30, 2014, the Reciprocal Exchanges recognized total revenues, total expenses and net income (loss) of $44.4 million, $49.7 million and $(5.3) million, respectively. For the three months ended June 30, 2013, the Reciprocal Exchanges recognized total revenues, total expenses and net income of $46.3 million, $46.2 million and $0.8 million, respectively. | |
For the six months ended June 30, 2014, the Reciprocal Exchanges recognized total revenues, total expenses and net income (loss) of $91.7 million, $102.7 million and $ (11.0) million, respectively. For the six months ended June 30, 2013, the Reciprocal Exchanges recognized total revenues, total expenses and net income (loss) of $92.9 million, $103.2 million and $(10.5) million, respectively. |
Investments
Investments | 6 Months Ended | ||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||
Investments | ' | ||||||||||||||||||||||||
Note 5—Investments | |||||||||||||||||||||||||
The cost or amortized cost and fair value of the Company’s investments in fixed maturity and equity securities, gross unrealized gains and losses, and other-than-temporary impairment losses (“OTTI”) as of June 30, 2014 and December 31, 2013 are summarized as follows: | |||||||||||||||||||||||||
($ in thousands) | Cost or | Gross | Gross | Fair Value | Unrealized | ||||||||||||||||||||
Amortized | Unrealized | Unrealized | OTTI | ||||||||||||||||||||||
Cost | Gains | Losses | Losses (1) | ||||||||||||||||||||||
June 30, 2014 | |||||||||||||||||||||||||
U.S. Treasury securities | $ | 457,224 | $ | 1,236 | $ | (2,997 | ) | $ | 455,463 | $ | - | ||||||||||||||
U.S. Agency securities | 98,877 | 1,313 | (28 | ) | 100,162 | - | |||||||||||||||||||
Municipal bonds | 237,595 | 11,312 | (702 | ) | 248,205 | - | |||||||||||||||||||
Corporate and other bonds | |||||||||||||||||||||||||
Finance | 102,041 | 4,183 | (146 | ) | 106,078 | - | |||||||||||||||||||
Industrial | 206,417 | 5,601 | (219 | ) | 211,799 | - | |||||||||||||||||||
Utilities | 35,896 | 599 | (346 | ) | 36,149 | - | |||||||||||||||||||
Commercial mortgage-backed securities | 80,792 | 5,703 | (259 | ) | 86,236 | (20 | ) | ||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency backed securities | 125,333 | 983 | (274 | ) | 126,042 | - | |||||||||||||||||||
Non-agency backed securities | 224 | 3 | - | 227 | - | ||||||||||||||||||||
Asset-backed securities | 64,146 | 90 | (218 | ) | 64,018 | - | |||||||||||||||||||
Total fixed-maturity securities | 1,408,545 | 31,023 | (5,189 | ) | 1,434,379 | (20 | ) | ||||||||||||||||||
Preferred stocks, principally financial sector | 16,120 | 250 | (807 | ) | 15,563 | - | |||||||||||||||||||
Short-term investments | 2,000 | - | - | 2,000 | - | ||||||||||||||||||||
Total, June 30, 2014 | $ | 1,426,665 | $ | 31,273 | $ | (5,996 | ) | $ | 1,451,942 | $ | (20 | ) | |||||||||||||
Tower | $ | 1,199,488 | $ | 23,721 | $ | (5,083 | ) | $ | 1,218,126 | $ | (20 | ) | |||||||||||||
Reciprocal Exchanges | 227,177 | 7,552 | (913 | ) | 233,816 | - | |||||||||||||||||||
Total, June 30, 2014 | $ | 1,426,665 | $ | 31,273 | $ | (5,996 | ) | $ | 1,451,942 | $ | (20 | ) | |||||||||||||
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 industrial and financial 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 | ) | |||||||||||||
-1 | Represents the gross unrealized loss on other-than-temporarily impaired securities recognized in accumulated other comprehensive income (loss). | ||||||||||||||||||||||||
In accordance with Lloyd’s operating guidelines, the Company deposits funds at Lloyd’s to support underwriting operations. These funds are available only to fund claims obligations. These restricted assets, which are reported in other assets on the consolidated balance sheets, consisted of approximately $106.6 million of cash and cash equivalents as of both June 30, 2014 and December 31, 2013. In addition, the Company had $219.6 million and $248.9 million of cash and cash equivalents and investments as of June 30, 2014 and December 31, 2013, respectively, held by counterparties as collateral or in trusts to support letters of credit issued on the Company’s behalf, reinsurance liabilities on certain assumed reinsurance treaties, collateral posted for certain leases and other purposes. | |||||||||||||||||||||||||
The Company also deposits funds with various state and governmental authorities in the U.S. For a discussion of the Company’s deposits with state and governmental authorities, see “Note 5 – Investments” of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. | |||||||||||||||||||||||||
Major categories of net investment income are summarized as follows: | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||
($ in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||
Income | |||||||||||||||||||||||||
Fixed-maturity securities | $ | 9,224 | $ | 20,562 | $ | 21,801 | $ | 41,535 | |||||||||||||||||
Equity securities | 437 | 6,808 | 1,748 | 13,292 | |||||||||||||||||||||
Cash and cash equivalents | (20 | ) | 19 | 30 | 70 | ||||||||||||||||||||
Other invested assets | 1,404 | 2,158 | 3,786 | 6,414 | |||||||||||||||||||||
Other | 160 | 288 | 241 | 615 | |||||||||||||||||||||
Total | 11,205 | 29,835 | 27,606 | 61,926 | |||||||||||||||||||||
Expenses | |||||||||||||||||||||||||
Investment expenses | (995 | ) | (1,433 | ) | (2,038 | ) | (3,207 | ) | |||||||||||||||||
Net investment income | $ | 10,210 | $ | 28,402 | $ | 25,568 | $ | 58,719 | |||||||||||||||||
Tower | 10,065 | 27,612 | 24,762 | 57,195 | |||||||||||||||||||||
Reciprocal Exchanges | 1,812 | 2,458 | 4,127 | 4,839 | |||||||||||||||||||||
Elimination of interest on Reciprocal Exchange surplus notes | (1,667 | ) | (1,668 | ) | (3,321 | ) | (3,315 | ) | |||||||||||||||||
Net investment income | $ | 10,210 | $ | 28,402 | $ | 25,568 | $ | 58,719 | |||||||||||||||||
Proceeds from the sale of fixed-maturity securities were $869.8 million and $664.4 million for the six months ended June 30, 2014 and 2013, respectively. Proceeds from the sale of equity securities were $146.7 million and $802.3 million for the six months ended June 30, 2014 and 2013, respectively. | |||||||||||||||||||||||||
Gross realized gains, losses and impairment write-downs on investments are summarized as follows: | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||
($ in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||
Fixed-maturity securities | |||||||||||||||||||||||||
Gross realized gains | $ | 7,094 | $ | 10,479 | $ | 35,662 | $ | 17,843 | |||||||||||||||||
Gross realized losses | (474 | ) | (1,672 | ) | (2,038 | ) | (1,862 | ) | |||||||||||||||||
6,620 | 8,807 | 33,624 | 15,981 | ||||||||||||||||||||||
Equity securities | |||||||||||||||||||||||||
Gross realized gains | 7,148 | 5,323 | 10,466 | 9,559 | |||||||||||||||||||||
Gross realized losses | (203 | ) | (12,717 | ) | (3,236 | ) | (17,530 | ) | |||||||||||||||||
6,945 | (7,394 | ) | 7,230 | (7,971 | ) | ||||||||||||||||||||
Other | |||||||||||||||||||||||||
Gross realized gains | 922 | 2,100 | 549 | 3,855 | |||||||||||||||||||||
Gross realized losses | - | (1,091 | ) | (3,746 | ) | (1,903 | ) | ||||||||||||||||||
922 | 1,009 | (3,197 | ) | 1,952 | |||||||||||||||||||||
Net realized gains (losses) on investments | 14,487 | 2,422 | 37,657 | 9,962 | |||||||||||||||||||||
Other-than-temporary impairment losses: | |||||||||||||||||||||||||
Fixed-maturity securities | (1,049 | ) | (23 | ) | (1,956 | ) | (187 | ) | |||||||||||||||||
Equity securities | - | (4,433 | ) | - | (4,958 | ) | |||||||||||||||||||
Total other-than-temporary impairment losses recognized in earnings | (1,049 | ) | (4,456 | ) | (1,956 | ) | (5,145 | ) | |||||||||||||||||
Total net realized investment gains (losses) | $ | 13,438 | $ | (2,034 | ) | $ | 35,701 | $ | 4,817 | ||||||||||||||||
Tower | $ | 13,405 | $ | (2,243 | ) | $ | 32,205 | $ | 3,990 | ||||||||||||||||
Reciprocal Exchanges | 33 | 209 | 3,496 | 827 | |||||||||||||||||||||
Total net realized investment gains (losses) | $ | 13,438 | $ | (2,034 | ) | $ | 35,701 | $ | 4,817 | ||||||||||||||||
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 portfolios to evaluate the necessity of recording impairment losses for OTTI in accordance with its impairment policy. 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 commercial mortgage-backed securities (“CMBS”) holdings using analytical techniques and various metrics including the level of subordination, debt-service-coverage ratios, loan-to-value ratios, delinquencies, defaults and foreclosures. | |||||||||||||||||||||||||
For the non-structured fixed-maturity securities (U.S. Treasury and Agency securities, municipal bonds, and corporate debt), unrealized losses are reviewed to determine whether full recovery of principal and interest will be received. The estimate of expected cash flows is determined by projecting a recovery value and a recovery time frame and assessing whether further principal and interest will be received. The determination of recovery value incorporates an issuer valuation assumption utilizing one or a combination of valuation methods as deemed appropriate by management. The present value of the cash flows is determined by applying the effective yield of the security at the date of acquisition (or the most recent implied rate used to accrete the security if the implied rate has changed as a result of a previous impairment) and an estimated recovery time frame. For securities for which the issuer is financially troubled but not in bankruptcy, that time frame is generally longer. Included in the present value calculation are expected principal and interest payments; however, for securities for which the issuer is classified as bankrupt or in default, the present value calculation assumes no interest payments and a single recovery amount. In situations for which a present value of cash flows cannot be estimated, a write-down to fair value is recorded. | |||||||||||||||||||||||||
In estimating the recovery value, significant judgment is involved in the development of assumptions 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 following table shows the fixed-maturity and equity securities OTTI amounts for the three and six months ended June 30, 2014 and 2013: | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||
($ in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||
Municipal bonds | (1 | ) | - | (673 | ) | - | |||||||||||||||||||
Corporate and other bonds | (1,006 | ) | - | (1,105 | ) | - | |||||||||||||||||||
Commercial mortgage-backed securities | (62 | ) | (23 | ) | (426 | ) | (47 | ) | |||||||||||||||||
Residential mortgage-backed securities | - | - | (123 | ) | (140 | ) | |||||||||||||||||||
Equities | - | (4,433 | ) | - | (4,958 | ) | |||||||||||||||||||
Other-than-temporary-impairments | (1,069 | ) | (4,456 | ) | (2,327 | ) | (5,145 | ) | |||||||||||||||||
Portion of loss recognized in accumulated other comprehensive income (loss) | 20 | - | 371 | - | |||||||||||||||||||||
Impairment losses recognized in earnings | $ | (1,049 | ) | $ | (4,456 | ) | $ | (1,956 | ) | $ | (5,145 | ) | |||||||||||||
Tower | $ | (1,049 | ) | $ | (4,456 | ) | $ | (1,711 | ) | $ | (5,145 | ) | |||||||||||||
Reciprocal Exchanges | - | - | (245 | ) | - | ||||||||||||||||||||
Impairment losses recognized in earnings | $ | (1,049 | ) | $ | (4,456 | ) | $ | (1,956 | ) | $ | (5,145 | ) | |||||||||||||
The following table provides a rollforward of the cumulative amounts of credit OTTI for securities held as of June 30, 2014 and 2013 showing the amounts that have been included in earnings on a pretax basis for the three months ended June 30, 2014 and 2013: | |||||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||||
June 30, | |||||||||||||||||||||||||
($ in thousands) | 2014 | 2013 | |||||||||||||||||||||||
Balance, April 1, | $ | 7,515 | $ | 4,516 | |||||||||||||||||||||
Additional credit losses recognized during the period, related to securities for which: | |||||||||||||||||||||||||
No OTTI has been previously recognized | 43 | (117 | ) | ||||||||||||||||||||||
OTTI has been previously recognized | 1,006 | - | |||||||||||||||||||||||
Reductions due to: | |||||||||||||||||||||||||
Securities sold during the period (realized) | (3,367 | ) | 140 | ||||||||||||||||||||||
Balance, June 30, | $ | 5,197 | $ | 4,539 | |||||||||||||||||||||
The following table provides a rollforward of the cumulative amounts of credit OTTI for securities held as of June 30, 2014 and 2013 showing the amounts that have been included in earnings on a pretax basis for the six months ended June 30, 2014 and 2013: | |||||||||||||||||||||||||
Six Months Ended | |||||||||||||||||||||||||
June 30, | |||||||||||||||||||||||||
($ in thousands) | 2014 | 2013 | |||||||||||||||||||||||
Balance, January 1, | $ | 7,817 | $ | 4,492 | |||||||||||||||||||||
Additional credit losses recognized during the period, related to securities for which: | |||||||||||||||||||||||||
No OTTI has been previously recognized | 815 | 47 | |||||||||||||||||||||||
OTTI has been previously recognized | 1,141 | - | |||||||||||||||||||||||
Reductions due to: | |||||||||||||||||||||||||
Securities sold during the period (realized) | (4,576 | ) | - | ||||||||||||||||||||||
Balance, June 30, | $ | 5,197 | $ | 4,539 | |||||||||||||||||||||
Unrealized Losses | |||||||||||||||||||||||||
There are 151 securities at June 30, 2014, including fixed maturities and equity securities, which account for the gross unrealized loss, none of which is deemed by management to be OTTI. Management considered all relevant factors, including expected recoverability of cash flows, in assessing whether a loss was other-than-temporary. The gross unrealized loss position associated with the fixed-maturity portfolio was $5.2 million as of June 30, 2014, consisting primarily of U.S. Treasury, municipal bonds and corporate and other bonds of $4.4 million. The total fixed-maturity portfolio of gross unrealized losses included 148 securities which were, in aggregate, approximately 2% below amortized cost. Of the 148 fixed maturity investments identified, 102 have been in an unrealized loss position for more than 12 months. The total unrealized loss on these investments at June 30, 2014 was $4.8 million. Management does not consider these investments to be other-than-temporarily impaired. | |||||||||||||||||||||||||
In the equity portfolio, there were 3 securities in a loss position at June 30, 2014 totaling $0.8 million. Management evaluated the financial condition of the common stock issuers, the severity and duration of the impairment, and the Company’s ability and intent to hold to recovery. The evaluation consisted of a detailed review, including but not limited to some or all of the following factors for each security: the current S&P rating, analysts’ reports, past earnings trends and analysts’ earnings expectations for the next 12 months, liquidity, near-term financing risk, and whether the company was currently paying dividends on its equity securities. Management does not consider these investments to be other-than-temporarily impaired. | |||||||||||||||||||||||||
The following table presents information regarding invested assets that were in an unrealized loss position at June 30, 2014 and December 31, 2013 by amount of time in a continuous unrealized loss position: | |||||||||||||||||||||||||
Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||||
($ in thousands) | Fair | Unrealized | Fair | Unrealized | Aggregate | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Fair Value | Losses | ||||||||||||||||||||
June 30, 2014 | |||||||||||||||||||||||||
U.S. Treasury securities | $ | 24,975 | $ | (23 | ) | $ | 184,185 | $ | (2,974 | ) | $ | 209,160 | $ | (2,997 | ) | ||||||||||
U.S. Agency securities | 2,495 | (3 | ) | 2,254 | (25 | ) | 4,749 | (28 | ) | ||||||||||||||||
Municipal bonds | 4,946 | (14 | ) | 34,090 | (688 | ) | 39,036 | (702 | ) | ||||||||||||||||
Corporate and other bonds | |||||||||||||||||||||||||
Finance | 19,851 | (33 | ) | 7,994 | (113 | ) | 27,845 | (146 | ) | ||||||||||||||||
Industrial | 15,849 | (61 | ) | 7,666 | (158 | ) | 23,515 | (219 | ) | ||||||||||||||||
Utilities | - | - | 10,600 | (346 | ) | 10,600 | (346 | ) | |||||||||||||||||
Commercial mortgage-backed securities | 4,442 | (24 | ) | 18,240 | (235 | ) | 22,682 | (259 | ) | ||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency backed | 4,231 | (6 | ) | 10,416 | (268 | ) | 14,647 | (274 | ) | ||||||||||||||||
Non-agency backed | - | - | - | - | - | - | |||||||||||||||||||
Asset-backed securities | 52,777 | (218 | ) | - | - | 52,777 | (218 | ) | |||||||||||||||||
Total fixed-maturity securities | 129,566 | (382 | ) | 275,445 | (4,807 | ) | 405,011 | (5,189 | ) | ||||||||||||||||
Preferred stocks | - | - | 10,889 | (807 | ) | 10,889 | (807 | ) | |||||||||||||||||
Total, June 30, 2014 | $ | 129,566 | $ | (382 | ) | $ | 286,334 | $ | (5,614 | ) | $ | 415,900 | $ | (5,996 | ) | ||||||||||
Tower | $ | 118,219 | $ | (343 | ) | $ | 241,468 | $ | (4,740 | ) | $ | 359,687 | $ | (5,083 | ) | ||||||||||
Reciprocal Exchanges | 11,347 | (39 | ) | 44,866 | (874 | ) | 56,213 | (913 | ) | ||||||||||||||||
Total, June 30, 2014 | $ | 129,566 | $ | (382 | ) | $ | 286,334 | $ | (5,614 | ) | $ | 415,900 | $ | (5,996 | ) | ||||||||||
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 | ) | ||||||||||
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. | |||||||||||||||||||||||||
Fixed-Maturity Investment—Time to Maturity | |||||||||||||||||||||||||
The following table shows the amortized cost and fair value of the fixed-maturity portfolio by contractual time to maturity at June 30, 2014 and December 31, 2013: | |||||||||||||||||||||||||
Tower | Reciprocal Exchanges | Total | |||||||||||||||||||||||
($ in thousands) | Amortized | Fair Value | Amortized | Fair Value | Amortized | Fair Value | |||||||||||||||||||
Cost | Cost | Cost | |||||||||||||||||||||||
June 30, 2014 | |||||||||||||||||||||||||
Remaining Time to Maturity | |||||||||||||||||||||||||
Less than one year | $ | 26,178 | $ | 26,490 | $ | 12,636 | $ | 12,802 | $ | 38,814 | $ | 39,292 | |||||||||||||
One to five years | 572,182 | 578,040 | 30,674 | 31,003 | 602,856 | 609,043 | |||||||||||||||||||
Five to ten years | 293,067 | 299,813 | 63,945 | 66,110 | 357,012 | 365,923 | |||||||||||||||||||
More than 10 years | 100,907 | 104,124 | 38,460 | 39,473 | 139,367 | 143,597 | |||||||||||||||||||
Mortgage and asset-backed securities | 191,785 | 194,868 | 78,711 | 81,656 | 270,496 | 276,524 | |||||||||||||||||||
Total, June 30, 2014 | $ | 1,184,119 | $ | 1,203,335 | $ | 224,426 | $ | 231,044 | $ | 1,408,545 | $ | 1,434,379 | |||||||||||||
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, December 31, 2013 | $ | 1,364,157 | $ | 1,390,146 | $ | 249,477 | $ | 252,549 | $ | 1,613,634 | $ | 1,642,695 | |||||||||||||
Other Invested Assets | |||||||||||||||||||||||||
The following table shows the composition of the other invested assets as of June 30, 2014 and December 31, 2013: | |||||||||||||||||||||||||
($ in thousands) | June 30, | December 31, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||
Limited partnerships, equity method | $ | 36,960 | $ | 46,521 | |||||||||||||||||||||
Real estate, amortized cost | - | 6,054 | |||||||||||||||||||||||
Securities reported under the fair value option | 18,657 | 43,580 | |||||||||||||||||||||||
Total | $ | 55,617 | $ | 96,155 | |||||||||||||||||||||
Other invested assets reported under the fair value option include six securities, which contain embedded derivatives and other features. The significant inputs used to determine fair value are considered Level 3 pursuant to the fair value hierarchy. See “Note 6 – Fair Value Measurements” below. | |||||||||||||||||||||||||
As of June 30, 2014, the Company and its insurance companies had future funding commitments of $22.9 million including but not limited to the limited partnerships. |
Fair_Value_Measurements
Fair Value Measurements | 6 Months Ended | ||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||
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. | |||||||||||||||||||||||
The availability of observable inputs varies and is affected by a wide variety of factors. When the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment. The degree of judgment exercised by management in determining fair value is greatest for investments categorized as Level 3. For investments in this category, management considers prices and inputs that are current as of the measurement date. In periods of market dislocation, as characterized by current market conditions, the ability to observe stable prices and inputs may be reduced for many instruments. This condition could cause a security to be reclassified between levels. | |||||||||||||||||||||||
As at June 30, 2014 and December 31, 2013, the Company’s financial instruments carried at fair value are allocated among levels as follows: | |||||||||||||||||||||||
($ in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
June 30, 2014 | |||||||||||||||||||||||
Fixed-maturity securities | |||||||||||||||||||||||
U.S. Treasury securities | $ | - | $ | 455,463 | $ | - | $ | 455,463 | |||||||||||||||
U.S. Agency securities | - | 100,162 | - | 100,162 | |||||||||||||||||||
Municipal bonds | - | 248,205 | - | 248,205 | |||||||||||||||||||
Corporate and other bonds | - | 351,606 | 2,420 | 354,026 | |||||||||||||||||||
Commercial mortgage-backed securities | - | 86,236 | - | 86,236 | |||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||
Agency | - | 126,042 | - | 126,042 | |||||||||||||||||||
Non-agency | - | 227 | - | 227 | |||||||||||||||||||
Asset-backed securities | - | 64,018 | - | 64,018 | |||||||||||||||||||
Total fixed-maturities | - | 1,431,959 | 2,420 | 1,434,379 | |||||||||||||||||||
Equity securities | 15,563 | - | - | 15,563 | |||||||||||||||||||
Short-term investments | - | 2,000 | - | 2,000 | |||||||||||||||||||
Total investments at fair value | 15,563 | 1,433,959 | 2,420 | 1,451,942 | |||||||||||||||||||
Other invested assets (1) | - | - | 18,657 | 18,657 | |||||||||||||||||||
Other Assets | |||||||||||||||||||||||
Additional Payment derivative | - | - | 3,403 | 3,403 | |||||||||||||||||||
Other liabilities | - | ||||||||||||||||||||||
Interest rate swap contracts | - | (4,766 | ) | - | (4,766 | ) | |||||||||||||||||
Total, June 30, 2014 | $ | 15,563 | $ | 1,429,193 | $ | 24,480 | $ | 1,469,236 | |||||||||||||||
Tower | $ | 12,791 | $ | 1,198,153 | $ | 24,480 | $ | 1,235,424 | |||||||||||||||
Reciprocal Exchanges | 2,772 | 231,040 | - | 233,812 | |||||||||||||||||||
Total, June 30, 2014 | $ | 15,563 | $ | 1,429,193 | $ | 24,480 | $ | 1,469,236 | |||||||||||||||
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 (2) | - | - | 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 | |||||||||||||||
(1) $18.6 million of the $55.6 million Other invested assets reported on the consolidated balance sheet at June 30, 2014 are reported at fair value. The remaining $37 million of Other invested assets are reported under the equity method of accounting. | |||||||||||||||||||||||
(2) $43.6 million of the $96.2 million Other invested assets reported on the consolidated balance sheet at December 31, 2013 are reported at fair value. The remaining $52.6 million of Other invested assets are reported under the equity method of accounting or at amortized cost. | |||||||||||||||||||||||
As of June 30, 2014, substantially all of the investment portfolio recorded at fair value was priced based upon quoted market prices or other observable inputs. For investments in active markets, the Company used the quoted market prices provided by the outside pricing services to determine fair value. In circumstances where quoted market prices were unavailable, the Company used fair value estimates based upon other observable inputs including matrix pricing, benchmark interest rates, market comparables and other relevant inputs. When observable inputs were adjusted to reflect management’s best estimate of fair value, such fair value measurements are considered a lower level measurement in the GAAP fair value hierarchy. | |||||||||||||||||||||||
The Company’s process to validate the market prices obtained from the outside pricing sources includes, but is not limited to, periodic evaluation of model pricing methodologies and analytical reviews of certain prices. The Company also periodically performs testing of the market to determine trading activity, or lack of trading activity, as well as market prices. Several securities sold during the quarter were “back-tested” (i.e., the sales price is compared to the previous month end reported market price to determine reasonableness of the reported market price). If management believes that the price provided from the pricing source is distressed, management will use a valuation method that reflects an orderly transaction between market participants, generally a discounted cash flow method that incorporates relevant interest rate, risk and liquidity factors. | |||||||||||||||||||||||
The ability to observe stable prices and inputs may be reduced for highly-customized and illiquid instruments which had been the case for certain non-agency residential and commercial mortgage-backed securities and asset-backed securities in previous periods. | |||||||||||||||||||||||
Substantially all of the portfolio valuations at June 30, 2014, classified as Level 1 or Level 2 in the above table are determined utilizing several independent pricing services that provide 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 2014 and 2013, there were no transfers of investments between Level 1 and Level 2 or between Level 2 and Level 3. | |||||||||||||||||||||||
The fair values of the interest rate swaps were derived using an industry standard swap valuation model with market based inputs for swaps having similar characteristics. | |||||||||||||||||||||||
The fair values of the debt and equity securities sold, not yet purchased were derived using quoted prices for similar securities in active markets. These instruments resulted in gross realized gains and losses of $0.2 million and $0.1 million for the six months ended June 30, 2014, respectively. | |||||||||||||||||||||||
The Company holds six 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. One of the six securities is an investment in credit-linked notes which mature in 2017, 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. | |||||||||||||||||||||||
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. These four preferred equity interest investments are carried at fair value and are modeled quarterly using discounted market yields from similar hotel properties. | |||||||||||||||||||||||
The Company has one fixed-maturity security classified as Level 3. This security, a privately placed corporate convertible bond, is valued by management using a liquidation pricing methodology. | |||||||||||||||||||||||
Management is responsible for the determination of the value of the investments carried at fair value and the supporting methodologies and assumptions. Management has reviewed the pricing techniques and methodologies of the independent pricing sources and believes that their policies adequately consider market activity, either based on specific transactions for the issue valued or based on modeling of securities with similar credit quality, duration, yield and structure that were recently traded. Management monitors security-specific valuation trends and discusses material changes or the absence of expected changes with the portfolio managers to understand the underlying factors and inputs and to validate the reasonableness of pricing. Management also back-tests the prices on numerous sales of securities during the year to validate the previous pricing provided as well as utilizes other pricing sources to validate the pricing provided by the Company’s primary provider of the majority of the non-U.S. Treasury securities and non-agency securities included in Level 2. | |||||||||||||||||||||||
The following table summarizes activity in Level 3 assets measured at fair value for the three months ended June 30, 2014 and 2013 for Tower (the Reciprocal Exchanges have no Level 3 assets): | |||||||||||||||||||||||
Three Months Ended June 30, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
($ in thousands) | Other | Fixed Maturity | Additional | Total | Other | ||||||||||||||||||
Invested | Securities (1) | Payment | Invested | ||||||||||||||||||||
Assets | Derivative | Assets | |||||||||||||||||||||
Beginning balance, April 1 | $ | 18,778 | $ | 3,426 | $ | 7,843 | $ | 30,047 | $ | 25,000 | |||||||||||||
Total gains (losses)-realized / unrealized | |||||||||||||||||||||||
Included in net income | (121 | ) | (1,006 | ) | 1,371 | 244 | - | ||||||||||||||||
Included in other comprehensive income (loss) | - | - | - | - | - | ||||||||||||||||||
Purchases | - | - | - | - | 5,250 | ||||||||||||||||||
Settlements | - | - | (5,811 | ) | (5,811 | ) | - | ||||||||||||||||
Ending balance, June 30, | $ | 18,657 | $ | 2,420 | $ | 3,403 | $ | 24,480 | $ | 30,250 | |||||||||||||
(1) Comprised of corporate and other bonds | |||||||||||||||||||||||
The following table summarizes activity in Level 3 assets measured at fair value for the six months ended June 30, 2014 and 2013 for Tower (the Reciprocal Exchanges have no Level 3 assets): | |||||||||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
($ in thousands) | Other | Fixed Maturity | Additional | Total | Other | ||||||||||||||||||
Invested | Securities (1) | Payment | Invested | ||||||||||||||||||||
Assets | Derivative | Assets | |||||||||||||||||||||
Beginning balance, January 1 | $ | 43,580 | $ | 3,426 | $ | 9,343 | $ | 56,349 | $ | 25,000 | |||||||||||||
Total gains (losses)-realized / unrealized | |||||||||||||||||||||||
Included in net income | (63 | ) | (1,006 | ) | (129 | ) | (1,198 | ) | - | ||||||||||||||
Included in other comprehensive income (loss) | - | - | - | - | - | ||||||||||||||||||
Purchases | - | - | - | - | 5,250 | ||||||||||||||||||
Settlements | (24,860 | ) | - | (5,811 | ) | (30,671 | ) | - | |||||||||||||||
Ending balance, June 30, | $ | 18,657 | $ | 2,420 | $ | 3,403 | $ | 24,480 | $ | 30,250 | |||||||||||||
(1) Comprised of corporate and other bonds |
Reinsurance
Reinsurance | 6 Months Ended | ||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||
Reinsurance | ' | ||||||||||||||||||||
Note 7—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 and 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 of 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, 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 and NGHC on all unearned premiums as of December 31, 2013 that were subject to the Cut-Through Reinsurance Agreements and a 22% ceding commission on 2014 ceded premiums. | |||||||||||||||||||||
Impact of Reinsurance on Premiums | |||||||||||||||||||||
The tables below show direct, assumed and ceded premiums for the three and six months ended June 30, 2014 and 2013: | |||||||||||||||||||||
Three Months Ended June 30, | |||||||||||||||||||||
($ in thousands) | Direct | Assumed | Ceded - | Ceded - Cut- | Net | ||||||||||||||||
Other | Through | ||||||||||||||||||||
2014 | |||||||||||||||||||||
Premiums written | $ | 284,934 | $ | 21,893 | $ | 75,286 | $ | 162,754 | $ | 68,787 | |||||||||||
Change in unearned premiums | 50,697 | (6,333 | ) | 26,276 | (7,792 | ) | 25,880 | ||||||||||||||
Premiums earned | $ | 335,631 | $ | 15,560 | $ | 101,562 | $ | 154,962 | $ | 94,667 | |||||||||||
2013 | |||||||||||||||||||||
Premiums written | $ | 430,688 | $ | 58,655 | $ | 87,354 | $ | - | $ | 401,989 | |||||||||||
Change in unearned premiums | 4,749 | 8,535 | (3,091 | ) | - | 16,375 | |||||||||||||||
Premiums earned | $ | 435,437 | $ | 67,190 | $ | 84,263 | $ | - | $ | 418,364 | |||||||||||
Six Months Ended June 30, | |||||||||||||||||||||
($ in thousands) | Direct | Assumed | Ceded - | Ceded - Cut- | Net | ||||||||||||||||
Other | Through | ||||||||||||||||||||
2014 | |||||||||||||||||||||
Premiums written | $ | 566,136 | $ | 43,352 | $ | 142,814 | $ | 647,795 | (1) | $ | (191,858 | ) | |||||||||
Change in unearned premiums | 133,643 | (11,786 | ) | 64,488 | (335,296 | ) | 398,069 | ||||||||||||||
Premiums earned | $ | 699,779 | $ | 31,566 | $ | 207,302 | $ | 312,499 | $ | 206,211 | |||||||||||
2013 | |||||||||||||||||||||
Premiums written | $ | 876,403 | $ | 164,169 | $ | 185,386 | $ | - | $ | 855,186 | |||||||||||
Change in unearned premiums | (11,379 | ) | (35,854 | ) | (32,297 | ) | - | (14,936 | ) | ||||||||||||
Premiums earned | $ | 865,024 | $ | 128,315 | $ | 153,089 | $ | - | $ | 840,250 | |||||||||||
(1) Includes $327.7 million of unearned premiums transferred on January 1, 2014 under Cut-Through Reinsurance Agreements. |
Loss_and_Loss_Adjustment_Expen
Loss and Loss Adjustment Expense | 6 Months Ended | ||||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||||
Loss and Loss Adjustment Expense | ' | ||||||||||||||||||||||||||
Note 8—Loss and Loss Adjustment Expense | |||||||||||||||||||||||||||
The following table provides a reconciliation of the beginning and ending consolidated balances for unpaid losses and loss adjustment expense (“LAE”) for the six months ended June 30, 2014 and 2013: | |||||||||||||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | Tower | Reciprocal | Total | |||||||||||||||||||||
Exchanges | Exchanges | ||||||||||||||||||||||||||
Balance at January 1 | $ | 1,973,972 | $ | 107,313 | $ | 2,081,285 | $ | 1,759,888 | $ | 135,791 | $ | 1,895,679 | |||||||||||||||
Less reinsurance recoverables on unpaid losses | (555,468 | ) | (15,392 | ) | (570,860 | ) | (407,068 | ) | (52,389 | ) | (459,457 | ) | |||||||||||||||
1,418,504 | 91,921 | 1,510,425 | 1,352,820 | 83,402 | 1,436,222 | ||||||||||||||||||||||
Net reserves, at fair value, of acquired entities | - | - | - | 161,886 | - | 161,886 | |||||||||||||||||||||
Change in net reserves for ADC (i) | 313,229 | - | 313,229 | - | - | - | |||||||||||||||||||||
Incurred related to: | |||||||||||||||||||||||||||
Current year | 103,790 | 60,084 | 163,874 | 451,020 | 57,688 | 508,708 | |||||||||||||||||||||
Prior years unfavorable/(favorable) development | 35,411 | (1,819 | ) | 33,592 | 326,749 | 167 | 326,916 | ||||||||||||||||||||
Total incurred | 139,201 | 58,265 | 197,466 | 777,769 | 57,855 | 835,624 | |||||||||||||||||||||
Paid related to: | |||||||||||||||||||||||||||
Current year | 87,435 | 39,833 | 127,268 | 164,774 | 36,669 | 201,443 | |||||||||||||||||||||
Prior years | 337,411 | 24,355 | 361,766 | 359,786 | 10,221 | 370,007 | |||||||||||||||||||||
Total paid | 424,846 | 64,188 | 489,034 | 524,560 | 46,890 | 571,450 | |||||||||||||||||||||
Net balance at end of period | 1,446,088 | 85,998 | 1,532,086 | 1,767,915 | 94,367 | 1,862,282 | |||||||||||||||||||||
Add reinsurance recoverables on unpaid losses | 441,213 | 14,259 | 455,472 | 665,172 | 24,897 | 690,069 | |||||||||||||||||||||
Balance at June 30, | $ | 1,887,301 | $ | 100,257 | $ | 1,987,558 | $ | 2,433,087 | $ | 119,264 | $ | 2,552,351 | |||||||||||||||
(i) In the first quarter of 2014, Tower terminated the Southport Re ADCs (see “Note 1 - Nature of the Business” for further description). The termination of the Southport Re ADCs resulted in a direct increase to net loss reserves. | |||||||||||||||||||||||||||
The consolidated net loss ratio, which includes the Reciprocal Exchanges, was 100.2% and 133.8% for the three months ended June 30, 2014 and 2013, respectively. Excluding the Reciprocal Exchanges, the net loss ratio was 122.1% and 142.7% for the three months ended June 30, 2014, and 2013, respectively. | |||||||||||||||||||||||||||
Incurred losses and LAE for the three months ended June 30, 2014 attributable to events of prior years were $26.6 million including the Reciprocal Exchanges and $27.5 million excluding the Reciprocal Exchanges. | |||||||||||||||||||||||||||
The consolidated net loss ratio, which includes the Reciprocal Exchanges, was 95.8% and 99.4% for the six months ended June 30, 2014 and 2013, respectively. Excluding the Reciprocal Exchanges, the net loss ratio was 109.4% and 102.7% for the six months ended June 30, 2014, and 2013, respectively. | |||||||||||||||||||||||||||
Incurred losses and LAE for the six months ended June 30, 2014 attributable to events of prior years were $33.6 million including the Reciprocal Exchanges and $35.4 million excluding the Reciprocal Exchanges. These prior accident year losses include $37.1 million of unfavorable losses from the Commercial Insurance segment, $6.1 million of favorable development from the Assumed Reinsurance segment, and unfavorable loss development of $2.6 million in the Personal Insurance segment for the six months ended June 30, 2014. | |||||||||||||||||||||||||||
The 2014 unfavorable incurred loss and LAE activity from prior accident years arose primarily from CMP Liability, Commercial Auto Liability, Other Liability and Workers’ Compensation lines of business. Reported loss activity for these lines of business was higher than expected resulting in higher selected ultimates for prior accident years. Consistent with prior quarters, the Company performed a comprehensive update to the internal actuarial study. The Company also retained an independent consulting firm to peer review the internal reserve study. | |||||||||||||||||||||||||||
Prior year development is based upon numerous estimates by line of business and accident year. The Company’s management continually monitors claims activity to assess the appropriateness of carried case and incurred but not reported (“IBNR”) reserves, giving consideration to Company and industry trends. |
Shareholders_Equity
Shareholders' Equity | 6 Months Ended |
Jun. 30, 2014 | |
Shareholders' Equity | ' |
Note 9—Shareholders’ Equity | |
Shares of Common Stock Issued | |
For both the three and six months ended June 30, 2014, zero new common shares were issued as the result of employee stock option exercises. | |
For both the three and six months ended June 30, 2014, zero new common shares were issued as the result of the Company’s restricted stock grants. For the three and six months ended June 30, 2013, 2,332 and 242,626 new common shares, respectively, were issued as the result of restricted stock grants. | |
For the three and six months ended June 30, 2014, zero and 17,364 shares, respectively, of common stock were purchased from employees in connection with the vesting of restricted stock issued under the Company’s equity compensation plans. For the three and six months ended June 30, 2013, 891 and 341,598 shares, respectively, of common stock were purchased from employees in connection with the vesting of restricted stock issued under the Company’s equity compensation plans. The shares were withheld at the direction of employees as permitted under the equity compensation plans in order to pay the expected amount of tax liability owed by the employees from the vesting of those shares. In addition, for the three and six months ended June 30, 2014, 13,899 and 66,733 shares, respectively, of common stock were surrendered as a result of restricted stock forfeitures. For the three and six months ended June 30, 2013, 7,167 and 14,015 shares, respectively of common stock were surrendered as a result of restricted stock forfeitures. | |
Share Repurchase Program | |
As part of Tower’s capital management strategy, Tower’s Board of Directors approved a $50 million share repurchase program on May 7, 2013. Purchases under this program can be made from time to time in the open market or in privately negotiated transactions in accordance with applicable laws and regulations. In the six months ended June 30, 2014 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. There can be no assurance that we will resume paying dividends in the future even if the necessary financial conditions are met and if sufficient cash is available for distribution. | |
Dividends on common stock and participating unvested restricted stock of $9.5 million and $16.7 million for the three and six months ended June 30, 2013 were declared and paid. |
Accumulated_Other_Comprehensiv
Accumulated Other Comprehensive Income (Loss) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Accumulated Other Comprehensive Income (Loss) | ' | ||||||||||||||||
Note 10—Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||
The following table provides a summary of changes in accumulated other comprehensive income, by component, for the six months ended June 30, 2014 and 2013, respectively, with all amounts reflected net of income taxes and noncontrolling interest: | |||||||||||||||||
($ 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 | (71,210 | ) | 1,406 | (2,382 | ) | (72,186 | ) | ||||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax | (2,594 | ) | 1,084 | - | (1,510 | ) | |||||||||||
Net current period other comprehensive income (loss) | (73,804 | ) | 2,490 | (2,382 | ) | (73,696 | ) | ||||||||||
Balance at June 30, 2013 | $ | 13,608 | $ | (3,370 | ) | $ | (1,178 | ) | $ | 9,060 | |||||||
Balance at December 31, 2013 | $ | (15,528 | ) | $ | (3,979 | ) | $ | - | $ | (19,507 | ) | ||||||
Other comprehensive income before reclassifications, net of tax | 20,129 | (8 | ) | - | 20,121 | ||||||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax | (32,207 | ) | 853 | - | (31,354 | ) | |||||||||||
Net current period other comprehensive income (loss) | (12,078 | ) | 845 | - | (11,233 | ) | |||||||||||
Balance at June 30, 2014 | $ | (27,606 | ) | $ | (3,134 | ) | $ | - | $ | (30,740 | ) | ||||||
The following provides a summary of the items that have been reclassified from accumulated other comprehensive income to net income in their entirety during the six months ended June 30, 2014 and 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 | |||||||||||||||
from accumulated other | operations | ||||||||||||||||
comprehensive income | |||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||
2014 | 2013 | ||||||||||||||||
Unrealized gains (losses) on available for sale securities | $ | (32,207 | ) | $ | (2,594 | ) | Other net realized investment gains | ||||||||||
- | - | Income tax expense | |||||||||||||||
$ | (32,207 | ) | $ | (2,594 | ) | Total net of income taxes | |||||||||||
Gains (losses) on cash flow hedges interest rate swaps | $ | 853 | $ | 1,084 | Interest expense | ||||||||||||
- | - | Income tax expense | |||||||||||||||
$ | 853 | $ | 1,084 | Total net of income taxes | |||||||||||||
Debt
Debt | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Debt | ' | ||||||||||||||||
Note 11—Debt | |||||||||||||||||
The Company’s borrowings consisted of the following at June 30, 2014 and December 31, 2013: | |||||||||||||||||
June 30, 2014 | December 31, 2013 | ||||||||||||||||
($ in thousands) | Carrying | Fair | Carrying | Fair | |||||||||||||
Value | Value | Value | Value | ||||||||||||||
Convertible senior notes | $ | 149,315 | $ | 127,875 | $ | 147,712 | $ | 129,525 | |||||||||
Subordinated debentures | 235,058 | 122,121 | 235,058 | 114,900 | |||||||||||||
Total | $ | 384,373 | $ | 249,996 | $ | 382,770 | $ | 244,425 | |||||||||
The fair value of the convertible senior notes is determined utilizing recent transaction prices for these securities between third-party market participants. The fair value of the subordinated debentures is based on discounted cash flow analysis. The significant inputs used for fair value are considered Level 2 in the fair value hierarchy. | |||||||||||||||||
Total interest expense incurred, including interest expense on the funds held liabilities, was $7.3 million and $7.6 million for the three months ended June 30, 2014 and 2013, respectively. Total interest expense incurred, including interest expense on the funds held liabilities, was $14.3 million and $15.4 million for the six months ended June 30, 2014 and 2013, respectively. | |||||||||||||||||
Subordinated Debentures | |||||||||||||||||
The Company and its wholly-owned subsidiaries have issued trust preferred securities through wholly-owned Delaware statutory business trusts. The trusts use the proceeds of the sale of the trust preferred securities and common securities that the Company acquired from the trusts to purchase junior subordinated debentures from the Company with terms that match the terms of the trust preferred securities. Interest on the junior subordinated debentures and the trust preferred securities is payable quarterly. In some cases, the interest rate is fixed for an initial period of five years after issuance and then floats with changes in the London Interbank Offered Rate (“LIBOR”) and in other cases the interest rate floats with LIBOR without any initial fixed-rate period. As of June 30, 2014, the Company had outstanding par of $ 235.1 million relating to the subordinated debentures. | |||||||||||||||||
Interest Rate Swaps | |||||||||||||||||
In October 2010, the Company entered into interest rate swap contracts (the “Swaps”) with $190 million notional value to manage interest costs and cash flows associated with the floating rate subordinated debentures. The Swaps have terms of five years. The Swaps convert the subordinated debentures to rates ranging from 5.1% to 5.9%. As of June 30, 2014 and December 31, 2013, the Swaps had a fair value of $4.8 million and $6.1 million in a liability position, respectively, and are reported in Other Liabilities. | |||||||||||||||||
The Company has designated and accounts for the Swaps as cash flow hedges. The Swaps are considered to have no ineffectiveness and changes in their fair values are recorded in accumulated other comprehensive income (“AOCI”), net of tax. For the six months ended June 30, 2014 and 2013, $0.9 million and $1.1 million, respectively, were reclassified from AOCI to interest expense for the effects of the hedges. As of June 30, 2014, the Company had collateral on deposit with the counterparty amounting to $4.7 million pursuant to a Credit Support Annex. | |||||||||||||||||
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. The original terms of the Notes allowed Holders to 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, TGI intends to settle its obligation either entirely or partially in cash. Upon completion of the Canopius Merger Transaction, the change in control provision of the Indenture was triggered and the Holders were allowed, at their option, to convert their notes into cash or common shares of Tower Group International, Ltd. at a make-whole exchange ratio. As required by the terms of the Indenture, TGI delivered a Fundamental Company Change Notice (“Change Notice”) to the Holders on March 23, 2013. The Change Notice provided Holders the option to convert the Notes into cash or common shares of TGIL at a fundamental make-whole exchange ratio up to and including April 26, 2013. There were no bonds tendered or converted as a result of the Change Notice delivery. | |||||||||||||||||
The adjusted conversion rate at June 30, 2014 is 37.5605 shares of common stock per $1,000 principal amount of the Notes (equivalent to a conversion price of $26.62 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”). 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 $3.0 million for the six months ended June 30, 2014. | |||||||||||||||||
The following table shows the amounts recorded for the Notes as of June 30, 2014 and December 31, 2013: | |||||||||||||||||
June 30, | December 31, | ||||||||||||||||
($ in thousands) | 2014 | 2013 | |||||||||||||||
Liability component | |||||||||||||||||
Outstanding principal | $ | 150,000 | $ | 150,000 | |||||||||||||
Unamortized OID | (685 | ) | (2,288 | ) | |||||||||||||
Liability component | 149,315 | 147,712 | |||||||||||||||
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, TGI 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 TGI’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 TGI 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, TGI terminated the Note Hedges and Warrants. The Company received $2.4 million and paid $1.0 million to terminate the Note Hedges and Warrants, respectively. The effects of the terminations and an associated tax adjustment of $0.8 million were recorded directly to paid-in-capital in shareholders’ equity. |
Stock_Based_Compensation
Stock Based Compensation | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Stock Based Compensation | ' | ||||||||||||||||
Note 12—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 140,174 are available for future grants as of June 30, 2014. | |||||||||||||||||
2013 Long-Term Incentive Plan (“2013 LTIP”) | |||||||||||||||||
The Compensation Committee of the Board of Directors established, beginning in 2013 a new Long Term Incentive Plan (the “2013 LTIP”), to replace the Company’s existing 2008 LTEP. The 2013 LTIP was approved by the shareholders in May 2013. The maximum amount of share-based awards authorized is 2,150,000 of which 2,147,531 are available for future grants as of June 30, 2014. | |||||||||||||||||
Restricted Stock | |||||||||||||||||
The following table provides an analysis of restricted stock activity for the six months ended June 30, 2014 and 2013: | |||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||
2014 | 2013 | ||||||||||||||||
Number of | Weighted | Number of | Weighted | ||||||||||||||
Shares | Average | Shares | Average | ||||||||||||||
Grant Date | Grant Date | ||||||||||||||||
Fair Value | Fair Value | ||||||||||||||||
Outstanding, January 1 | 235,586 | $ | 17.98 | 1,015,902 | $ | 20.19 | |||||||||||
Granted | - | - | 242,626 | 18.09 | |||||||||||||
Vested | (42,670 | ) | 18.07 | (953,242 | ) | 20.43 | |||||||||||
Forfeitures | (66,733 | ) | 18.11 | (14,015 | ) | 19.26 | |||||||||||
Outstanding, June 30, | 126,183 | $ | 17.87 | 291,271 | $ | 17.68 | |||||||||||
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 six months ended June 30, 2014 and 2013: | |||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||
2014 | 2013 | ||||||||||||||||
Number of | Average | Number of | Average | ||||||||||||||
Shares | Exercise | Shares | Exercise | ||||||||||||||
Price | Price | ||||||||||||||||
Outstanding, January 1 | 955,804 | $ | 17.75 | 969,307 | $ | 17.78 | |||||||||||
Exercised | - | - | (2,674 | ) | 16.48 | ||||||||||||
Forfeitures and expirations | (691,162 | ) | 17 | (7,657 | ) | 17.72 | |||||||||||
Outstanding, June 30 | 264,642 | $ | 19.73 | 958,976 | $ | 17.78 | |||||||||||
Exercisable, June 30 | 264,642 | $ | 19.73 | 958,976 | $ | 17.78 | |||||||||||
Stock Based Compensation Expense | |||||||||||||||||
The following table provides an analysis of stock based compensation expense for the six months ended June 30, 2014 and 2013: | |||||||||||||||||
Six Months Ended | |||||||||||||||||
June 30, | |||||||||||||||||
($ in thousands) | 2014 | 2013 | |||||||||||||||
Restricted stock | |||||||||||||||||
Expense, net of tax | $ | 205 | $ | 8,204 | |||||||||||||
Value of shares vested | 959 | 21,042 | |||||||||||||||
Value of unvested shares | 251 | 5,974 | |||||||||||||||
Stock options | |||||||||||||||||
Intrinsic value of outstanding options | - | 3,471 | |||||||||||||||
Intrinsic value of vested outstanding options | - | 3,471 | |||||||||||||||
Unrecognized compensation expense | |||||||||||||||||
Unvested restricted stock, net of tax | 251 | 5,974 | |||||||||||||||
Weighted average years over which expense will be recognized (in years) | 2.7 | 3.6 |
Income_Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2014 | |
Income Taxes | ' |
Note 13—Income Taxes | |
Under current Bermuda Law the Company is not required to pay any taxes on Bermuda based income or capital gains. The Company has received an undertaking from the Minister of Finance in Bermuda that in the event of such taxes being imposed, the Company will be exempted from taxation until the year 2035 pursuant to the Bermuda Exempted Undertakings Tax Protection Act of 1966. The Company’s United States-based subsidiaries are subject to federal, state and local taxes, as applicable, on income and capital gains earned by those subsidiaries. | |
The Company and TRL, its Bermuda reinsurance subsidiary, are deemed to have permanent establishments in Bermuda. The Bermuda companies have not and do not expect to conduct business that is through a permanent establishment in the U.S. All transactions between Tower’s U.S.-based subsidiaries and the Bermuda companies are subject to transfer pricing rules. The Company has executed certain reinsurance treaties and service agreements between its U.S.-based subsidiaries and TRL and management believes these arrangements to be conducted at current market rates and in accordance with transfer pricing rules. | |
During the three and six months ended June 30, 2014, Tower’s U.S. taxed subsidiaries (excluding the Reciprocal Exchanges) recognized pre-tax losses of approximately $(45.3) million and $(68.3) million, respectively. This resulted in $205.4 million of net operating loss carryforwards in the deferred tax inventory and a net deferred tax asset, before any valuation allowance, of $287.3 million (excluding the Reciprocal Exchanges) as of June 30, 2014. Including the Reciprocal Exchanges, the net deferred tax asset, before any valuation allowance, was $288.6 million. | |
At June 30, 2014, a full valuation allowance was recorded against the deferred tax assets. For the six months ended June 30, 2014, $18.1 million of the valuation allowance was recorded in income tax expense (benefit) in the statement of operations. For the three months ended June 30, 2014 $12.9 million of the valuation allowance was recorded in income tax expense (benefit) in the statement of operations. | |
In 2013, 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 the 2013 and 2012 pre-tax losses. Management believed that the negative evidence associated with the realizability of its net deferred tax asset, including a cumulative three-year pre-tax loss outweighed the positive evidence that the deferred tax assets, including the net operating loss carryforward, would be realized, and recorded the full valuation allowance. | |
The Company’s effective tax rates of (0.2)% and (1.7)% for the three and six months ended June 30, 2014, respectively, reflect the recording of the full valuation allowance in the first and second quarters of 2014. Prior to the first quarter of 2014, Tower calculated an estimated annual effective tax rate on its U.S. taxed subsidiaries that differed from the U.S. statutory rate due to costs associated with tax exempt interest and dividends received deductions. |
Earnings_Loss_per_Share
Earnings (Loss) per Share | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Earnings (Loss) per Share | ' | ||||||||||||||||
Note 14—Earnings (Loss) per Share | |||||||||||||||||
Undistributed net earnings (net income less dividends declared during the period) are allocated to both common stock and unvested share-based payment awards (“unvested restricted stock”). Because the common shareholders and unvested restricted stock holders share in dividends on a 1:1 basis, the earnings per share on undistributed earnings is equivalent, however, undistributed losses are allocated only to common stock holders. Undistributed earnings are allocated to all outstanding share-based payment awards, including those for which the requisite service period is not expected to be rendered. | |||||||||||||||||
The following table shows the computation of the earnings per share: | |||||||||||||||||
Three Months | Six Months | ||||||||||||||||
Ended June 30, | Ended June 30, | ||||||||||||||||
(in thousands, except per share amounts) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Numerator | |||||||||||||||||
Net income (loss) attributable to Tower Group International, Ltd. | $ | (48,742 | ) | $ | (507,342 | ) | $ | (95,220 | ) | $ | (494,425 | ) | |||||
Less: Dividends on unvested participating restricted stock | - | (48 | ) | - | (215 | ) | |||||||||||
Net income (loss) available to common shareholders - Basic | (48,742 | ) | (507,390 | ) | (95,220 | ) | (494,640 | ) | |||||||||
Reallocation of income for unvested participating restricted stock | - | - | - | - | |||||||||||||
Net income (loss) available to common shareholders - Diluted | (48,742 | ) | (507,390 | ) | (95,220 | ) | (494,640 | ) | |||||||||
Denominator | |||||||||||||||||
Basic earnings per share denominator | 57,171 | 57,135 | 57,161 | 51,487 | |||||||||||||
Effect of dilutive securities: | - | - | - | - | |||||||||||||
Diluted earnings per share denominator | 57,171 | 57,135 | 57,161 | 51,487 | |||||||||||||
Earnings (loss) per share attributable to Tower Group International, Ltd. - Basic | |||||||||||||||||
Common stock: | |||||||||||||||||
Distributed earnings | $ | - | $ | 0.17 | $ | - | $ | 0.34 | |||||||||
Undistributed earnings | (0.85 | ) | (9.05 | ) | (1.67 | ) | (9.95 | ) | |||||||||
Total - basic | (0.85 | ) | (8.88 | ) | (1.67 | ) | (9.61 | ) | |||||||||
Earnings (loss) per share attributable to Tower Group International, Ltd. - Diluted | $ | (0.85 | ) | $ | (8.88 | ) | $ | (1.67 | ) | $ | (9.61 | ) | |||||
The computation of diluted earnings (loss) per share excludes outstanding options and other common stock equivalents in periods where inclusion of such potential common stock instruments would be anti-dilutive. For the three and six months ended June 30, 2014, 268,100 and, 268,100, respectively, options to purchase Company shares were excluded from the computation of diluted earnings (loss) per share because the exercise price of the options was greater than the average market price. For the three and six months ended June 30, 2013, 190,480 and, 188,890, respectively, options to purchase Company shares were excluded from the computation of diluted earnings (loss) per share because the exercise price of the options was greater than the average market price. |
Segment_Information
Segment Information | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Segment Information | ' | ||||||||||||||||
Note 15—Segment Information | |||||||||||||||||
The accounting policies of the segments are the same as those described in TGIL’s summary of significant accounting policies in the Annual Report on Form 10-K for the year ended December 31, 2013. | |||||||||||||||||
Segment performance is evaluated based on segment profit, which excludes investment income, realized gains and losses, interest expense, income taxes, goodwill and fixed asset impairments and corporate expenses. The Company’s assets and liabilities are not allocated to segments because they are considered in total by management for decision-making purposes. | |||||||||||||||||
The Personal Insurance segment, which includes the Reciprocal Exchanges and the management companies, reports the management fees earned by Tower from the Reciprocal Exchanges for underwriting, investment management and other services as a reduction to other underwriting expenses. The effects of these management fees between Tower and the Reciprocal Exchanges are eliminated in consolidation to derive consolidated net income. However, the management fee income is reported in net income attributable to Tower Group International, Ltd. and included in basic and diluted earnings (loss) per share. | |||||||||||||||||
Business segment results are as follows: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
($ in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Commercial Insurance Segment | |||||||||||||||||
Revenues | |||||||||||||||||
Premiums earned | $ | 35,896 | $ | 247,495 | $ | 91,669 | $ | 505,913 | |||||||||
Ceding commission revenue | 1,678 | (7,780 | ) | 4,057 | (7,332 | ) | |||||||||||
Policy billing fees | 1,264 | 1,422 | 2,540 | 2,792 | |||||||||||||
Total revenues | 38,838 | 241,137 | 98,266 | 501,373 | |||||||||||||
Expenses | |||||||||||||||||
Loss and loss adjustment expenses | 48,897 | 470,284 | 112,868 | 647,287 | |||||||||||||
Underwriting expenses | 36,055 | 93,635 | 87,076 | 185,917 | |||||||||||||
Total expenses | 84,952 | 563,919 | 199,944 | 833,204 | |||||||||||||
Underwriting profit (loss) | $ | (46,114 | ) | $ | (322,782 | ) | $ | (101,678 | ) | $ | (331,831 | ) | |||||
Assumed Reinsurance Segment | |||||||||||||||||
Revenues | |||||||||||||||||
Premiums earned | $ | 15,532 | $ | 45,548 | $ | 31,565 | $ | 94,913 | |||||||||
Ceding commission revenue | - | - | - | - | |||||||||||||
Total revenues | 15,532 | 45,548 | 31,565 | 94,913 | |||||||||||||
Expenses | |||||||||||||||||
Loss and loss adjustment expenses | 5,407 | 28,088 | 7,815 | 47,448 | |||||||||||||
Underwriting expenses | 9,246 | 26,742 | 10,118 | 44,535 | |||||||||||||
Total expenses | 14,653 | 54,830 | 17,933 | 91,983 | |||||||||||||
Underwriting profit (loss) | $ | 879 | $ | (9,282 | ) | $ | 13,632 | $ | 2,930 | ||||||||
Personal Insurance Segment | |||||||||||||||||
Revenues | |||||||||||||||||
Premiums earned | $ | 43,239 | $ | 125,321 | $ | 82,977 | $ | 239,424 | |||||||||
Ceding commission revenue | 16,042 | 6,004 | 24,465 | 10,993 | |||||||||||||
Policy billing fees | 1,495 | 1,899 | 2,895 | 3,679 | |||||||||||||
Total revenues | 60,776 | 133,224 | 110,337 | 254,096 | |||||||||||||
Expenses | |||||||||||||||||
Loss and loss adjustment expenses | 40,601 | 61,520 | 76,783 | 140,889 | |||||||||||||
Underwriting expenses | 36,412 | 57,669 | 75,991 | 109,781 | |||||||||||||
Total expenses | 77,013 | 119,189 | 152,774 | 250,670 | |||||||||||||
Underwriting profit (loss) | $ | (16,237 | ) | $ | 14,035 | $ | (42,437 | ) | $ | 3,426 | |||||||
Tower | $ | (10,787 | ) | $ | 14,139 | $ | (27,071 | ) | $ | 16,156 | |||||||
Reciprocal Exchanges | (5,450 | ) | (104 | ) | (15,366 | ) | (12,730 | ) | |||||||||
Total underwriting profit (loss) | $ | (16,237 | ) | $ | 14,035 | $ | (42,437 | ) | $ | 3,426 | |||||||
The following table reconciles revenue by segment to consolidated revenues: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
($ in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Commercial Insurance segment | $ | 38,838 | $ | 241,137 | $ | 98,266 | $ | 501,373 | |||||||||
Assumed Reinsurance segment | 15,532 | 45,548 | 31,565 | 94,913 | |||||||||||||
Personal Insurance segment | 60,776 | 133,224 | 110,337 | 254,096 | |||||||||||||
Total segment revenues | 115,146 | 419,909 | 240,168 | 850,382 | |||||||||||||
Net investment income | 10,210 | 28,402 | 25,568 | 58,719 | |||||||||||||
Net realized gains (losses) on investments, including other-than-temporary impairments | 13,438 | (2,034 | ) | 35,701 | 4,817 | ||||||||||||
Insurance services revenue and other | 48 | 5,192 | 613 | 5,322 | |||||||||||||
Consolidated revenues | $ | 138,842 | $ | 451,469 | $ | 302,050 | $ | 919,240 | |||||||||
The following table reconciles the results of the Company’s individual segments to consolidated income before income taxes: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
($ in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Commercial Insurance segment underwriting profit (loss) | $ | (46,114 | ) | $ | (322,782 | ) | $ | (101,678 | ) | $ | (331,831 | ) | |||||
Assumed Reinsurance segment underwriting profit (loss) | 879 | (9,282 | ) | 13,632 | 2,930 | ||||||||||||
Personal Insurance segment underwriting profit (loss) | (16,237 | ) | 14,035 | (42,437 | ) | 3,426 | |||||||||||
Net investment income | 10,210 | 28,402 | 25,568 | 58,719 | |||||||||||||
Net realized gains on investments, including other-than-temporary impairments | 13,438 | (2,034 | ) | 35,701 | 4,817 | ||||||||||||
Corporate and other | (5,683 | ) | (2,299 | ) | (17,572 | ) | (5,239 | ) | |||||||||
Acquisition-related transaction costs | (2,397 | ) | (665 | ) | (3,043 | ) | (19,721 | ) | |||||||||
Interest expense | (7,322 | ) | (7,635 | ) | (14,332 | ) | (15,443 | ) | |||||||||
Goodwill and fixed asset impairment | - | (214,049 | ) | - | (214,049 | ) | |||||||||||
Equity income in unconsolidated affiliate | - | 7,838 | - | 7,966 | |||||||||||||
Income before income taxes | $ | (53,226 | ) | $ | (508,471 | ) | $ | (104,161 | ) | $ | (508,425 | ) |
Contingencies
Contingencies | 6 Months Ended |
Jun. 30, 2014 | |
Contingencies | ' |
Note 16—Contingencies | |
Legal Proceedings | |
On August 20, 2013, Robert P. Lang, a purported shareholder of Tower Group International Ltd. (“Tower”), filed a purported class action complaint (the “Lang Complaint”) against Tower and certain of its 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. On June 17, 2014, the United States District Court for the Southern District of New York issued an order consolidating the Lang, Feighay, and Sharma actions (hereinafter the “Consolidated Securities Action”) and appointing Adar Enhanced Investment Fund, Ltd. and Adar Investment Fund, Ltd. (the “Adar Funds”) and Jacksonville Police and Fire Pension Fund, Oklahoma Firefighters Pension and Retirement System, and the Kansas City, Missouri Employees’ Retirement System (the “Public Pension Funds”) as co-lead plaintiffs in the Consolidated Securities Action and Bernstein Liebhard LLP, Saxena White P.A., and Bernstein Litowitz Berger & Grossmann LLP as co-lead counsel. On July 1, 2014, the Court entered a stipulation and order providing for the co-lead plaintiffs to file a Consolidated Class Action Complaint on August 22, 2014. The Company believes that it is not probable that the Consolidated Securities Action will result in a loss, and if it 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. On June 2, 2014, counsel for Plaintiffs filed a notice of discontinuance without prejudice against all defendants in the New York Action. | |
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 by the directors 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 purported shareholder filed an amended complaint alleging, in addition, that the Company and the directors 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 May 12, 2014, the United States District Court for the Southern District of New York issued an order consolidating the Wilson and Raul actions (hereinafter the “Consolidated Federal Action”). On May 22, 2014, the Court issued an order appointing Wilson and George Strum, another purported shareholder of the Company, as co-lead plaintiffs in the Consolidated Federal Action and appointing Robbins Arroyo LLP and WeissLaw LLP as co-lead counsel. | |
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. On May 16, 2014, the defendants removed the Bekkerman action to the United States District Court for the Southern District of New York, and requested that it be designated as related to the Consolidated Federal Action. On June 3, 2014, the United States District Court for the Southern District of New York accepted the designation of the Bekkerman Complaint as related to the Consolidated Federal Action. On July 21, 2014, the Court issued an order consolidating the Bekkerman action into the Consolidated Federal Action for all purposes. | |
On July 25, 2014, the defendants reached an agreement in principle with the plaintiffs to settle the Consolidated Federal Action. The settlement remains subject to appropriate documentation by the parties and approval by the Court. As part of the settlement, the Company agreed to make certain supplemental disclosures to Tower shareholders on Form 8-K, which was filed with the SEC on July 28, 2014. As set forth therein, the defendants deny all fault or liability and deny that they have committed any of the unlawful or wrongful acts alleged in the Merger Complaints or otherwise in relation to the Merger Agreement, or any of the events or actions related thereto, and specifically deny that any further disclosure was required to supplement the Proxy Statement under any applicable rule, statute, regulation or law. The Company agreed to provide those supplemental disclosures solely to minimize the cost of defending the litigation and to permit the special general meeting and stockholder vote to proceed without delay. | |
On July 29, 2014, the Court ordered that the Consolidated Federal Action be discontinued with prejudice but without costs, providing, however, that counsel for plaintiffs could apply by letter for restoration of the action to the calendar within 30 days of the order, in which event the action will be restored. 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. |
Accounting_Policies_and_Basis_1
Accounting Policies and Basis of Presentation (Policies) | 6 Months Ended | |||
Jun. 30, 2014 | ||||
Basis of Presentation | ' | |||
Basis of Presentation | ||||
The 2013 Canopius Merger Transaction (see “Note 3 – Canopius Merger Transaction” in the Notes to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 filed on May 2, 2014 (“the 2013 Form 10-K”)) was accounted for as a reverse acquisition, under which TGI was identified and treated as the accounting acquirer. As such, the Company’s 2013 unaudited consolidated financial statements include the accounts and operations of TGI and its insurance subsidiaries, managing general agencies and management companies as its historical financial statements, with the results of Tower Group International, Ltd., as accounting acquiree, being included from March 13, 2013, the effective date of the Canopius Merger Transaction. The unaudited consolidated financial statements also include the accounts of Adirondack Insurance Exchange, a New York reciprocal insurer, and New Jersey Skylands Insurance Association, a New Jersey reciprocal insurer (together, the “Reciprocal Exchanges”). The Company does not own the Reciprocal Exchanges but manages their business operations through its wholly-owned management companies. | ||||
The unaudited consolidated financial statements included in this report have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q and Article 10 of SEC Regulation S-X. The principles for condensed interim financial information do not require the inclusion of all the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s consolidated financial statements as of and for the year ended December 31, 2013 and notes thereto included in the Company’s 2013 Form 10-K. The accompanying consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with standards of the Public Company Accounting Oversight Board (United States) but, in the opinion of management, such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Company’s financial position, results of operations and cash flows. All intercompany transactions have been eliminated in consolidation. | ||||
Use of Estimates | ' | |||
Use of Estimates | ||||
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | ||||
Reclassifications | ' | |||
Reclassifications | ||||
Certain reclassifications have been made to prior year’s financial information to conform to the current year presentation. | ||||
Accounting Pronouncements | ' | |||
Accounting Pronouncements | ||||
Accounting guidance adopted in 2014 | ||||
In March 2013, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standard Codification (“ASC”) update 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 adopted the standard effective January 1, 2014 with no 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. We adopted the standard effective January 1, 2014 with no material effect on our consolidated financial condition, results of operations or cash flows. | ||||
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 apply this guidance if and when it enters into any new hedging relationships. | ||||
Accounting guidance not yet effective | ||||
In April 2014, the FASB issued updated guidance on reporting discontinued operations. Under this updated guidance, a discontinued operation will include a disposal of a major part of an entity’s operations and financial results such as a separate major line of business or a separate major geographical area of operations. The guidance raises the threshold to be a major operation but no longer precludes discontinued operations presentation where there is significant continuing involvement or cash flows with a disposed component of an entity. The guidance expands disclosures to include cash flows where there is significant continuing involvement with a discontinued operation and the pre-tax profit or loss of disposal transactions not reported as discontinued operations. The updated guidance is effective prospectively for years beginning on or after December 15, 2014, with early application permitted. The Company will apply this new guidance in any future disposals and the impacts, if any, on the Company’s consolidated financial condition, results of operations or cash flows will be dependent on the nature of such disposals. | ||||
In May 2014, the FASB issued accounting guidance on the recognition of revenue from customers. The FASB notes that the core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. | ||||
The guidance sets out five steps an entity should undertake to fulfill the core principle of the guidance as follows: | ||||
• | Identify the contract(s) with a customer. | |||
• | Identify the performance obligations in the contract. | |||
• | Determine the transaction price. | |||
• | Allocate the transaction price to the performance obligations in the contract. | |||
• | Recognize revenue when (or as) the entity satisfies a performance obligation. | |||
For a public entity, the amendments in this update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. While the guidance specifically excludes revenues from insurance contracts, investments and financial instruments from the scope of the new guidance, the guidance will be applicable to the Company’s other forms of revenue not specifically exempted from the guidance. The Company is currently evaluating the impact this guidance will have on its consolidated financial condition, results of operations, cash flows and disclosures and is currently unable to estimate the impact of adopting this guidance. |
Investments_Tables
Investments (Tables) | 6 Months Ended | ||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||
Summary of Cost or Amortized Cost and Fair Value of Investments in Fixed Maturity and Equity Securities, Gross Unrealized Gains and Losses, and Other-Than-Temporary Impairment Losses | ' | ||||||||||||||||||||||||
The cost or amortized cost and fair value of the Company’s investments in fixed maturity and equity securities, gross unrealized gains and losses, and other-than-temporary impairment losses (“OTTI”) as of June 30, 2014 and December 31, 2013 are summarized as follows: | |||||||||||||||||||||||||
($ in thousands) | Cost or | Gross | Gross | Fair Value | Unrealized | ||||||||||||||||||||
Amortized | Unrealized | Unrealized | OTTI | ||||||||||||||||||||||
Cost | Gains | Losses | Losses (1) | ||||||||||||||||||||||
June 30, 2014 | |||||||||||||||||||||||||
U.S. Treasury securities | $ | 457,224 | $ | 1,236 | $ | (2,997 | ) | $ | 455,463 | $ | - | ||||||||||||||
U.S. Agency securities | 98,877 | 1,313 | (28 | ) | 100,162 | - | |||||||||||||||||||
Municipal bonds | 237,595 | 11,312 | (702 | ) | 248,205 | - | |||||||||||||||||||
Corporate and other bonds | |||||||||||||||||||||||||
Finance | 102,041 | 4,183 | (146 | ) | 106,078 | - | |||||||||||||||||||
Industrial | 206,417 | 5,601 | (219 | ) | 211,799 | - | |||||||||||||||||||
Utilities | 35,896 | 599 | (346 | ) | 36,149 | - | |||||||||||||||||||
Commercial mortgage-backed securities | 80,792 | 5,703 | (259 | ) | 86,236 | (20 | ) | ||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency backed securities | 125,333 | 983 | (274 | ) | 126,042 | - | |||||||||||||||||||
Non-agency backed securities | 224 | 3 | - | 227 | - | ||||||||||||||||||||
Asset-backed securities | 64,146 | 90 | (218 | ) | 64,018 | - | |||||||||||||||||||
Total fixed-maturity securities | 1,408,545 | 31,023 | (5,189 | ) | 1,434,379 | (20 | ) | ||||||||||||||||||
Preferred stocks, principally financial sector | 16,120 | 250 | (807 | ) | 15,563 | - | |||||||||||||||||||
Short-term investments | 2,000 | - | - | 2,000 | - | ||||||||||||||||||||
Total, June 30, 2014 | $ | 1,426,665 | $ | 31,273 | $ | (5,996 | ) | $ | 1,451,942 | $ | (20 | ) | |||||||||||||
Tower | $ | 1,199,488 | $ | 23,721 | $ | (5,083 | ) | $ | 1,218,126 | $ | (20 | ) | |||||||||||||
Reciprocal Exchanges | 227,177 | 7,552 | (913 | ) | 233,816 | - | |||||||||||||||||||
Total, June 30, 2014 | $ | 1,426,665 | $ | 31,273 | $ | (5,996 | ) | $ | 1,451,942 | $ | (20 | ) | |||||||||||||
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 industrial and financial 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 | ) | |||||||||||||
-1 | Represents the gross unrealized loss on other-than-temporarily impaired securities recognized in accumulated other comprehensive income (loss). | ||||||||||||||||||||||||
Summary of Major Categories of Net Investment Income | ' | ||||||||||||||||||||||||
Major categories of net investment income are summarized as follows: | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||
($ in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||
Income | |||||||||||||||||||||||||
Fixed-maturity securities | $ | 9,224 | $ | 20,562 | $ | 21,801 | $ | 41,535 | |||||||||||||||||
Equity securities | 437 | 6,808 | 1,748 | 13,292 | |||||||||||||||||||||
Cash and cash equivalents | (20 | ) | 19 | 30 | 70 | ||||||||||||||||||||
Other invested assets | 1,404 | 2,158 | 3,786 | 6,414 | |||||||||||||||||||||
Other | 160 | 288 | 241 | 615 | |||||||||||||||||||||
Total | 11,205 | 29,835 | 27,606 | 61,926 | |||||||||||||||||||||
Expenses | |||||||||||||||||||||||||
Investment expenses | (995 | ) | (1,433 | ) | (2,038 | ) | (3,207 | ) | |||||||||||||||||
Net investment income | $ | 10,210 | $ | 28,402 | $ | 25,568 | $ | 58,719 | |||||||||||||||||
Tower | 10,065 | 27,612 | 24,762 | 57,195 | |||||||||||||||||||||
Reciprocal Exchanges | 1,812 | 2,458 | 4,127 | 4,839 | |||||||||||||||||||||
Elimination of interest on Reciprocal Exchange surplus notes | (1,667 | ) | (1,668 | ) | (3,321 | ) | (3,315 | ) | |||||||||||||||||
Net investment income | $ | 10,210 | $ | 28,402 | $ | 25,568 | $ | 58,719 | |||||||||||||||||
Summary of Gross Realized Gains, Losses and Impairment Write-Downs on Investments | ' | ||||||||||||||||||||||||
Gross realized gains, losses and impairment write-downs on investments are summarized as follows: | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||
($ in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||
Fixed-maturity securities | |||||||||||||||||||||||||
Gross realized gains | $ | 7,094 | $ | 10,479 | $ | 35,662 | $ | 17,843 | |||||||||||||||||
Gross realized losses | (474 | ) | (1,672 | ) | (2,038 | ) | (1,862 | ) | |||||||||||||||||
6,620 | 8,807 | 33,624 | 15,981 | ||||||||||||||||||||||
Equity securities | |||||||||||||||||||||||||
Gross realized gains | 7,148 | 5,323 | 10,466 | 9,559 | |||||||||||||||||||||
Gross realized losses | (203 | ) | (12,717 | ) | (3,236 | ) | (17,530 | ) | |||||||||||||||||
6,945 | (7,394 | ) | 7,230 | (7,971 | ) | ||||||||||||||||||||
Other | |||||||||||||||||||||||||
Gross realized gains | 922 | 2,100 | 549 | 3,855 | |||||||||||||||||||||
Gross realized losses | - | (1,091 | ) | (3,746 | ) | (1,903 | ) | ||||||||||||||||||
922 | 1,009 | (3,197 | ) | 1,952 | |||||||||||||||||||||
Net realized gains (losses) on investments | 14,487 | 2,422 | 37,657 | 9,962 | |||||||||||||||||||||
Other-than-temporary impairment losses: | |||||||||||||||||||||||||
Fixed-maturity securities | (1,049 | ) | (23 | ) | (1,956 | ) | (187 | ) | |||||||||||||||||
Equity securities | - | (4,433 | ) | - | (4,958 | ) | |||||||||||||||||||
Total other-than-temporary impairment losses recognized in earnings | (1,049 | ) | (4,456 | ) | (1,956 | ) | (5,145 | ) | |||||||||||||||||
Total net realized investment gains (losses) | $ | 13,438 | $ | (2,034 | ) | $ | 35,701 | $ | 4,817 | ||||||||||||||||
Tower | $ | 13,405 | $ | (2,243 | ) | $ | 32,205 | $ | 3,990 | ||||||||||||||||
Reciprocal Exchanges | 33 | 209 | 3,496 | 827 | |||||||||||||||||||||
Total net realized investment gains (losses) | $ | 13,438 | $ | (2,034 | ) | $ | 35,701 | $ | 4,817 | ||||||||||||||||
Amount of Fixed-Maturity and Equity Securities that were Other-Than-Temporary Impairment | ' | ||||||||||||||||||||||||
The following table shows the fixed-maturity and equity securities OTTI amounts for the three and six months ended June 30, 2014 and 2013: | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||
($ in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||
Municipal bonds | (1 | ) | - | (673 | ) | - | |||||||||||||||||||
Corporate and other bonds | (1,006 | ) | - | (1,105 | ) | - | |||||||||||||||||||
Commercial mortgage-backed securities | (62 | ) | (23 | ) | (426 | ) | (47 | ) | |||||||||||||||||
Residential mortgage-backed securities | - | - | (123 | ) | (140 | ) | |||||||||||||||||||
Equities | - | (4,433 | ) | - | (4,958 | ) | |||||||||||||||||||
Other-than-temporary-impairments | (1,069 | ) | (4,456 | ) | (2,327 | ) | (5,145 | ) | |||||||||||||||||
Portion of loss recognized in accumulated other comprehensive income (loss) | 20 | - | 371 | - | |||||||||||||||||||||
Impairment losses recognized in earnings | $ | (1,049 | ) | $ | (4,456 | ) | $ | (1,956 | ) | $ | (5,145 | ) | |||||||||||||
Tower | $ | (1,049 | ) | $ | (4,456 | ) | $ | (1,711 | ) | $ | (5,145 | ) | |||||||||||||
Reciprocal Exchanges | - | - | (245 | ) | - | ||||||||||||||||||||
Impairment losses recognized in earnings | $ | (1,049 | ) | $ | (4,456 | ) | $ | (1,956 | ) | $ | (5,145 | ) | |||||||||||||
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 amounts of credit OTTI for securities held as of June 30, 2014 and 2013 showing the amounts that have been included in earnings on a pretax basis for the three months ended June 30, 2014 and 2013: | |||||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||||
June 30, | |||||||||||||||||||||||||
($ in thousands) | 2014 | 2013 | |||||||||||||||||||||||
Balance, April 1, | $ | 7,515 | $ | 4,516 | |||||||||||||||||||||
Additional credit losses recognized during the period, related to securities for which: | |||||||||||||||||||||||||
No OTTI has been previously recognized | 43 | (117 | ) | ||||||||||||||||||||||
OTTI has been previously recognized | 1,006 | - | |||||||||||||||||||||||
Reductions due to: | |||||||||||||||||||||||||
Securities sold during the period (realized) | (3,367 | ) | 140 | ||||||||||||||||||||||
Balance, June 30, | $ | 5,197 | $ | 4,539 | |||||||||||||||||||||
The following table provides a rollforward of the cumulative amounts of credit OTTI for securities held as of June 30, 2014 and 2013 showing the amounts that have been included in earnings on a pretax basis for the six months ended June 30, 2014 and 2013: | |||||||||||||||||||||||||
Six Months Ended | |||||||||||||||||||||||||
June 30, | |||||||||||||||||||||||||
($ in thousands) | 2014 | 2013 | |||||||||||||||||||||||
Balance, January 1, | $ | 7,817 | $ | 4,492 | |||||||||||||||||||||
Additional credit losses recognized during the period, related to securities for which: | |||||||||||||||||||||||||
No OTTI has been previously recognized | 815 | 47 | |||||||||||||||||||||||
OTTI has been previously recognized | 1,141 | - | |||||||||||||||||||||||
Reductions due to: | |||||||||||||||||||||||||
Securities sold during the period (realized) | (4,576 | ) | - | ||||||||||||||||||||||
Balance, June 30, | $ | 5,197 | $ | 4,539 | |||||||||||||||||||||
Information Regarding Invested Assets that were in Unrealized Loss Position | ' | ||||||||||||||||||||||||
The following table presents information regarding invested assets that were in an unrealized loss position at June 30, 2014 and December 31, 2013 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 | ||||||||||||||||||||
June 30, 2014 | |||||||||||||||||||||||||
U.S. Treasury securities | $ | 24,975 | $ | (23 | ) | $ | 184,185 | $ | (2,974 | ) | $ | 209,160 | $ | (2,997 | ) | ||||||||||
U.S. Agency securities | 2,495 | (3 | ) | 2,254 | (25 | ) | 4,749 | (28 | ) | ||||||||||||||||
Municipal bonds | 4,946 | (14 | ) | 34,090 | (688 | ) | 39,036 | (702 | ) | ||||||||||||||||
Corporate and other bonds | |||||||||||||||||||||||||
Finance | 19,851 | (33 | ) | 7,994 | (113 | ) | 27,845 | (146 | ) | ||||||||||||||||
Industrial | 15,849 | (61 | ) | 7,666 | (158 | ) | 23,515 | (219 | ) | ||||||||||||||||
Utilities | - | - | 10,600 | (346 | ) | 10,600 | (346 | ) | |||||||||||||||||
Commercial mortgage-backed securities | 4,442 | (24 | ) | 18,240 | (235 | ) | 22,682 | (259 | ) | ||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||||
Agency backed | 4,231 | (6 | ) | 10,416 | (268 | ) | 14,647 | (274 | ) | ||||||||||||||||
Non-agency backed | - | - | - | - | - | - | |||||||||||||||||||
Asset-backed securities | 52,777 | (218 | ) | - | - | 52,777 | (218 | ) | |||||||||||||||||
Total fixed-maturity securities | 129,566 | (382 | ) | 275,445 | (4,807 | ) | 405,011 | (5,189 | ) | ||||||||||||||||
Preferred stocks | - | - | 10,889 | (807 | ) | 10,889 | (807 | ) | |||||||||||||||||
Total, June 30, 2014 | $ | 129,566 | $ | (382 | ) | $ | 286,334 | $ | (5,614 | ) | $ | 415,900 | $ | (5,996 | ) | ||||||||||
Tower | $ | 118,219 | $ | (343 | ) | $ | 241,468 | $ | (4,740 | ) | $ | 359,687 | $ | (5,083 | ) | ||||||||||
Reciprocal Exchanges | 11,347 | (39 | ) | 44,866 | (874 | ) | 56,213 | (913 | ) | ||||||||||||||||
Total, June 30, 2014 | $ | 129,566 | $ | (382 | ) | $ | 286,334 | $ | (5,614 | ) | $ | 415,900 | $ | (5,996 | ) | ||||||||||
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 | ) | ||||||||||
Amortized Cost and Fair Value of Fixed-Maturity Portfolio by Contractual Time to Maturity | ' | ||||||||||||||||||||||||
The following table shows the amortized cost and fair value of the fixed-maturity portfolio by contractual time to maturity at June 30, 2014 and December 31, 2013: | |||||||||||||||||||||||||
Tower | Reciprocal Exchanges | Total | |||||||||||||||||||||||
($ in thousands) | Amortized | Fair Value | Amortized | Fair Value | Amortized | Fair Value | |||||||||||||||||||
Cost | Cost | Cost | |||||||||||||||||||||||
June 30, 2014 | |||||||||||||||||||||||||
Remaining Time to Maturity | |||||||||||||||||||||||||
Less than one year | $ | 26,178 | $ | 26,490 | $ | 12,636 | $ | 12,802 | $ | 38,814 | $ | 39,292 | |||||||||||||
One to five years | 572,182 | 578,040 | 30,674 | 31,003 | 602,856 | 609,043 | |||||||||||||||||||
Five to ten years | 293,067 | 299,813 | 63,945 | 66,110 | 357,012 | 365,923 | |||||||||||||||||||
More than 10 years | 100,907 | 104,124 | 38,460 | 39,473 | 139,367 | 143,597 | |||||||||||||||||||
Mortgage and asset-backed securities | 191,785 | 194,868 | 78,711 | 81,656 | 270,496 | 276,524 | |||||||||||||||||||
Total, June 30, 2014 | $ | 1,184,119 | $ | 1,203,335 | $ | 224,426 | $ | 231,044 | $ | 1,408,545 | $ | 1,434,379 | |||||||||||||
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, December 31, 2013 | $ | 1,364,157 | $ | 1,390,146 | $ | 249,477 | $ | 252,549 | $ | 1,613,634 | $ | 1,642,695 | |||||||||||||
Composition of Other Invested Assets | ' | ||||||||||||||||||||||||
The following table shows the composition of the other invested assets as of June 30, 2014 and December 31, 2013: | |||||||||||||||||||||||||
($ in thousands) | June 30, | December 31, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||
Limited partnerships, equity method | $ | 36,960 | $ | 46,521 | |||||||||||||||||||||
Real estate, amortized cost | - | 6,054 | |||||||||||||||||||||||
Securities reported under the fair value option | 18,657 | 43,580 | |||||||||||||||||||||||
Total | $ | 55,617 | $ | 96,155 |
Fair_Value_Measurements_Tables
Fair Value Measurements (Tables) | 6 Months Ended | ||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||
Financial Instruments at Fair Value among Levels | ' | ||||||||||||||||||||||
As at June 30, 2014 and December 31, 2013, the Company’s financial instruments carried at fair value are allocated among levels as follows: | |||||||||||||||||||||||
($ in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
June 30, 2014 | |||||||||||||||||||||||
Fixed-maturity securities | |||||||||||||||||||||||
U.S. Treasury securities | $ | - | $ | 455,463 | $ | - | $ | 455,463 | |||||||||||||||
U.S. Agency securities | - | 100,162 | - | 100,162 | |||||||||||||||||||
Municipal bonds | - | 248,205 | - | 248,205 | |||||||||||||||||||
Corporate and other bonds | - | 351,606 | 2,420 | 354,026 | |||||||||||||||||||
Commercial mortgage-backed securities | - | 86,236 | - | 86,236 | |||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||
Agency | - | 126,042 | - | 126,042 | |||||||||||||||||||
Non-agency | - | 227 | - | 227 | |||||||||||||||||||
Asset-backed securities | - | 64,018 | - | 64,018 | |||||||||||||||||||
Total fixed-maturities | - | 1,431,959 | 2,420 | 1,434,379 | |||||||||||||||||||
Equity securities | 15,563 | - | - | 15,563 | |||||||||||||||||||
Short-term investments | - | 2,000 | - | 2,000 | |||||||||||||||||||
Total investments at fair value | 15,563 | 1,433,959 | 2,420 | 1,451,942 | |||||||||||||||||||
Other invested assets (1) | - | - | 18,657 | 18,657 | |||||||||||||||||||
Other Assets | |||||||||||||||||||||||
Additional Payment derivative | - | - | 3,403 | 3,403 | |||||||||||||||||||
Other liabilities | - | ||||||||||||||||||||||
Interest rate swap contracts | - | (4,766 | ) | - | (4,766 | ) | |||||||||||||||||
Total, June 30, 2014 | $ | 15,563 | $ | 1,429,193 | $ | 24,480 | $ | 1,469,236 | |||||||||||||||
Tower | $ | 12,791 | $ | 1,198,153 | $ | 24,480 | $ | 1,235,424 | |||||||||||||||
Reciprocal Exchanges | 2,772 | 231,040 | - | 233,812 | |||||||||||||||||||
Total, June 30, 2014 | $ | 15,563 | $ | 1,429,193 | $ | 24,480 | $ | 1,469,236 | |||||||||||||||
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 (2) | - | - | 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 | |||||||||||||||
(1) $18.6 million of the $55.6 million Other invested assets reported on the consolidated balance sheet at June 30, 2014 are reported at fair value. The remaining $37 million of Other invested assets are reported under the equity method of accounting. | |||||||||||||||||||||||
(2) $43.6 million of the $96.2 million Other invested assets reported on the consolidated balance sheet at December 31, 2013 are reported at fair value. The remaining $52.6 million of Other invested assets are reported under the equity method of accounting or at amortized cost. | |||||||||||||||||||||||
Summary of Activity in Level Three Assets Measured at Fair Value | ' | ||||||||||||||||||||||
The following table summarizes activity in Level 3 assets measured at fair value for the three months ended June 30, 2014 and 2013 for Tower (the Reciprocal Exchanges have no Level 3 assets): | |||||||||||||||||||||||
Three Months Ended June 30, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
($ in thousands) | Other | Fixed Maturity | Additional | Total | Other | ||||||||||||||||||
Invested | Securities (1) | Payment | Invested | ||||||||||||||||||||
Assets | Derivative | Assets | |||||||||||||||||||||
Beginning balance, April 1 | $ | 18,778 | $ | 3,426 | $ | 7,843 | $ | 30,047 | $ | 25,000 | |||||||||||||
Total gains (losses)-realized / unrealized | |||||||||||||||||||||||
Included in net income | (121 | ) | (1,006 | ) | 1,371 | 244 | - | ||||||||||||||||
Included in other comprehensive income (loss) | - | - | - | - | - | ||||||||||||||||||
Purchases | - | - | - | - | 5,250 | ||||||||||||||||||
Settlements | - | - | (5,811 | ) | (5,811 | ) | - | ||||||||||||||||
Ending balance, June 30, | $ | 18,657 | $ | 2,420 | $ | 3,403 | $ | 24,480 | $ | 30,250 | |||||||||||||
(1) Comprised of corporate and other bonds | |||||||||||||||||||||||
The following table summarizes activity in Level 3 assets measured at fair value for the six months ended June 30, 2014 and 2013 for Tower (the Reciprocal Exchanges have no Level 3 assets): | |||||||||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
($ in thousands) | Other | Fixed Maturity | Additional | Total | Other | ||||||||||||||||||
Invested | Securities (1) | Payment | Invested | ||||||||||||||||||||
Assets | Derivative | Assets | |||||||||||||||||||||
Beginning balance, January 1 | $ | 43,580 | $ | 3,426 | $ | 9,343 | $ | 56,349 | $ | 25,000 | |||||||||||||
Total gains (losses)-realized / unrealized | |||||||||||||||||||||||
Included in net income | (63 | ) | (1,006 | ) | (129 | ) | (1,198 | ) | - | ||||||||||||||
Included in other comprehensive income (loss) | - | - | - | - | - | ||||||||||||||||||
Purchases | - | - | - | - | 5,250 | ||||||||||||||||||
Settlements | (24,860 | ) | - | (5,811 | ) | (30,671 | ) | - | |||||||||||||||
Ending balance, June 30, | $ | 18,657 | $ | 2,420 | $ | 3,403 | $ | 24,480 | $ | 30,250 | |||||||||||||
(1) Comprised of corporate and other bonds |
Reinsurance_Tables
Reinsurance (Tables) | 6 Months Ended | ||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||
Premiums, Written, Ceded and Earned | ' | ||||||||||||||||||||
The tables below show direct, assumed and ceded premiums for the three and six months ended June 30, 2014 and 2013: | |||||||||||||||||||||
Three Months Ended June 30, | |||||||||||||||||||||
($ in thousands) | Direct | Assumed | Ceded - | Ceded - Cut- | Net | ||||||||||||||||
Other | Through | ||||||||||||||||||||
2014 | |||||||||||||||||||||
Premiums written | $ | 284,934 | $ | 21,893 | $ | 75,286 | $ | 162,754 | $ | 68,787 | |||||||||||
Change in unearned premiums | 50,697 | (6,333 | ) | 26,276 | (7,792 | ) | 25,880 | ||||||||||||||
Premiums earned | $ | 335,631 | $ | 15,560 | $ | 101,562 | $ | 154,962 | $ | 94,667 | |||||||||||
2013 | |||||||||||||||||||||
Premiums written | $ | 430,688 | $ | 58,655 | $ | 87,354 | $ | - | $ | 401,989 | |||||||||||
Change in unearned premiums | 4,749 | 8,535 | (3,091 | ) | - | 16,375 | |||||||||||||||
Premiums earned | $ | 435,437 | $ | 67,190 | $ | 84,263 | $ | - | $ | 418,364 | |||||||||||
Six Months Ended June 30, | |||||||||||||||||||||
($ in thousands) | Direct | Assumed | Ceded - | Ceded - Cut- | Net | ||||||||||||||||
Other | Through | ||||||||||||||||||||
2014 | |||||||||||||||||||||
Premiums written | $ | 566,136 | $ | 43,352 | $ | 142,814 | $ | 647,795 | (1) | $ | (191,858 | ) | |||||||||
Change in unearned premiums | 133,643 | (11,786 | ) | 64,488 | (335,296 | ) | 398,069 | ||||||||||||||
Premiums earned | $ | 699,779 | $ | 31,566 | $ | 207,302 | $ | 312,499 | $ | 206,211 | |||||||||||
2013 | |||||||||||||||||||||
Premiums written | $ | 876,403 | $ | 164,169 | $ | 185,386 | $ | - | $ | 855,186 | |||||||||||
Change in unearned premiums | (11,379 | ) | (35,854 | ) | (32,297 | ) | - | (14,936 | ) | ||||||||||||
Premiums earned | $ | 865,024 | $ | 128,315 | $ | 153,089 | $ | - | $ | 840,250 | |||||||||||
(1) Includes $327.7 million of unearned premiums transferred on January 1, 2014 under Cut-Through Reinsurance Agreements. |
Loss_and_Loss_Adjustment_Expen1
Loss and Loss Adjustment Expense (Tables) | 6 Months Ended | ||||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||||
Reconciliation of Beginning and Ending Consolidated Balances for Unpaid Losses and Loss Adjustment Expense | ' | ||||||||||||||||||||||||||
The following table provides a reconciliation of the beginning and ending consolidated balances for unpaid losses and loss adjustment expense (“LAE”) for the six months ended June 30, 2014 and 2013: | |||||||||||||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||||
($ in thousands) | Tower | Reciprocal | Total | Tower | Reciprocal | Total | |||||||||||||||||||||
Exchanges | Exchanges | ||||||||||||||||||||||||||
Balance at January 1 | $ | 1,973,972 | $ | 107,313 | $ | 2,081,285 | $ | 1,759,888 | $ | 135,791 | $ | 1,895,679 | |||||||||||||||
Less reinsurance recoverables on unpaid losses | (555,468 | ) | (15,392 | ) | (570,860 | ) | (407,068 | ) | (52,389 | ) | (459,457 | ) | |||||||||||||||
1,418,504 | 91,921 | 1,510,425 | 1,352,820 | 83,402 | 1,436,222 | ||||||||||||||||||||||
Net reserves, at fair value, of acquired entities | - | - | - | 161,886 | - | 161,886 | |||||||||||||||||||||
Change in net reserves for ADC (i) | 313,229 | - | 313,229 | - | - | - | |||||||||||||||||||||
Incurred related to: | |||||||||||||||||||||||||||
Current year | 103,790 | 60,084 | 163,874 | 451,020 | 57,688 | 508,708 | |||||||||||||||||||||
Prior years unfavorable/(favorable) development | 35,411 | (1,819 | ) | 33,592 | 326,749 | 167 | 326,916 | ||||||||||||||||||||
Total incurred | 139,201 | 58,265 | 197,466 | 777,769 | 57,855 | 835,624 | |||||||||||||||||||||
Paid related to: | |||||||||||||||||||||||||||
Current year | 87,435 | 39,833 | 127,268 | 164,774 | 36,669 | 201,443 | |||||||||||||||||||||
Prior years | 337,411 | 24,355 | 361,766 | 359,786 | 10,221 | 370,007 | |||||||||||||||||||||
Total paid | 424,846 | 64,188 | 489,034 | 524,560 | 46,890 | 571,450 | |||||||||||||||||||||
Net balance at end of period | 1,446,088 | 85,998 | 1,532,086 | 1,767,915 | 94,367 | 1,862,282 | |||||||||||||||||||||
Add reinsurance recoverables on unpaid losses | 441,213 | 14,259 | 455,472 | 665,172 | 24,897 | 690,069 | |||||||||||||||||||||
Balance at June 30, | $ | 1,887,301 | $ | 100,257 | $ | 1,987,558 | $ | 2,433,087 | $ | 119,264 | $ | 2,552,351 | |||||||||||||||
(i) In the first quarter of 2014, Tower terminated the Southport Re ADCs (see “Note 1 - Nature of the Business” for further description). The termination of the Southport Re ADCs resulted in a direct increase to net loss reserves. |
Accumulated_Other_Comprehensiv1
Accumulated Other Comprehensive Income (Loss) (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Summary of Changes in Accumulated Other Comprehensive Income | ' | ||||||||||||||||
The following table provides a summary of changes in accumulated other comprehensive income, by component, for the six months ended June 30, 2014 and 2013, respectively, 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 | (71,210 | ) | 1,406 | (2,382 | ) | (72,186 | ) | ||||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax | (2,594 | ) | 1,084 | - | (1,510 | ) | |||||||||||
Net current period other comprehensive income (loss) | (73,804 | ) | 2,490 | (2,382 | ) | (73,696 | ) | ||||||||||
Balance at June 30, 2013 | $ | 13,608 | $ | (3,370 | ) | $ | (1,178 | ) | $ | 9,060 | |||||||
Balance at December 31, 2013 | $ | (15,528 | ) | $ | (3,979 | ) | $ | - | $ | (19,507 | ) | ||||||
Other comprehensive income before reclassifications, net of tax | 20,129 | (8 | ) | - | 20,121 | ||||||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax | (32,207 | ) | 853 | - | (31,354 | ) | |||||||||||
Net current period other comprehensive income (loss) | (12,078 | ) | 845 | - | (11,233 | ) | |||||||||||
Balance at June 30, 2014 | $ | (27,606 | ) | $ | (3,134 | ) | $ | - | $ | (30,740 | ) | ||||||
Reclassified from Accumulated Other Comprehensive Income to Net Income | ' | ||||||||||||||||
The following provides a summary of the items that have been reclassified from accumulated other comprehensive income to net income in their entirety during the six months ended June 30, 2014 and 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 | |||||||||||||||
from accumulated other | operations | ||||||||||||||||
comprehensive income | |||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||
2014 | 2013 | ||||||||||||||||
Unrealized gains (losses) on available for sale securities | $ | (32,207 | ) | $ | (2,594 | ) | Other net realized investment gains | ||||||||||
- | - | Income tax expense | |||||||||||||||
$ | (32,207 | ) | $ | (2,594 | ) | Total net of income taxes | |||||||||||
Gains (losses) on cash flow hedges interest rate swaps | $ | 853 | $ | 1,084 | Interest expense | ||||||||||||
- | - | Income tax expense | |||||||||||||||
$ | 853 | $ | 1,084 | Total net of income taxes | |||||||||||||
Debt_Tables
Debt (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Borrowings | ' | ||||||||||||||||
The Company’s borrowings consisted of the following at June 30, 2014 and December 31, 2013: | |||||||||||||||||
June 30, 2014 | December 31, 2013 | ||||||||||||||||
($ in thousands) | Carrying | Fair | Carrying | Fair | |||||||||||||
Value | Value | Value | Value | ||||||||||||||
Convertible senior notes | $ | 149,315 | $ | 127,875 | $ | 147,712 | $ | 129,525 | |||||||||
Subordinated debentures | 235,058 | 122,121 | 235,058 | 114,900 | |||||||||||||
Total | $ | 384,373 | $ | 249,996 | $ | 382,770 | $ | 244,425 | |||||||||
Amounts Recorded for Notes | ' | ||||||||||||||||
The following table shows the amounts recorded for the Notes as of June 30, 2014 and December 31, 2013: | |||||||||||||||||
June 30, | December 31, | ||||||||||||||||
($ in thousands) | 2014 | 2013 | |||||||||||||||
Liability component | |||||||||||||||||
Outstanding principal | $ | 150,000 | $ | 150,000 | |||||||||||||
Unamortized OID | (685 | ) | (2,288 | ) | |||||||||||||
Liability component | 149,315 | 147,712 | |||||||||||||||
Equity component, net of tax | $ | 7,469 | $ | 7,469 |
Stock_Based_Compensation_Table
Stock Based Compensation (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Analysis of Restricted Stock Activity | ' | ||||||||||||||||
The following table provides an analysis of restricted stock activity for the six months ended June 30, 2014 and 2013: | |||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||
2014 | 2013 | ||||||||||||||||
Number of | Weighted | Number of | Weighted | ||||||||||||||
Shares | Average | Shares | Average | ||||||||||||||
Grant Date | Grant Date | ||||||||||||||||
Fair Value | Fair Value | ||||||||||||||||
Outstanding, January 1 | 235,586 | $ | 17.98 | 1,015,902 | $ | 20.19 | |||||||||||
Granted | - | - | 242,626 | 18.09 | |||||||||||||
Vested | (42,670 | ) | 18.07 | (953,242 | ) | 20.43 | |||||||||||
Forfeitures | (66,733 | ) | 18.11 | (14,015 | ) | 19.26 | |||||||||||
Outstanding, June 30, | 126,183 | $ | 17.87 | 291,271 | $ | 17.68 | |||||||||||
Analysis of Stock Option Activity | ' | ||||||||||||||||
The following table provides an analysis of stock option activity for the six months ended June 30, 2014 and 2013: | |||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||
2014 | 2013 | ||||||||||||||||
Number of | Average | Number of | Average | ||||||||||||||
Shares | Exercise | Shares | Exercise | ||||||||||||||
Price | Price | ||||||||||||||||
Outstanding, January 1 | 955,804 | $ | 17.75 | 969,307 | $ | 17.78 | |||||||||||
Exercised | - | - | (2,674 | ) | 16.48 | ||||||||||||
Forfeitures and expirations | (691,162 | ) | 17 | (7,657 | ) | 17.72 | |||||||||||
Outstanding, June 30 | 264,642 | $ | 19.73 | 958,976 | $ | 17.78 | |||||||||||
Exercisable, June 30 | 264,642 | $ | 19.73 | 958,976 | $ | 17.78 | |||||||||||
Analysis of Stock Based Compensation Expense | ' | ||||||||||||||||
The following table provides an analysis of stock based compensation expense for the six months ended June 30, 2014 and 2013: | |||||||||||||||||
Six Months Ended | |||||||||||||||||
June 30, | |||||||||||||||||
($ in thousands) | 2014 | 2013 | |||||||||||||||
Restricted stock | |||||||||||||||||
Expense, net of tax | $ | 205 | $ | 8,204 | |||||||||||||
Value of shares vested | 959 | 21,042 | |||||||||||||||
Value of unvested shares | 251 | 5,974 | |||||||||||||||
Stock options | |||||||||||||||||
Intrinsic value of outstanding options | - | 3,471 | |||||||||||||||
Intrinsic value of vested outstanding options | - | 3,471 | |||||||||||||||
Unrecognized compensation expense | |||||||||||||||||
Unvested restricted stock, net of tax | 251 | 5,974 | |||||||||||||||
Weighted average years over which expense will be recognized (in years) | 2.7 | 3.6 |
Earnings_Loss_per_Share_Tables
Earnings (Loss) per Share (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Computation of Earnings Per Share | ' | ||||||||||||||||
The following table shows the computation of the earnings per share: | |||||||||||||||||
Three Months | Six Months | ||||||||||||||||
Ended June 30, | Ended June 30, | ||||||||||||||||
(in thousands, except per share amounts) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Numerator | |||||||||||||||||
Net income (loss) attributable to Tower Group International, Ltd. | $ | (48,742 | ) | $ | (507,342 | ) | $ | (95,220 | ) | $ | (494,425 | ) | |||||
Less: Dividends on unvested participating restricted stock | - | (48 | ) | - | (215 | ) | |||||||||||
Net income (loss) available to common shareholders - Basic | (48,742 | ) | (507,390 | ) | (95,220 | ) | (494,640 | ) | |||||||||
Reallocation of income for unvested participating restricted stock | - | - | - | - | |||||||||||||
Net income (loss) available to common shareholders - Diluted | (48,742 | ) | (507,390 | ) | (95,220 | ) | (494,640 | ) | |||||||||
Denominator | |||||||||||||||||
Basic earnings per share denominator | 57,171 | 57,135 | 57,161 | 51,487 | |||||||||||||
Effect of dilutive securities: | - | - | - | - | |||||||||||||
Diluted earnings per share denominator | 57,171 | 57,135 | 57,161 | 51,487 | |||||||||||||
Earnings (loss) per share attributable to Tower Group International, Ltd. - Basic | |||||||||||||||||
Common stock: | |||||||||||||||||
Distributed earnings | $ | - | $ | 0.17 | $ | - | $ | 0.34 | |||||||||
Undistributed earnings | (0.85 | ) | (9.05 | ) | (1.67 | ) | (9.95 | ) | |||||||||
Total - basic | (0.85 | ) | (8.88 | ) | (1.67 | ) | (9.61 | ) | |||||||||
Earnings (loss) per share attributable to Tower Group International, Ltd. - Diluted | $ | (0.85 | ) | $ | (8.88 | ) | $ | (1.67 | ) | $ | (9.61 | ) |
Segment_Information_Tables
Segment Information (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Business Segments Results | ' | ||||||||||||||||
Business segment results are as follows: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
($ in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Commercial Insurance Segment | |||||||||||||||||
Revenues | |||||||||||||||||
Premiums earned | $ | 35,896 | $ | 247,495 | $ | 91,669 | $ | 505,913 | |||||||||
Ceding commission revenue | 1,678 | (7,780 | ) | 4,057 | (7,332 | ) | |||||||||||
Policy billing fees | 1,264 | 1,422 | 2,540 | 2,792 | |||||||||||||
Total revenues | 38,838 | 241,137 | 98,266 | 501,373 | |||||||||||||
Expenses | |||||||||||||||||
Loss and loss adjustment expenses | 48,897 | 470,284 | 112,868 | 647,287 | |||||||||||||
Underwriting expenses | 36,055 | 93,635 | 87,076 | 185,917 | |||||||||||||
Total expenses | 84,952 | 563,919 | 199,944 | 833,204 | |||||||||||||
Underwriting profit (loss) | $ | (46,114 | ) | $ | (322,782 | ) | $ | (101,678 | ) | $ | (331,831 | ) | |||||
Assumed Reinsurance Segment | |||||||||||||||||
Revenues | |||||||||||||||||
Premiums earned | $ | 15,532 | $ | 45,548 | $ | 31,565 | $ | 94,913 | |||||||||
Ceding commission revenue | - | - | - | - | |||||||||||||
Total revenues | 15,532 | 45,548 | 31,565 | 94,913 | |||||||||||||
Expenses | |||||||||||||||||
Loss and loss adjustment expenses | 5,407 | 28,088 | 7,815 | 47,448 | |||||||||||||
Underwriting expenses | 9,246 | 26,742 | 10,118 | 44,535 | |||||||||||||
Total expenses | 14,653 | 54,830 | 17,933 | 91,983 | |||||||||||||
Underwriting profit (loss) | $ | 879 | $ | (9,282 | ) | $ | 13,632 | $ | 2,930 | ||||||||
Personal Insurance Segment | |||||||||||||||||
Revenues | |||||||||||||||||
Premiums earned | $ | 43,239 | $ | 125,321 | $ | 82,977 | $ | 239,424 | |||||||||
Ceding commission revenue | 16,042 | 6,004 | 24,465 | 10,993 | |||||||||||||
Policy billing fees | 1,495 | 1,899 | 2,895 | 3,679 | |||||||||||||
Total revenues | 60,776 | 133,224 | 110,337 | 254,096 | |||||||||||||
Expenses | |||||||||||||||||
Loss and loss adjustment expenses | 40,601 | 61,520 | 76,783 | 140,889 | |||||||||||||
Underwriting expenses | 36,412 | 57,669 | 75,991 | 109,781 | |||||||||||||
Total expenses | 77,013 | 119,189 | 152,774 | 250,670 | |||||||||||||
Underwriting profit (loss) | $ | (16,237 | ) | $ | 14,035 | $ | (42,437 | ) | $ | 3,426 | |||||||
Tower | $ | (10,787 | ) | $ | 14,139 | $ | (27,071 | ) | $ | 16,156 | |||||||
Reciprocal Exchanges | (5,450 | ) | (104 | ) | (15,366 | ) | (12,730 | ) | |||||||||
Total underwriting profit (loss) | $ | (16,237 | ) | $ | 14,035 | $ | (42,437 | ) | $ | 3,426 | |||||||
Reconciliation of Revenue by Segment to Consolidated Revenues | ' | ||||||||||||||||
The following table reconciles revenue by segment to consolidated revenues: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
($ in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Commercial Insurance segment | $ | 38,838 | $ | 241,137 | $ | 98,266 | $ | 501,373 | |||||||||
Assumed Reinsurance segment | 15,532 | 45,548 | 31,565 | 94,913 | |||||||||||||
Personal Insurance segment | 60,776 | 133,224 | 110,337 | 254,096 | |||||||||||||
Total segment revenues | 115,146 | 419,909 | 240,168 | 850,382 | |||||||||||||
Net investment income | 10,210 | 28,402 | 25,568 | 58,719 | |||||||||||||
Net realized gains (losses) on investments, including other-than-temporary impairments | 13,438 | (2,034 | ) | 35,701 | 4,817 | ||||||||||||
Insurance services revenue and other | 48 | 5,192 | 613 | 5,322 | |||||||||||||
Consolidated revenues | $ | 138,842 | $ | 451,469 | $ | 302,050 | $ | 919,240 | |||||||||
Reconciliation of Results of Individual Segments to Consolidated Income Before Income Taxes | ' | ||||||||||||||||
The following table reconciles the results of the Company’s individual segments to consolidated income before income taxes: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
($ in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Commercial Insurance segment underwriting profit (loss) | $ | (46,114 | ) | $ | (322,782 | ) | $ | (101,678 | ) | $ | (331,831 | ) | |||||
Assumed Reinsurance segment underwriting profit (loss) | 879 | (9,282 | ) | 13,632 | 2,930 | ||||||||||||
Personal Insurance segment underwriting profit (loss) | (16,237 | ) | 14,035 | (42,437 | ) | 3,426 | |||||||||||
Net investment income | 10,210 | 28,402 | 25,568 | 58,719 | |||||||||||||
Net realized gains on investments, including other-than-temporary impairments | 13,438 | (2,034 | ) | 35,701 | 4,817 | ||||||||||||
Corporate and other | (5,683 | ) | (2,299 | ) | (17,572 | ) | (5,239 | ) | |||||||||
Acquisition-related transaction costs | (2,397 | ) | (665 | ) | (3,043 | ) | (19,721 | ) | |||||||||
Interest expense | (7,322 | ) | (7,635 | ) | (14,332 | ) | (15,443 | ) | |||||||||
Goodwill and fixed asset impairment | - | (214,049 | ) | - | (214,049 | ) | |||||||||||
Equity income in unconsolidated affiliate | - | 7,838 | - | 7,966 | |||||||||||||
Income before income taxes | $ | (53,226 | ) | $ | (508,471 | ) | $ | (104,161 | ) | $ | (508,425 | ) |
Nature_of_Business_Additional_
Nature of Business - Additional Information (Detail) (USD $) | 0 Months Ended | 3 Months Ended | 6 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 6 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 0 Months Ended | 0 Months Ended | 0 Months Ended | 1 Months Ended | 6 Months Ended | ||||||||||||||||||||
Jun. 27, 2014 | 20-May-14 | 9-May-14 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 27, 2014 | 8-May-14 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Jun. 30, 2014 | Feb. 05, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | 8-May-14 | 8-May-14 | 8-May-14 | 8-May-14 | Dec. 31, 2013 | Dec. 31, 2013 | 8-May-14 | 8-May-14 | 8-May-14 | 9-May-14 | Sep. 30, 2010 | Jun. 30, 2014 | Dec. 31, 2013 | |
Agreement | Subsidiary of AmTrust and a subsidiary of NGHC | Subsidiary of AmTrust and a subsidiary of NGHC | Maximum | CastlePoint Re | TRL | 2014 Ceded Premiums | AmTrust | AmTrust | AmTrust | NGHC | NGHC | NGHC | Tower | Tower | Tower | Tower | Tower | Tower | Acp Re Ltd | Acp Re Ltd | Before Amendment | 2014 Senior Convertible Notes | Convertible Senior Notes | Convertible Senior Notes | Convertible Senior Notes | |||||||||||
Agreement | Subsidiary of AmTrust and a subsidiary of NGHC | Subsidiary of AmTrust and a subsidiary of NGHC | Commercial Insurance | Commercial Insurance | Subsidiary of AmTrust and a subsidiary of NGHC | Personal Insurance | Personal Insurance | Maximum | 2014 Ceded Premiums | AmTrust | NGHC | Maximum | ||||||||||||||||||||||||
Subsidiary of AmTrust and a subsidiary of NGHC | Subsidiary of AmTrust and a subsidiary of NGHC | Subsidiary of AmTrust and a subsidiary of NGHC | Subsidiary of AmTrust and a subsidiary of NGHC | |||||||||||||||||||||||||||||||||
Nature Of Business [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Equity awards settlement in cash | ' | ' | ' | ' | ' | ' | ' | ' | $2.50 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $3 | ' | ' | ' | ' |
Percentage of common stockholders dissenting to the merger | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 15.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock, par value | ' | ' | ' | $0.01 | ' | $0.01 | ' | ' | $0.01 | $0.01 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Outstanding equity awards, aggregate value | ' | ' | ' | ' | ' | ' | ' | ' | $143,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Reimburse transaction expense | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,000,000 | ' | ' | ' | ' | ' |
Termination fee | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -6,800,000 | ' | ' | ' | ' | ' | ' |
Contribution to wholly owned subsidiaries (TNIC) | 3,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Surplus note receivable from TNIC | ' | ' | ' | ' | ' | ' | ' | 3,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Reinsured percentage on losses incurred | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 60.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Commission percentage on premium | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 20.00% | ' | ' | ' | 22.00% | ' | ' | ' | ' | ' | ' | 20.00% | ' | ' | 22.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Quota share reinsurance percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 100.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 100.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unearned premium reserve percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 65.70% | ' | ' | 100.00% | ' | ' | ' | ' | ' | ' | 65.70% | 100.00% | ' | ' | ' | ' | ' | ' | ' |
Written premiums net transferred | ' | ' | ' | 68,787,000 | 401,989,000 | -191,858,000 | 855,186,000 | ' | ' | ' | ' | 330,800,000 | ' | ' | ' | ' | ' | ' | 227,000,000 | ' | ' | 103,800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unearned premiums transferred | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 327,700,000 | ' | ' | ' | ' | ' | ' | 194,000,000 | ' | ' | 133,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of reinsurers | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3 | 2 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt carrying amount | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 150,000,000 | ' | 150,000,000 | 150,000,000 |
Debt instrument interest rate | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5.00% | 5.00% | ' | ' |
Prior year reserve development | ' | ' | 63,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Gross written premiums | ' | ' | ' | ' | ' | 609,500,000 | 1,040,600,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amount required to be collateralized against adverse loss reserve development | ' | ' | ' | 82,021,000 | ' | 82,021,000 | ' | ' | ' | 222,159,000 | ' | ' | ' | ' | 547,600,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unencumbered liquid assets | ' | ' | ' | 51,281,000 | ' | 51,281,000 | ' | ' | ' | 68,963,000 | ' | ' | ' | ' | ' | 167,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Funds held by reinsured companies | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 532,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of reinsured to affiliates | ' | 100.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Statutory capital requirement | ' | ' | ' | ' | ' | ' | ' | ' | ' | 843,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Maturity date of convertible senior notes | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 15-Sep-14 | 15-Sep-14 | ' |
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 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Maximum number of quarters to defer interest payments | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '60 months | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Employee severance payment | ' | ' | ' | ' | ' | $3,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Investment_in_Canopius_Group_L1
Investment in Canopius Group Limited ("Canopius Group") - Additional Information (Detail) | 3 Months Ended | 6 Months Ended | 1 Months Ended | 0 Months Ended | ||||||
In Millions, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2014 | Jul. 31, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | 1-May-14 | Dec. 13, 2013 | Dec. 13, 2013 | Dec. 13, 2013 | Dec. 13, 2013 |
USD ($) | USD ($) | Subsequent Event | Other Assets | Other Assets | Canopius Group Limited | Canopius Group Limited | Canopius Group Limited | Canopius Group Limited | Canopius Group Limited | |
USD ($) | USD ($) | USD ($) | USD ($) | GBP (£) | Condition One | Condition Two | ||||
GBP (£) | GBP (£) | |||||||||
Investments in and Advances to Affiliates [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Initial purchase price | ' | ' | ' | ' | ' | ' | $69.70 | £ 42.5 | £ 40.6 | £ 1.95 |
Sale of investment to NKSJ Holdings, percentage | ' | ' | ' | ' | ' | 100.00% | ' | ' | ' | ' |
Fair value of derivative | ' | ' | ' | 3.4 | 9.3 | ' | ' | ' | ' | ' |
Final payment of additional consideration | 5.8 | ' | 3.4 | ' | ' | ' | ' | ' | ' | ' |
Net realized gains (losses) | $1.40 | ($0.10) | ' | ' | ' | ' | ' | ' | ' | ' |
Variable_Interest_Entities_VIE1
Variable Interest Entities ("VIEs") - Additional Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Variable Interest Entity [Line Items] | ' | ' | ' | ' |
Total revenues | $138,842 | $451,469 | $302,050 | $919,240 |
Total expenses | 192,068 | 753,729 | 406,211 | 1,221,582 |
Net income (loss) | -5,250 | 801 | -10,670 | -10,480 |
Reciprocal Exchanges | ' | ' | ' | ' |
Variable Interest Entity [Line Items] | ' | ' | ' | ' |
Total revenues | 44,400 | 46,300 | 91,700 | 92,900 |
Total expenses | 49,700 | 46,200 | 102,700 | 103,200 |
Net income (loss) | ($5,300) | $800 | ($11,000) | ($10,500) |
Summary_of_Cost_or_Amortized_C
Summary of Cost or Amortized Cost and Fair Value of Investments in Fixed Maturity and Equity Securities, Gross Unrealized Gains and Losses, and Other-Than-Temporary Impairment Losses (Detail) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | ||
In Thousands, unless otherwise specified | ||||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | $1,426,665 | $1,717,267 | ||
Gross Unrealized Gains | 31,273 | 64,123 | ||
Gross Unrealized Losses | -5,996 | -26,168 | ||
Investments | 1,451,942 | 1,755,222 | ||
Unrealized OTTI Losses | -20 | [1] | -664 | [1] |
Tower | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 1,199,488 | 1,465,039 | ||
Gross Unrealized Gains | 23,721 | 56,480 | ||
Gross Unrealized Losses | -5,083 | -21,369 | ||
Investments | 1,218,126 | 1,500,150 | ||
Unrealized OTTI Losses | -20 | [1] | -664 | [1] |
Reciprocal Exchanges | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 227,177 | 252,228 | ||
Gross Unrealized Gains | 7,552 | 7,643 | ||
Gross Unrealized Losses | -913 | -4,799 | ||
Investments | 233,816 | 255,072 | ||
Short-term investments | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 2,000 | 5,925 | ||
Gross Unrealized Losses | ' | -28 | ||
Investments | 2,000 | 5,897 | ||
Fixed Maturity Securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 1,408,545 | 1,613,634 | ||
Gross Unrealized Gains | 31,023 | 52,637 | ||
Gross Unrealized Losses | -5,189 | -23,576 | ||
Investments | 1,434,379 | 1,642,695 | ||
Unrealized OTTI Losses | -20 | [1] | -664 | [1] |
Fixed Maturity Securities | Municipal Bonds | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 237,595 | 277,382 | ||
Gross Unrealized Gains | 11,312 | 7,981 | ||
Gross Unrealized Losses | -702 | -6,257 | ||
Investments | 248,205 | 279,106 | ||
Fixed Maturity Securities | U.S. Treasury Securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 457,224 | 370,959 | ||
Gross Unrealized Gains | 1,236 | 729 | ||
Gross Unrealized Losses | -2,997 | -7,726 | ||
Investments | 455,463 | 363,962 | ||
Fixed Maturity Securities | U.S. Agency securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 98,877 | 110,362 | ||
Gross Unrealized Gains | 1,313 | 1,420 | ||
Gross Unrealized Losses | -28 | -561 | ||
Investments | 100,162 | 111,221 | ||
Fixed Maturity Securities | Corporate Securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Investments | 354,026 | 525,942 | ||
Fixed Maturity Securities | Corporate Securities | Finance | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 102,041 | 148,132 | ||
Gross Unrealized Gains | 4,183 | 9,797 | ||
Gross Unrealized Losses | -146 | -1,028 | ||
Investments | 106,078 | 156,901 | ||
Fixed Maturity Securities | Corporate Securities | Industrial | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 206,417 | 316,474 | ||
Gross Unrealized Gains | 5,601 | 8,286 | ||
Gross Unrealized Losses | -219 | -3,008 | ||
Investments | 211,799 | 321,752 | ||
Fixed Maturity Securities | Corporate Securities | Utilities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 35,896 | 47,838 | ||
Gross Unrealized Gains | 599 | 1,341 | ||
Gross Unrealized Losses | -346 | -1,890 | ||
Investments | 36,149 | 47,289 | ||
Unrealized OTTI Losses | ' | -17 | [1] | |
Fixed Maturity Securities | Commercial mortgage-backed securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 80,792 | 189,808 | ||
Gross Unrealized Gains | 5,703 | 16,852 | ||
Gross Unrealized Losses | -259 | -1,754 | ||
Investments | 86,236 | 204,906 | ||
Unrealized OTTI Losses | -20 | [1] | -634 | [1] |
Fixed Maturity Securities | Residential mortgage-backed securities, Agency backed securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 125,333 | 63,668 | ||
Gross Unrealized Gains | 983 | 891 | ||
Gross Unrealized Losses | -274 | -1,218 | ||
Investments | 126,042 | 63,341 | ||
Fixed Maturity Securities | Residential mortgage-backed securities, Non-agency backed securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 224 | 30,228 | ||
Gross Unrealized Gains | 3 | 4,659 | ||
Gross Unrealized Losses | ' | -31 | ||
Investments | 227 | 34,856 | ||
Unrealized OTTI Losses | ' | -13 | [1] | |
Fixed Maturity Securities | Asset-Backed Securities | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 64,146 | 58,783 | ||
Gross Unrealized Gains | 90 | 681 | ||
Gross Unrealized Losses | -218 | -103 | ||
Investments | 64,018 | 59,361 | ||
Preferred stocks | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | 16,120 | 21,330 | ||
Gross Unrealized Gains | 250 | 54 | ||
Gross Unrealized Losses | -807 | -2,536 | ||
Investments | 15,563 | 18,848 | ||
Common Stocks | ' | ' | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ||
Cost or Amortized Cost | ' | 76,378 | ||
Gross Unrealized Gains | ' | 11,432 | ||
Gross Unrealized Losses | ' | -28 | ||
Investments | ' | $87,782 | ||
[1] | Represents the gross unrealized loss on other-than-temporarily impaired securities recognized in accumulated other comprehensive income (loss). |
Investments_Additional_Informa
Investments - Additional Information (Detail) (USD $) | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | |
Investment | |||
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Restricted assets, cash and cash equivalents | $106,600,000 | ' | $106,600,000 |
Investment, carrying values | 1,426,665,000 | ' | 1,717,267,000 |
Proceeds from sale of equity securities | 146,692,000 | 802,297,000 | ' |
Number of securities in unrealized loss position not deemed OTTI | 151 | ' | ' |
Unrealized losses | 5,996,000 | ' | 26,168,000 |
Unrealized losses related to securities in loss position for more than 12 months | 5,614,000 | ' | 4,480,000 |
Future funding commitments including not limited to limited partnerships | 22,900,000 | ' | ' |
Fixed Maturity Securities | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Proceeds from sale or maturity of fixed maturity securities | 869,800,000 | 664,400,000 | ' |
Number of securities in unrealized loss position not deemed OTTI | 148 | ' | ' |
Unrealized losses | 5,200,000 | ' | ' |
Percentage of fixed maturity securities in unrealized loss position below amortized cost | 2.00% | ' | ' |
Number of securities in unrealized loss position for more than 12 months | 102 | ' | ' |
Unrealized losses related to securities in loss position for more than 12 months | 4,800,000 | ' | ' |
US Treasury Notes and Other Securities | Held by Counterparties | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Restricted assets, cash and cash equivalents | 219,600,000 | ' | ' |
Investment, carrying values | ' | ' | 248,900,000 |
Municipal Bonds Corporate Securities And US Treasury Securities | Fixed Maturity Securities | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Unrealized losses | 4,400,000 | ' | ' |
Equity securities | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Number of securities in unrealized loss position not deemed OTTI | 3 | ' | ' |
Unrealized losses | 800,000 | ' | ' |
Tower | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Investment, carrying values | 1,199,488,000 | ' | 1,465,039,000 |
Unrealized losses | 5,083,000 | ' | 21,369,000 |
Unrealized losses related to securities in loss position for more than 12 months | $4,740,000 | ' | $2,034,000 |
Tower | Other | ' | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' | ' |
Number of securities purchased | 6 | ' | ' |
Summary_of_Major_Categories_of
Summary of Major Categories of Net Investment Income (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Income | $11,205 | $29,835 | $27,606 | $61,926 |
Investment expenses | -995 | -1,433 | -2,038 | -3,207 |
Net investment income | 10,210 | 28,402 | 25,568 | 58,719 |
Consolidation, Eliminations | ' | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Net investment income | -1,667 | -1,668 | -3,321 | -3,315 |
Tower | ' | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Net investment income | 10,065 | 27,612 | 24,762 | 57,195 |
Reciprocal Exchanges | ' | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Net investment income | 1,812 | 2,458 | 4,127 | 4,839 |
Fixed Maturity Securities | ' | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Income | 9,224 | 20,562 | 21,801 | 41,535 |
Equity securities | ' | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Income | 437 | 6,808 | 1,748 | 13,292 |
Cash and cash equivalents | ' | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Income | -20 | 19 | 30 | 70 |
Other Invested Asset | ' | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Income | 1,404 | 2,158 | 3,786 | 6,414 |
Other | ' | ' | ' | ' |
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] | ' | ' | ' | ' |
Income | $160 | $288 | $241 | $615 |
Summary_of_Gross_Realized_Gain
Summary of Gross Realized Gains, Losses and Impairment Write-Downs on Investments (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ' |
Net realized gains (losses) on investments | $14,487 | $2,422 | $37,657 | $9,962 |
Other-than-temporary impairment losses | -1,049 | -4,456 | -1,956 | -5,145 |
Total net realized investment gains (losses) | 13,438 | -2,034 | 35,701 | 4,817 |
Tower | ' | ' | ' | ' |
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ' |
Other-than-temporary impairment losses | -1,049 | -4,456 | -1,711 | -5,145 |
Total net realized investment gains (losses) | 13,405 | -2,243 | 32,205 | 3,990 |
Reciprocal Exchanges | ' | ' | ' | ' |
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ' |
Other-than-temporary impairment losses | ' | ' | -245 | ' |
Total net realized investment gains (losses) | 33 | 209 | 3,496 | 827 |
Fixed Maturity Securities | ' | ' | ' | ' |
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ' |
Gross realized gains | 7,094 | 10,479 | 35,662 | 17,843 |
Gross realized losses | -474 | -1,672 | -2,038 | -1,862 |
Net realized gains (losses) on investments | 6,620 | 8,807 | 33,624 | 15,981 |
Other-than-temporary impairment losses | -1,049 | -23 | -1,956 | -187 |
Equity securities | ' | ' | ' | ' |
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ' |
Gross realized gains | 7,148 | 5,323 | 10,466 | 9,559 |
Gross realized losses | -203 | -12,717 | -3,236 | -17,530 |
Net realized gains (losses) on investments | 6,945 | -7,394 | 7,230 | -7,971 |
Other-than-temporary impairment losses | ' | -4,433 | ' | -4,958 |
Other | ' | ' | ' | ' |
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ' |
Gross realized gains | 922 | 2,100 | 549 | 3,855 |
Gross realized losses | ' | -1,091 | -3,746 | -1,903 |
Net realized gains (losses) on investments | $922 | $1,009 | ($3,197) | $1,952 |
Amount_of_FixedMaturity_and_Eq
Amount of Fixed-Maturity and Equity Securities that were Other-Than-Temporary Impairment (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' | ' |
Other-than-temporary impairments | ($1,069) | ($4,456) | ($2,327) | ($5,145) |
Portion of loss recognized in accumulated other comprehensive income (loss) | 20 | ' | 371 | ' |
Other-than-temporary impairment losses | -1,049 | -4,456 | -1,956 | -5,145 |
Tower | ' | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' | ' |
Other-than-temporary impairment losses | -1,049 | -4,456 | -1,711 | -5,145 |
Reciprocal Exchanges | ' | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' | ' |
Other-than-temporary impairment losses | ' | ' | -245 | ' |
Corporate Securities | ' | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' | ' |
Other-than-temporary impairments | -1,006 | ' | -1,105 | ' |
Commercial mortgage-backed securities | ' | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' | ' |
Other-than-temporary impairments | -62 | -23 | -426 | -47 |
Residential mortgage-backed securities | ' | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' | ' |
Other-than-temporary impairments | ' | ' | -123 | -140 |
Municipal Bonds | ' | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' | ' |
Other-than-temporary impairments | -1 | ' | -673 | ' |
Equity securities | ' | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' | ' |
Other-than-temporary impairments | ' | -4,433 | ' | -4,958 |
Other-than-temporary impairment losses | ' | ($4,433) | ' | ($4,958) |
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 $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Tower | ' | ' | ' | ' |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ' | ' | ' | ' |
Balance at beginning of period | $7,515 | $4,516 | $7,817 | $4,492 |
Additional credit losses recognized during the period, related to securities for which no OTTI has been previously recognized | 43 | -117 | 815 | 47 |
Additional credit losses recognized during the period, related to securities for which OTTI has been previously recognized | 1,006 | ' | 1,141 | ' |
Reductions due to Securities sold during the period (realized) | -3,367 | 140 | -4,576 | ' |
Balance at end of period | $5,197 | $4,539 | $5,197 | $4,539 |
Information_Regarding_Invested
Information Regarding Invested Assets that were in Unrealized Loss Position (Detail) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | $129,566 | $743,925 |
Less than 12 Months, Unrealized Losses | -382 | -21,688 |
12 Months or Longer, Fair Value | 286,334 | 53,817 |
12 Months or Longer, Unrealized Losses | -5,614 | -4,480 |
Total, Aggregate Fair Value | 415,900 | 797,742 |
Total, Unrealized Losses | -5,996 | -26,168 |
Tower | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 118,219 | 663,127 |
Less than 12 Months, Unrealized Losses | -343 | -19,335 |
12 Months or Longer, Fair Value | 241,468 | 23,096 |
12 Months or Longer, Unrealized Losses | -4,740 | -2,034 |
Total, Aggregate Fair Value | 359,687 | 686,223 |
Total, Unrealized Losses | -5,083 | -21,369 |
Reciprocal Exchanges | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 11,347 | 80,798 |
Less than 12 Months, Unrealized Losses | -39 | -2,353 |
12 Months or Longer, Fair Value | 44,866 | 30,721 |
12 Months or Longer, Unrealized Losses | -874 | -2,446 |
Total, Aggregate Fair Value | 56,213 | 111,519 |
Total, Unrealized Losses | -913 | -4,799 |
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 |
Fixed Maturity Securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 129,566 | 722,365 |
Less than 12 Months, Unrealized Losses | -382 | -19,347 |
12 Months or Longer, Fair Value | 275,445 | 47,663 |
12 Months or Longer, Unrealized Losses | -4,807 | -4,229 |
Total, Aggregate Fair Value | 405,011 | 770,028 |
Total, Unrealized Losses | -5,189 | -23,576 |
Fixed Maturity Securities | Municipal Bonds | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 4,946 | 109,345 |
Less than 12 Months, Unrealized Losses | -14 | -5,056 |
12 Months or Longer, Fair Value | 34,090 | 4,268 |
12 Months or Longer, Unrealized Losses | -688 | -1,201 |
Total, Aggregate Fair Value | 39,036 | 113,613 |
Total, Unrealized Losses | -702 | -6,257 |
Fixed Maturity Securities | U.S. Treasury Securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 24,975 | 273,217 |
Less than 12 Months, Unrealized Losses | -23 | -7,726 |
12 Months or Longer, Fair Value | 184,185 | ' |
12 Months or Longer, Unrealized Losses | -2,974 | ' |
Total, Aggregate Fair Value | 209,160 | 273,217 |
Total, Unrealized Losses | -2,997 | -7,726 |
Fixed Maturity Securities | U.S. Agency securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 2,495 | 51,808 |
Less than 12 Months, Unrealized Losses | -3 | -561 |
12 Months or Longer, Fair Value | 2,254 | ' |
12 Months or Longer, Unrealized Losses | -25 | ' |
Total, Aggregate Fair Value | 4,749 | 51,808 |
Total, Unrealized Losses | -28 | -561 |
Fixed Maturity Securities | Corporate Securities | Finance | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 19,851 | 37,811 |
Less than 12 Months, Unrealized Losses | -33 | -1,005 |
12 Months or Longer, Fair Value | 7,994 | 335 |
12 Months or Longer, Unrealized Losses | -113 | -23 |
Total, Aggregate Fair Value | 27,845 | 38,146 |
Total, Unrealized Losses | -146 | -1,028 |
Fixed Maturity Securities | Corporate Securities | Industrial | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 15,849 | 124,869 |
Less than 12 Months, Unrealized Losses | -61 | -2,550 |
12 Months or Longer, Fair Value | 7,666 | 10,023 |
12 Months or Longer, Unrealized Losses | -158 | -458 |
Total, Aggregate Fair Value | 23,515 | 134,892 |
Total, Unrealized Losses | -219 | -3,008 |
Fixed Maturity Securities | Corporate Securities | Utilities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | ' | 27,698 |
Less than 12 Months, Unrealized Losses | ' | -805 |
12 Months or Longer, Fair Value | 10,600 | 7,292 |
12 Months or Longer, Unrealized Losses | -346 | -1,085 |
Total, Aggregate Fair Value | 10,600 | 34,990 |
Total, Unrealized Losses | -346 | -1,890 |
Fixed Maturity Securities | Commercial mortgage-backed securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 4,442 | 26,469 |
Less than 12 Months, Unrealized Losses | -24 | -597 |
12 Months or Longer, Fair Value | 18,240 | 20,397 |
12 Months or Longer, Unrealized Losses | -235 | -1,157 |
Total, Aggregate Fair Value | 22,682 | 46,866 |
Total, Unrealized Losses | -259 | -1,754 |
Fixed Maturity Securities | Residential mortgage-backed securities, Agency backed securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 4,231 | 37,660 |
Less than 12 Months, Unrealized Losses | -6 | -925 |
12 Months or Longer, Fair Value | 10,416 | 5,166 |
12 Months or Longer, Unrealized Losses | -268 | -293 |
Total, Aggregate Fair Value | 14,647 | 42,826 |
Total, Unrealized Losses | -274 | -1,218 |
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 |
Less than 12 Months, Unrealized Losses | ' | -19 |
12 Months or Longer, Fair Value | ' | 182 |
12 Months or Longer, Unrealized Losses | ' | -12 |
Total, Aggregate Fair Value | ' | 1,209 |
Total, Unrealized Losses | ' | -31 |
Fixed Maturity Securities | Asset-Backed Securities | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | 52,777 | 32,461 |
Less than 12 Months, Unrealized Losses | -218 | -103 |
Total, Aggregate Fair Value | 52,777 | 32,461 |
Total, Unrealized Losses | -218 | -103 |
Preferred stocks | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | ' | 10,538 |
Less than 12 Months, Unrealized Losses | ' | -2,285 |
12 Months or Longer, Fair Value | 10,889 | 6,154 |
12 Months or Longer, Unrealized Losses | -807 | -251 |
Total, Aggregate Fair Value | 10,889 | 16,692 |
Total, Unrealized Losses | -807 | -2,536 |
Common Stocks | ' | ' |
Investments, Unrealized Loss Position [Line Items] | ' | ' |
Less than 12 Months, Fair Value | ' | 7,125 |
Less than 12 Months, Unrealized Losses | ' | -28 |
Total, Aggregate Fair Value | ' | 7,125 |
Total, Unrealized Losses | ' | ($28) |
Composition_of_FixedMaturity_P
Composition of Fixed-Maturity Portfolio by Remaining Time to Maturity (Detail) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Less than one year, amortized cost | $38,814 | $41,171 |
One to five years, amortized cost | 602,856 | 546,857 |
Five to ten years, amortized cost | 357,012 | 541,073 |
More than 10 years, amortized cost | 139,367 | 142,046 |
Mortgage and asset-backed securities, amortized cost | 270,496 | 342,487 |
Total at end of period, amortized cost | 1,408,545 | 1,613,634 |
Less than one year, fair value | 39,292 | 41,748 |
One to five years, fair value | 609,043 | 555,222 |
Five to ten years, fair value | 365,923 | 540,766 |
More than 10 years, fair value | 143,597 | 142,494 |
Mortgage and asset-backed securities, fair value | 276,524 | 362,465 |
Total at end of period, fair value | 1,434,379 | 1,642,695 |
Tower | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Less than one year, amortized cost | 26,178 | 33,305 |
One to five years, amortized cost | 572,182 | 507,388 |
Five to ten years, amortized cost | 293,067 | 459,070 |
More than 10 years, amortized cost | 100,907 | 100,977 |
Mortgage and asset-backed securities, amortized cost | 191,785 | 263,417 |
Total at end of period, amortized cost | 1,184,119 | 1,364,157 |
Less than one year, fair value | 26,490 | 33,727 |
One to five years, fair value | 578,040 | 513,841 |
Five to ten years, fair value | 299,813 | 459,251 |
More than 10 years, fair value | 104,124 | 102,801 |
Mortgage and asset-backed securities, fair value | 194,868 | 280,526 |
Total at end of period, fair value | 1,203,335 | 1,390,146 |
Reciprocal Exchanges | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Less than one year, amortized cost | 12,636 | 7,866 |
One to five years, amortized cost | 30,674 | 39,469 |
Five to ten years, amortized cost | 63,945 | 82,003 |
More than 10 years, amortized cost | 38,460 | 41,069 |
Mortgage and asset-backed securities, amortized cost | 78,711 | 79,070 |
Total at end of period, amortized cost | 224,426 | 249,477 |
Less than one year, fair value | 12,802 | 8,021 |
One to five years, fair value | 31,003 | 41,381 |
Five to ten years, fair value | 66,110 | 81,515 |
More than 10 years, fair value | 39,473 | 39,693 |
Mortgage and asset-backed securities, fair value | 81,656 | 81,939 |
Total at end of period, fair value | $231,044 | $252,549 |
Composition_of_Other_Invested_
Composition of Other Invested Assets (Detail) (Tower, USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Schedule of Investments [Line Items] | ' | ' |
Other invested assets | $55,617 | $96,155 |
Limited partnerships, equity method | ' | ' |
Schedule of Investments [Line Items] | ' | ' |
Other invested assets | 36,960 | 46,521 |
Real estate, amortized cost | ' | ' |
Schedule of Investments [Line Items] | ' | ' |
Other invested assets | ' | 6,054 |
Securities reported under the fair value option | ' | ' |
Schedule of Investments [Line Items] | ' | ' |
Other invested assets | $18,657 | $43,580 |
Financial_Instruments_at_Fair_
Financial Instruments at Fair Value among Levels (Detail) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | ||
In Thousands, unless otherwise specified | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | $1,451,942 | $1,755,222 | ||
Other invested assets | 18,657 | [1] | 43,580 | [2] |
Additional Payment derivative | 3,403 | 9,343 | ||
Other liabilities | ' | ' | ||
Interest rate swap contracts | -4,766 | -6,066 | ||
Total investments and Other liabilities | 1,469,236 | 1,790,980 | ||
Debt and equity securities sold, not yet purchased | ' | -11,099 | ||
Short-term investments | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 2,000 | 5,897 | ||
Tower | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 1,218,126 | 1,500,150 | ||
Total investments and Other liabilities | 1,235,424 | 1,535,908 | ||
Reciprocal Exchanges | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 233,816 | 255,072 | ||
Total investments and Other liabilities | 233,812 | 255,072 | ||
Level 1 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 15,563 | 106,630 | ||
Other liabilities | ' | ' | ||
Total investments and Other liabilities | 15,563 | 106,630 | ||
Level 1 | Tower | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Total investments and Other liabilities | 12,791 | 104,107 | ||
Level 1 | Reciprocal Exchanges | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Total investments and Other liabilities | 2,772 | 2,523 | ||
Level 2 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 1,433,959 | 1,645,166 | ||
Other liabilities | ' | ' | ||
Interest rate swap contracts | -4,766 | -6,066 | ||
Total investments and Other liabilities | 1,429,193 | 1,628,001 | ||
Debt and equity securities sold, not yet purchased | ' | -11,099 | ||
Level 2 | Short-term investments | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 2,000 | 5,897 | ||
Level 2 | Tower | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Total investments and Other liabilities | 1,198,153 | 1,375,452 | ||
Level 2 | Reciprocal Exchanges | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Total investments and Other liabilities | 231,040 | 252,549 | ||
Level 3 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 2,420 | 3,426 | ||
Other invested assets | 18,657 | [1] | 43,580 | [2] |
Additional Payment derivative | 3,403 | 9,343 | ||
Other liabilities | ' | ' | ||
Total investments and Other liabilities | 24,480 | 56,349 | ||
Level 3 | Tower | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Total investments and Other liabilities | 24,480 | 56,349 | ||
Fixed Maturity Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 1,434,379 | 1,642,695 | ||
Fixed Maturity Securities | Municipal Bonds | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 248,205 | 279,106 | ||
Fixed Maturity Securities | U.S. Treasury Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 455,463 | 363,962 | ||
Fixed Maturity Securities | U.S. Agency securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 100,162 | 111,221 | ||
Fixed Maturity Securities | Corporate Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 354,026 | 525,942 | ||
Fixed Maturity Securities | Commercial mortgage-backed securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 86,236 | 204,906 | ||
Fixed Maturity Securities | Residential mortgage-backed securities, Agency backed securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 126,042 | 63,341 | ||
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 | 227 | 34,856 | ||
Fixed Maturity Securities | Asset-Backed Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 64,018 | 59,361 | ||
Fixed Maturity Securities | Level 2 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 1,431,959 | 1,639,269 | ||
Fixed Maturity Securities | Level 2 | Municipal Bonds | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 248,205 | 279,106 | ||
Fixed Maturity Securities | Level 2 | U.S. Treasury Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 455,463 | 363,962 | ||
Fixed Maturity Securities | Level 2 | U.S. Agency securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 100,162 | 111,221 | ||
Fixed Maturity Securities | Level 2 | Corporate Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 351,606 | 522,516 | ||
Fixed Maturity Securities | Level 2 | Commercial mortgage-backed securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 86,236 | 204,906 | ||
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 | 126,042 | 63,341 | ||
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 | 227 | 34,856 | ||
Fixed Maturity Securities | Level 2 | Asset-Backed Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 64,018 | 59,361 | ||
Fixed Maturity Securities | Level 3 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 2,420 | 3,426 | ||
Fixed Maturity Securities | Level 3 | Corporate Securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 2,420 | 3,426 | ||
Equity securities | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | 15,563 | 106,630 | ||
Equity securities | Level 1 | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Investments | $15,563 | $106,630 | ||
[1] | $18.6 million of the $55.6 million Other invested assets reported on the consolidated balance sheet at June 30, 2014 are reported at fair value. The remaining $37 million of Other invested assets are reported under the equity method of accounting. | |||
[2] | $43.6 million of the $96.2 million Other invested assets reported on the consolidated balance sheet at December 31, 2013 are reported at fair value. The remaining $52.6 million of Other invested assets are reported under the equity method of accounting or at amortized cost. |
Financial_Instruments_at_Fair_1
Financial Instruments at Fair Value among Levels (Parenthetical) (Detail) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Other invested assets, fair value | $18,657,000 | [1] | $43,580,000 | [2] |
Other invested assets, amortized cost | 55,600,000 | 52,600,000 | ||
Tower | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Other invested asset | 55,617,000 | 96,155,000 | ||
Tower | Minimum | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Other invested asset | $37,000,000 | ' | ||
[1] | $18.6 million of the $55.6 million Other invested assets reported on the consolidated balance sheet at June 30, 2014 are reported at fair value. The remaining $37 million of Other invested assets are reported under the equity method of accounting. | |||
[2] | $43.6 million of the $96.2 million Other invested assets reported on the consolidated balance sheet at December 31, 2013 are reported at fair value. The remaining $52.6 million of Other invested assets are reported under the equity method of accounting or at amortized cost. |
Fair_Value_Measurements_Additi
Fair Value Measurements - Additional Information (Detail) (USD $) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
Fair Value [Line Items] | ' | ' |
Gross transfers out of Level 3 | $0 | $0 |
Gross transfers out of Level 1 into Level 2 | 0 | 0 |
Gross transfers out of Level 2 into Level 1 | 0 | 0 |
Gross realized gains and losses from fair value of debt securities sold, not yet purchased | 200,000 | ' |
Gross realized gains and losses from fair value of equity securities sold, not yet purchased | $100,000 | ' |
Tower | Other | ' | ' |
Fair Value [Line Items] | ' | ' |
Number of securities purchased | 6 | ' |
Tower | Other | Level 3 | ' | ' |
Fair Value [Line Items] | ' | ' |
Number of securities purchased | 6 | ' |
Tower | Equity securities | Level 3 | ' | ' |
Fair Value [Line Items] | ' | ' |
Number of securities purchased | 4 | ' |
Tower | Fixed Maturity Securities | Level 3 | ' | ' |
Fair Value [Line Items] | ' | ' |
Number of securities purchased | 1 | ' |
Summary_of_Activity_in_Level_T
Summary of Activity in Level Three Assets Measured at Fair Value (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ' | ' | ' | ' | ||
Beginning balance | $30,047 | ' | $56,349 | ' | ||
Total gains (losses)-realized / unrealized included in net income | 244 | ' | -1,198 | ' | ||
Settlements | -5,811 | ' | -30,671 | ' | ||
Ending balance | 24,480 | ' | 24,480 | ' | ||
Other Invested Asset | ' | ' | ' | ' | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ' | ' | ' | ' | ||
Beginning balance | 18,778 | 25,000 | 43,580 | 25,000 | ||
Total gains (losses)-realized / unrealized included in net income | -121 | ' | -63 | ' | ||
Purchases | ' | 5,250 | ' | 5,250 | ||
Settlements | ' | ' | -24,860 | ' | ||
Ending balance | 18,657 | 30,250 | 18,657 | 30,250 | ||
Fixed Maturity Securities | ' | ' | ' | ' | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ' | ' | ' | ' | ||
Beginning balance | 3,426 | [1] | ' | 3,426 | [1] | ' |
Total gains (losses)-realized / unrealized included in net income | -1,006 | [1] | ' | -1,006 | [1] | ' |
Ending balance | 2,420 | [1] | ' | 2,420 | [1] | ' |
Additional Payment Derivatives | ' | ' | ' | ' | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ' | ' | ' | ' | ||
Beginning balance | 7,843 | ' | 9,343 | ' | ||
Total gains (losses)-realized / unrealized included in net income | 1,371 | ' | -129 | ' | ||
Settlements | -5,811 | ' | -5,811 | ' | ||
Ending balance | $3,403 | ' | $3,403 | ' | ||
[1] | Comprised of corporate and other bonds |
Reinsurance_Additional_Informa
Reinsurance - Additional Information (Detail) | Sep. 30, 2013 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Jun. 30, 2014 | Jun. 30, 2014 |
Agreement | Subsidiary of AmTrust and a subsidiary of NGHC | Subsidiary of AmTrust and a subsidiary of NGHC | Subsidiary of AmTrust and a subsidiary of NGHC | Subsidiary of AmTrust and a subsidiary of NGHC | Subsidiary of AmTrust and a subsidiary of NGHC | Subsidiary of AmTrust and a subsidiary of NGHC | |
Agreement | AmTrust | NGHC | 2014 Ceded Premiums | Maximum | |||
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items] | ' | ' | ' | ' | ' | ' | ' |
Number of reinsurers | 3 | ' | 2 | ' | ' | ' | ' |
Quota share reinsurance cede, percentage | ' | ' | 100.00% | ' | ' | ' | ' |
Reinsured percentage on losses incurred | ' | ' | ' | ' | ' | ' | 60.00% |
Ceding commission on cut through reinsurance agreements percentage | ' | 20.00% | ' | ' | ' | 22.00% | ' |
Unearned premium reserve percentage | ' | ' | ' | 65.70% | 100.00% | ' | ' |
Premiums_Written_Ceded_and_Ear
Premiums Written, Ceded and Earned (Detail) (USD $) | 3 Months Ended | 6 Months Ended | |||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items] | ' | ' | ' | ' | |
Premiums written | $284,934 | $430,688 | $566,136 | $876,403 | |
Change in unearned premiums | 50,697 | 4,749 | 133,643 | -11,379 | |
Premiums earned, Direct | 335,631 | 435,437 | 699,779 | 865,024 | |
Premiums written, Assumed | 21,893 | 58,655 | 43,352 | 164,169 | |
Change in unearned premiums, Assumed | -6,333 | 8,535 | -11,786 | -35,854 | |
Premiums earned, Assumed | 15,560 | 67,190 | 31,566 | 128,315 | |
Premiums written, Net | 68,787 | 401,989 | -191,858 | 855,186 | |
Change in unearned premiums, Net | 25,880 | 16,375 | 398,069 | -14,936 | |
Premiums earned, Net | 94,667 | 418,364 | 206,211 | 840,250 | |
Ceded - Cut - Through | ' | ' | ' | ' | |
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items] | ' | ' | ' | ' | |
Premiums written, Ceded | 162,754 | ' | 647,795 | [1] | ' |
Change in unearned premiums, Ceded | -7,792 | ' | -335,296 | ' | |
Premiums earned, Ceded | 154,962 | ' | 312,499 | ' | |
Ceded - Other | ' | ' | ' | ' | |
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items] | ' | ' | ' | ' | |
Premiums written, Ceded | 75,286 | 87,354 | 142,814 | 185,386 | |
Change in unearned premiums, Ceded | 26,276 | -3,091 | 64,488 | -32,297 | |
Premiums earned, Ceded | $101,562 | $84,263 | $207,302 | $153,089 | |
[1] | Includes $327.7 million of unearned premiums transferred on January 1, 2014 under Cut-Through Reinsurance Agreements. |
Premiums_Written_Ceded_and_Ear1
Premiums Written, Ceded and Earned (Parenthetical) (Detail) (Subsidiary of AmTrust and a subsidiary of NGHC, USD $) | 12 Months Ended |
In Thousands, unless otherwise specified | Dec. 31, 2013 |
Subsidiary of AmTrust and a subsidiary of NGHC | ' |
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items] | ' |
Unearned premium transferred | $327,700 |
Reconciliation_of_Beginning_an
Reconciliation of Beginning and Ending Consolidated Balances for Unpaid Losses and Loss Adjustment Expense (Detail) (USD $) | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 6 Months Ended | |||||||||||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | ||
Beginning | Beginning | Tower | Tower | Tower | Tower | Tower | Reciprocal Exchanges | Reciprocal Exchanges | Reciprocal Exchanges | Reciprocal Exchanges | ||||||
Beginning | Beginning | Beginning | Beginning | |||||||||||||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Balance at beginning of year | ' | $2,081,285 | ' | $2,081,285 | $1,895,679 | ' | ' | ' | $1,973,972 | $1,759,888 | $107,315 | ' | $107,313 | $135,791 | ||
Less reinsurance recoverables on unpaid losses | -570,860 | -570,860 | -459,457 | ' | ' | -555,468 | -555,468 | -407,068 | ' | ' | -15,392 | -52,389 | ' | ' | ||
Liability for Unpaid Claims and Claims Adjustment Expense, Net | ' | 1,510,425 | 1,436,222 | ' | ' | ' | 1,418,504 | 1,352,820 | ' | ' | 91,921 | 83,402 | ' | ' | ||
Net reserves, at fair value, of acquired entities | ' | ' | 161,886 | ' | ' | ' | ' | 161,886 | ' | ' | ' | ' | ' | ' | ||
Change in net reserves for ADC | ' | 313,229 | [1] | ' | ' | ' | ' | 313,229 | [1] | ' | ' | ' | ' | ' | ' | ' |
Incurred related to: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Current year | ' | 163,874 | 508,708 | ' | ' | ' | 103,790 | 451,020 | ' | ' | 60,084 | 57,688 | ' | ' | ||
Prior years unfavorable/(favorable) development | 26,600 | 33,592 | 326,916 | ' | ' | 27,500 | 35,411 | 326,749 | ' | ' | -1,819 | 167 | ' | ' | ||
Total incurred | ' | 197,466 | 835,624 | ' | ' | ' | 139,201 | 777,769 | ' | ' | 58,265 | 57,855 | ' | ' | ||
Paid related to: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Current year | ' | 127,268 | 201,443 | ' | ' | ' | 87,435 | 164,774 | ' | ' | 39,833 | 36,669 | ' | ' | ||
Prior years | ' | 361,766 | 370,007 | ' | ' | ' | 337,411 | 359,786 | ' | ' | 24,355 | 10,221 | ' | ' | ||
Total paid | ' | 489,034 | 571,450 | ' | ' | ' | 424,846 | 524,560 | ' | ' | 64,188 | 46,890 | ' | ' | ||
Net balance at end of period | 1,532,086 | 1,532,086 | 1,862,282 | ' | ' | 1,446,088 | 1,446,088 | 1,767,915 | ' | ' | 85,998 | 94,367 | ' | ' | ||
Add reinsurance recoverables on unpaid losses | 455,472 | 455,472 | 690,069 | ' | ' | 441,213 | 441,213 | 665,172 | ' | ' | 14,259 | 24,897 | ' | ' | ||
Net balance at end of year | $1,987,558 | $1,987,558 | $2,552,351 | $2,081,285 | $1,895,679 | $1,887,301 | $1,887,301 | $2,433,087 | $1,973,972 | $1,759,888 | $100,257 | $119,264 | $107,313 | $135,791 | ||
[1] | In the first quarter of 2014, Tower terminated the Southport Re ADCs (see "Note 1 - Nature of the Business" for further description). The termination of the Southport Re ADCs resulted in a direct increase to net loss reserves. |
Loss_and_Loss_Adjustment_Expen2
Loss and Loss Adjustment Expense - Additional Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' |
Loss and loss adjustment expenses ratio | 100.20% | 133.80% | 95.80% | 99.40% |
Prior years unfavorable/(favorable) development | $26,600 | ' | $33,592 | $326,916 |
Commercial Insurance | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | ' | 37,100 | ' |
Assumed Reinsurance Segment | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | ' | -6,100 | ' |
Personal Insurance | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' |
Prior years unfavorable/(favorable) development | ' | ' | 2,600 | ' |
Tower | ' | ' | ' | ' |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ' | ' | ' | ' |
Loss and loss adjustment expenses ratio | 122.10% | 142.70% | 109.40% | 102.70% |
Prior years unfavorable/(favorable) development | $27,500 | ' | $35,411 | $326,749 |
Shareholders_Equity_Additional
Shareholders' Equity - Additional Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Stockholders Equity Note [Line Items] | ' | ' | ' | ' |
Employee stock option exercises | 0 | ' | 0 | 2,674 |
Stock repurchase program authorized amount | ' | ' | $50,000,000 | ' |
Repurchase of common stock, shares | ' | ' | 0 | ' |
Share repurchase program authorization date | ' | ' | 7-May-13 | ' |
Dividends declared and paid | ' | $9,500,000 | ' | $16,676,000 |
Restricted Stock | ' | ' | ' | ' |
Stockholders Equity Note [Line Items] | ' | ' | ' | ' |
Number of option, grants | 0 | 2,332 | 0 | 242,626 |
Common stock purchased from employees to pay expected amount of tax liability | 0 | 891 | 17,364 | 341,598 |
Number of shares, forfeitures | 13,899 | 7,167 | 66,733 | 14,015 |
Summary_of_Changes_in_Accumula
Summary of Changes in Accumulated Other Comprehensive Income, by Component (Detail) (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ' | ' |
Beginning Balance | ($15,528) | $87,412 |
Other comprehensive income before reclassifications, net of tax | 20,129 | -71,210 |
Amounts reclassified from accumulated other comprehensive income, net of tax | -32,207 | -2,594 |
Net current period other comprehensive income (loss) | -12,078 | -73,804 |
Ending Balance | -27,606 | 13,608 |
Beginning Balance | -3,979 | -5,860 |
Other comprehensive income before reclassifications, net of tax | -8 | 1,406 |
Amounts reclassified from accumulated other comprehensive income, net of tax | 853 | 1,084 |
Net current period other comprehensive income (loss) | 845 | 2,490 |
Ending Balance | -3,134 | -3,370 |
Beginning Balance | ' | 1,204 |
Other comprehensive income before reclassifications, net of tax | ' | -2,382 |
Net current period other comprehensive income (loss) | ' | -2,382 |
Ending Balance | ' | -1,178 |
Beginning Balance | -19,507 | 82,756 |
Other comprehensive income before reclassifications, net of tax | 20,121 | -72,186 |
Amounts reclassified from accumulated other comprehensive income, net of tax | -31,354 | -1,510 |
Net current period other comprehensive income (loss) | -11,233 | -73,696 |
Ending Balance | ($30,740) | $9,060 |
Reclassified_from_Accumulated_
Reclassified from Accumulated Other Comprehensive Income to Net Income (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ' | ' | ' | ' |
Unrealized gains (losses) on available for sale securities, before income tax | $14,733 | ($1,938) | $35,703 | $4,529 |
Unrealized gains (losses) on available for sale securities, net income tax | ' | ' | -32,207 | -2,594 |
Gains (losses) on cash flow hedges interest rate swaps, net of income taxes | ' | ' | -853 | -1,084 |
Other Net Realized Investment Gains (Losses) | ' | ' | ' | ' |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ' | ' | ' | ' |
Unrealized gains (losses) on available for sale securities, before income tax | ' | ' | -32,207 | -2,594 |
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 | ' | ' | 853 | 1,084 |
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 | ' | ' | $853 | $1,084 |
Borrowings_Detail
Borrowings (Detail) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Debt Instrument [Line Items] | ' | ' |
Subordinated debentures | $235,058 | $235,058 |
Total | 384,373 | 382,770 |
Subordinated debentures | 122,121 | 114,900 |
Total | 249,996 | 244,425 |
Convertible Senior Notes | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Convertible senior notes | 149,315 | 147,712 |
Convertible senior notes | $127,875 | $129,525 |
Debt_Additional_Information_De
Debt - Additional Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | 6 Months Ended | 1 Months Ended | 1 Months Ended | 6 Months Ended | ||||||||
Jun. 30, 2014 | Jun. 30, 2013 | Mar. 31, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Oct. 31, 2010 | Oct. 31, 2010 | Sep. 30, 2010 | Jun. 30, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | |
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 | Other liability | Other liability | |||||||
Cash Flow Hedging | Interest Rate Swaps | Interest Rate Swaps | ||||||||||||
Debt Instrument [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest expense | $7,322,000 | $7,635,000 | ' | $14,332,000 | $15,443,000 | ' | ' | ' | ' | ' | ' | $3,000,000 | ' | ' |
Subordinated debentures, carrying value | 235,058,000 | ' | ' | 235,058,000 | ' | 235,058,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Notional amount, interest rate swap contracts | ' | ' | ' | ' | ' | ' | ' | ' | ' | 190,000,000 | ' | ' | ' | ' |
Interest rate swap contracts, terms | ' | ' | ' | ' | ' | ' | ' | ' | '5 years | ' | ' | ' | ' | ' |
Interest rate range on swaps, minimum | ' | ' | ' | ' | ' | ' | ' | ' | 5.10% | ' | ' | ' | ' | ' |
Interest rate range on swaps, maximum | ' | ' | ' | ' | ' | ' | ' | ' | 5.90% | ' | ' | ' | ' | ' |
Interest rate swap contracts liabilities, fair value | 4,766,000 | ' | ' | 4,766,000 | ' | 6,066,000 | ' | ' | ' | ' | ' | ' | 4,800,000 | 6,100,000 |
Gain (loss) on Swaps designated as cash flow hedges reclassified from AOCI to interest expense | ' | ' | ' | ' | ' | ' | 900,000 | 1,100,000 | ' | ' | ' | ' | ' | ' |
Collateral on deposit with the counterparty | 4,700,000 | ' | ' | 4,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
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 | 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 | ' | ' |
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 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 37.5605 | ' | ' |
Principal amount of Notes | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,000 | ' | ' |
Initial conversion price | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $26.62 | ' | ' |
Debt conversion term | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 'The adjusted conversion rate at June 30, 2014 is 37.5605 shares of common stock per $1,000 principal amount of the Notes (equivalent to a conversion price of $26.62 per share), subject to further adjustment upon the occurrence of certain events, including the following: if Tower issues shares of common stock as a dividend or distribution on shares of the common stock, or if Tower effects a share split or share combination; if Tower issues to all or substantially all holders of common stock any rights, options or warrants entitling them, for a period of not more than 45 calendar days after the announcement date of such issuance, to subscribe for or purchase shares of the common stock at a price per share that is less than the average of the last reported sales price of the common stock for the ten consecutive trading day period ending on the date of announcement of such issuance; if Tower distributes shares of its capital stock, other indebtedness, other assets or property of Tower or rights, options or warrants to acquire capital stock or other securities of Tower, to all or substantially all holders of capital stock; if any cash dividend or distribution is made to all or substantially all holders of the common stock, other than a regular quarterly cash dividend that does not exceed $0.110 per share; if Tower makes a payment in respect of a tender offer or exchange offer for common stock, and the cash and value of any other consideration included in the payment per share of common stock exceeds the last reported sale price of the common stock on the trading day next succeeding the last day on which the tenders or exchange may be made. | ' | ' |
Effective interest rate on convertible senior note | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 7.20% | ' | ' |
Transaction costs associated with equity component | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 400,000 | ' | ' |
Proceeds from issuance of note hedge | ' | ' | 2,400,000 | ' | 2,380,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Payments for warrants | ' | ' | 1,000,000 | ' | 1,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Tax adjustment recorded in paid-in-capital | ' | ' | $800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amounts_Recorded_for_Notes_Det
Amounts Recorded for Notes (Detail) (Convertible Senior Notes, USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Convertible Senior Notes | ' | ' |
Liability component | ' | ' |
Outstanding principal | $150,000 | $150,000 |
Unamortized OID | -685 | -2,288 |
Liability component | 149,315 | 147,712 |
Equity component, net of tax | $7,469 | $7,469 |
Stock_Based_Compensation_Addit
Stock Based Compensation - Additional Information (Detail) | 0 Months Ended | ||
Mar. 13, 2013 | Jun. 30, 2014 | Jun. 30, 2014 | |
Canopius Group Limited | 2008 LTEP | 2013 LTIP | |
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 | ' | 140,174 | 2,147,531 |
Number of Shares, Vested | 525,548 | ' | ' |
Analysis_of_Restricted_Stock_A
Analysis of Restricted Stock Activity (Detail) (Restricted Stock, USD $) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | |
Share Based Awards | Share Based Awards | |||||
Number of Shares | ' | ' | ' | ' | ' | ' |
Number of Shares, Beginning Balance | ' | ' | 235,586 | 1,015,902 | ' | ' |
Number of Shares, Granted | 0 | 2,332 | 0 | 242,626 | ' | ' |
Number of Shares, Vested | ' | ' | -42,670 | -953,242 | ' | ' |
Number of Shares, Forfeitures | -13,899 | -7,167 | -66,733 | -14,015 | ' | ' |
Number of Shares, Ending Balance | 126,183 | 291,271 | 126,183 | 291,271 | ' | ' |
Weighted Average Grant Date Fair Value | ' | ' | ' | ' | ' | ' |
Weighted Average Grant Date Fair Value, Beginning Balance | ' | ' | ' | ' | $17.98 | $20.19 |
Weighted Average Grant Date Fair Value, Granted | ' | ' | ' | $18.09 | ' | ' |
Weighted Average Grant Date Fair Value, Vested | ' | ' | $18.07 | $20.43 | ' | ' |
Weighted Average Grant Date Fair Value, Forfeitures | ' | ' | $18.11 | $19.26 | ' | ' |
Weighted Average Grant Date Fair Value, Ending Balance | $17.87 | $17.68 | $17.87 | $17.68 | $17.98 | $20.19 |
Analysis_of_Stock_Option_Activ
Analysis of Stock Option Activity (Detail) (USD $) | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2013 | |
Number of Shares | ' | ' | ' |
Number of Shares Outstanding, Beginning Balance | ' | 955,804 | 969,307 |
Number of Shares, Exercised | 0 | 0 | -2,674 |
Number of Shares, Forfeitures and expirations | ' | -691,162 | -7,657 |
Number of Shares Outstanding, Ending Balance | 264,642 | 264,642 | 958,976 |
Number of Shares Exercisable, Ending Balance | 264,642 | 264,642 | 958,976 |
Average Exercise Price | ' | ' | ' |
Average Exercise Price Outstanding, Beginning Balance | ' | $17.75 | $17.78 |
Average Exercise Price, Exercised | ' | ' | $16.48 |
Average Exercise Price, Forfeitures and expirations | ' | $17 | $17.72 |
Average Exercise Price Outstanding, Ending Balance | $19.73 | $19.73 | $17.78 |
Average Exercise Price Exercisable, Ending Balance | $19.73 | $19.73 | $17.78 |
Analysis_of_Stock_Based_Compen
Analysis of Stock Based Compensation Expense (Detail) (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' |
Weighted average years over which expense will be recognized (in years) | '2 years 8 months 12 days | '3 years 7 months 6 days |
Restricted Stock | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' |
Expense, net of tax | 205 | 8,204 |
Value of shares vested | 959 | 21,042 |
Value of unvested shares | 251 | 5,974 |
Unrecognized compensation expense | 251 | 5,974 |
Employee Stock Option | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' |
Intrinsic value of outstanding options | ' | 3,471 |
Intrinsic value of vested outstanding options | ' | 3,471 |
Income_Taxes_Additional_Inform
Income Taxes - Additional Information (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Income Taxes [Line Items] | ' | ' | ' | ' |
Income (loss) before income taxes | ($53,226,000) | ($508,471,000) | ($104,161,000) | ($508,425,000) |
Effective tax rate | -0.20% | ' | -1.70% | ' |
U.S. | ' | ' | ' | ' |
Income Taxes [Line Items] | ' | ' | ' | ' |
Net deferred tax asset | 288,600,000 | ' | 288,600,000 | ' |
U.S. | Tower | ' | ' | ' | ' |
Income Taxes [Line Items] | ' | ' | ' | ' |
Income (loss) before income taxes | -45,300,000 | ' | -68,300,000 | ' |
Net deferred tax asset | 287,300,000 | ' | 287,300,000 | ' |
Income tax expense (benefit) | ' | ' | ' | ' |
Income Taxes [Line Items] | ' | ' | ' | ' |
Deferred tax assets, valuation allowance | 12,900,000 | ' | 18,100,000 | ' |
Net Operating Loss Carryforwards | U.S. | Tower | ' | ' | ' | ' |
Income Taxes [Line Items] | ' | ' | ' | ' |
Deferred tax inventory | $205,400,000 | ' | $205,400,000 | ' |
Computation_of_Earnings_Per_Sh
Computation of Earnings Per Share (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Numerator | ' | ' | ' | ' |
Net income (loss) attributable to Tower Group International, Ltd. | ($48,742) | ($507,342) | ($95,220) | ($494,425) |
Less: Dividends on unvested participating restricted stock | ' | -48 | ' | -215 |
Net income (loss) available to common shareholders - Basic | -48,742 | -507,390 | -95,220 | -494,640 |
Reallocation of income for unvested participating restricted stock | ' | ' | ' | ' |
Net income (loss) available to common shareholders - Diluted | ($48,742) | ($507,390) | ($95,220) | ($494,640) |
Denominator | ' | ' | ' | ' |
Basic earnings per share denominator | 57,171 | 57,135 | 57,161 | 51,487 |
Effect of dilutive securities: | ' | ' | ' | ' |
Diluted earnings per share denominator | 57,171 | 57,135 | 57,161 | 51,487 |
Common stock: | ' | ' | ' | ' |
Distributed earnings | ' | $0.17 | ' | $0.34 |
Undistributed earnings | ($0.85) | ($9.05) | ($1.67) | ($9.95) |
Total - basic | ($0.85) | ($8.88) | ($1.67) | ($9.61) |
Earnings (loss) per share attributable to Tower Group International, Ltd. - Diluted | ($0.85) | ($8.88) | ($1.67) | ($9.61) |
Earnings_Loss_per_Share_Additi
Earnings (Loss) per Share - Additional Information (Detail) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Earnings Per Share Disclosure [Line Items] | ' | ' | ' | ' |
Options and other common stock equivalents excluded from computation of diluted earnings per share | 268,100 | 190,480 | 268,100 | 188,890 |
Business_Segments_Results_Deta
Business Segments Results (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Revenues | ' | ' | ' | ' |
Premiums earned | $94,667 | $418,364 | $206,211 | $840,250 |
Ceding commission revenue | 17,720 | 2,884 | 28,522 | 8,323 |
Policy billing fees | 2,759 | 3,321 | 5,435 | 6,471 |
Total revenues | 138,842 | 451,469 | 302,050 | 919,240 |
Expenses | ' | ' | ' | ' |
Loss and loss adjustment expenses | 94,905 | 559,892 | 197,466 | 835,624 |
Total expenses | 192,068 | 753,729 | 406,211 | 1,221,582 |
Reciprocal Exchanges | ' | ' | ' | ' |
Revenues | ' | ' | ' | ' |
Total revenues | 44,400 | 46,300 | 91,700 | 92,900 |
Expenses | ' | ' | ' | ' |
Total expenses | 49,700 | 46,200 | 102,700 | 103,200 |
Commercial Insurance | ' | ' | ' | ' |
Revenues | ' | ' | ' | ' |
Premiums earned | 35,896 | 247,495 | 91,669 | 505,913 |
Ceding commission revenue | 1,678 | -7,780 | 4,057 | -7,332 |
Policy billing fees | 1,264 | 1,422 | 2,540 | 2,792 |
Total revenues | 38,838 | 241,137 | 98,266 | 501,373 |
Expenses | ' | ' | ' | ' |
Loss and loss adjustment expenses | 48,897 | 470,284 | 112,868 | 647,287 |
Underwriting expenses | 36,055 | 93,635 | 87,076 | 185,917 |
Total expenses | 84,952 | 563,919 | 199,944 | 833,204 |
Underwriting profit (loss) | -46,114 | -322,782 | -101,678 | -331,831 |
Assumed Reinsurance Segment | ' | ' | ' | ' |
Revenues | ' | ' | ' | ' |
Premiums earned | 15,532 | 45,548 | 31,565 | 94,913 |
Total revenues | 15,532 | 45,548 | 31,565 | 94,913 |
Expenses | ' | ' | ' | ' |
Loss and loss adjustment expenses | 5,407 | 28,088 | 7,815 | 47,448 |
Underwriting expenses | 9,246 | 26,742 | 10,118 | 44,535 |
Total expenses | 14,653 | 54,830 | 17,933 | 91,983 |
Underwriting profit (loss) | 879 | -9,282 | 13,632 | 2,930 |
Personal Insurance | ' | ' | ' | ' |
Revenues | ' | ' | ' | ' |
Premiums earned | 43,239 | 125,321 | 82,977 | 239,424 |
Ceding commission revenue | 16,042 | 6,004 | 24,465 | 10,993 |
Policy billing fees | 1,495 | 1,899 | 2,895 | 3,679 |
Total revenues | 60,776 | 133,224 | 110,337 | 254,096 |
Expenses | ' | ' | ' | ' |
Loss and loss adjustment expenses | 40,601 | 61,520 | 76,783 | 140,889 |
Underwriting expenses | 36,412 | 57,669 | 75,991 | 109,781 |
Total expenses | 77,013 | 119,189 | 152,774 | 250,670 |
Underwriting profit (loss) | -16,237 | 14,035 | -42,437 | 3,426 |
Personal Insurance | Tower | ' | ' | ' | ' |
Expenses | ' | ' | ' | ' |
Underwriting profit (loss) | -10,787 | 14,139 | -27,071 | 16,156 |
Personal Insurance | Reciprocal Exchanges | ' | ' | ' | ' |
Expenses | ' | ' | ' | ' |
Underwriting profit (loss) | ($5,450) | ($104) | ($15,366) | ($12,730) |
Reconciliation_of_Revenue_by_S
Reconciliation of Revenue by Segment to Consolidated Revenues (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Net investment income | $10,210 | $28,402 | $25,568 | $58,719 |
Net realized gains (losses) on investments, including other-than-temporary impairments | 13,438 | -2,034 | 35,701 | 4,817 |
Insurance services revenue and other | 48 | 5,192 | 613 | 5,322 |
Revenues | 138,842 | 451,469 | 302,050 | 919,240 |
Commercial Insurance | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 38,838 | 241,137 | 98,266 | 501,373 |
Assumed Reinsurance Segment | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 15,532 | 45,548 | 31,565 | 94,913 |
Personal Insurance | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | 60,776 | 133,224 | 110,337 | 254,096 |
Total Reportable Segments | ' | ' | ' | ' |
Segment Reporting, Revenue Reconciling Item [Line Items] | ' | ' | ' | ' |
Revenues | $115,146 | $419,909 | $240,168 | $850,382 |
Reconciliation_of_Results_of_I
Reconciliation of Results of Individual Segments to Consolidated Income Before Income Taxes (Detail) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ' | ' | ' | ' |
Net investment income | $10,210 | $28,402 | $25,568 | $58,719 |
Net realized gains on investments, including other-than-temporary impairments | 13,438 | -2,034 | 35,701 | 4,817 |
Corporate and other | -5,683 | -2,299 | -17,572 | -5,239 |
Acquisition-related transaction costs | -2,397 | -665 | -3,043 | -19,721 |
Interest expense | -7,322 | -7,635 | -14,332 | -15,443 |
Goodwill and fixed asset impairment | ' | -214,049 | ' | -214,049 |
Equity income in unconsolidated affiliate | ' | 7,838 | ' | 7,966 |
Income before income taxes | -53,226 | -508,471 | -104,161 | -508,425 |
Commercial Insurance | ' | ' | ' | ' |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ' | ' | ' | ' |
Underwriting profit (loss) | -46,114 | -322,782 | -101,678 | -331,831 |
Assumed Reinsurance Segment | ' | ' | ' | ' |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ' | ' | ' | ' |
Underwriting profit (loss) | 879 | -9,282 | 13,632 | 2,930 |
Personal Insurance | ' | ' | ' | ' |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ' | ' | ' | ' |
Underwriting profit (loss) | ($16,237) | $14,035 | ($42,437) | $3,426 |
Contingencies_Additional_Infor
Contingencies - Additional Information (Detail) (USD $) | 0 Months Ended |
In Millions, unless otherwise specified | Oct. 18, 2013 |
Loss Contingencies [Line Items] | ' |
Contingencies, damages sought | $150 |