Exhibit 99.1
Tower Group, Inc. Reports a 130% Increase in
Third Quarter of 2005 Net Income
NEW YORK--(BUSINESS WIRE)--Nov. 8, 2005--Tower Group, Inc.
(NASDAQ: TWGP) today reported its financial results for the third
quarter of 2005 including a 130% increase in net income to $5.7
million as compared to net income of $2.5 million in the third quarter
of 2004. For the first nine months of 2005, net income increased 145%
to $14.2 million as compared to $5.8 million for the first nine months
of 2004.
Diluted earnings per share of $0.28 for the third quarter of 2005
were based on 20,161,873 weighted average diluted shares as compared
with $0.43 per share for the third quarter of 2004, based on 5,858,366
weighted average diluted shares. For the first nine months of 2005,
Tower reported diluted earnings per share of $0.71, based on
20,119,280 weighted average diluted shares, as compared with $1.01 per
diluted share for the first nine months of 2004 based on 5,794,807
weighted average diluted shares. Net income, excluding realized gains,
net of taxes, was $5.7 million for the third quarter of 2005 and $14.1
million for the first nine months of 2005.
Michael H. Lee, President and Chief Executive Officer of Tower
Group, Inc. commented, "We were able to significantly increase our net
income during the third quarter by achieving record levels of gross
and net premiums written and earned as well as investment income while
maintaining our disciplined underwriting approach as reflected in our
combined ratio of 87.8%. We are especially pleased that we continue to
successfully deploy our capital that we raised from the IPO in October
of last year. Our return on average equity has improved to 16.5% for
the third quarter from 14.3% during the second quarter and is
approaching our goal of 18%."
Third Quarter 2005 Financial Highlights:
Total revenues increased 127% to $59.9 million in the third
quarter of 2005 as compared to $26.5 million in the same period in
2004. This increase was driven primarily by increases in net premiums
earned and net investment income while partially offset by lower total
commission and fee income. Net premiums earned represented 76% of
total revenues for the third quarter of 2005 as compared to 46% for
the same period of 2004. Ceding commission and fee income represented
18% of total revenue for the third quarter of 2005 as compared to 50%
in the third quarter of 2004. This reflected the reduced ceding
percentage under the quota share reinsurance agreements to 25%
beginning October 1, 2004 from 60% for the first nine months of 2004
due to the increased capitalization of our insurance company in the
fourth quarter of 2004. In addition, due to a decrease in the loss
ratio, we recorded a $0.1 million adjustment to commission revenue in
the third quarter of 2005 that increased commission and fee income as
compared to no adjustment in the same period of 2004. Net investment
income, excluding realized gains, was 7% of total revenues in the
third quarter of 2005 and 5% in the same period of 2004.
Return on average equity was 16.5% in the third quarter of 2005 as
compared with 60.1% in the third quarter of 2004. Although net income
was significantly higher in the third quarter of 2005 as compared to
the same period in the prior year, the lower return on average equity
resulted from the significant increase in average stockholders' equity
resulting primarily from capital raised from the initial public
offering ("IPO") and concurrent private placement in October 2004. The
return on average equity for the third quarter of 2005 was calculated
by dividing annualized net income of $22.8 million by average
stockholders' equity of $138.7 million. For the third quarter of 2004,
the return was calculated by dividing annualized net income of $9.9
million by average stockholders' equity of $16.5 million.
Gross premiums written in the insurance and reinsurance segments
increased by 71.8% to $72.8 million for the three months ended
September 30, 2005 compared to $42.4 million for the same period in
2004. Gross premiums earned increased by 69.2% to $64.9 million for
the three months ended September 30, 2005 compared to $38.3 million
for the same period in 2004. Factors contributing to these increases
from the insurance segment include a 28.9% increase in the number of
policies in force as of September 30, 2005 compared to September 30,
2004 and premium increases on renewed business which averaged 5.1% in
personal lines and 4.5% in commercial lines for the third quarter of
2005. The retention rate was 92% for personal lines and 84% for
commercial lines. Additionally, business subject to the OneBeacon
renewal rights agreement, entered into in September 2004, amounted to
$9.5 million during the third quarter of 2005. New business during the
third quarter of 2005 through former OneBeacon producers that we
appointed in connection with the renewal rights transaction was $4.3
million. Also, due to the upgrade in TICNY's A.M. Best rating to "A-"
(Excellent) from "B++" (Very Good), certain policies in the more
rating sensitive large lines and middle market programs in our
Insurance Services Segment were renewed in the Insurance Segment.
Net premiums written increased 227% to $51.4 million in the third
quarter of 2005 as compared to $15.7 million in the same period of
2004. The increase was driven by the growth in gross premiums written
and a reduction in the quota share ceding percentage of 25% beginning
October 1, 2004 from 60% for the first nine months of 2004.
Net premiums earned rose 275% to $45.3 million for the third
quarter of 2005 as compared to $12.1 million in the same quarter of
2004 due to overall growth in gross premiums written and the reduction
in the ceding percentage as mentioned above. In addition, the third
quarter's net premiums earned included approximately $1.8 million from
the $13.1 million of retained unearned premiums as of December 31,
2004 that would have been ceded to Converium Reinsurance (North
America) Inc. absent a novation of the reinsurance agreement in 2004.
Ceding commission revenue declined 27% to $6.8 million in the
third quarter of 2005 as compared to $9.4 million in the third quarter
of 2004 reflecting the significant reduction in the quota share ceding
percentage.
The net loss ratio improved to 58.5% for the third quarter of 2005
as compared to 61.4% in the third quarter of 2004. The improvement
resulted from the increase in net premiums earned which reduced the
proportional effect of catastrophe reinsurance premiums on the net
loss ratio.
The gross expense ratio increased to 31.0% in the third quarter of
2005 as compared to 29.0% in the third quarter of 2004. This increase
resulted primarily from insurance regulatory assessments that were
higher than expected and compliance costs related to being a public
company.
The net expense ratio increased to 29.3% in the third quarter of
2005 as compared to 14.3% in the same period in 2004 primarily due to
the lower ceding commission revenue discussed above.
The net combined ratio increased to 87.8% in the third quarter of
2005 from 75.7% in the same period in the prior year primarily due to
the increase in the net expense ratio driven by the lower ceding
commission revenue. Nevertheless, despite the increase in the combined
ratio, underwriting profits increased due to the significantly higher
base of net premiums earned in the third quarter of 2005 as compared
to the third quarter of 2004.
Pre-tax income in the insurance services segment increased to $0.7
million in the third quarter of 2005 from $0.2 million in the same
quarter of 2004 primarily as a result of an increase in the direct
commission revenue rate.
Net investment income was a strong contributor to revenue growth
in the third quarter of 2005, increasing 238% to $4.1 million versus
$1.2 million in the third quarter of 2004. This increase was primarily
due to the growth in invested assets from operating cash flow, net
proceeds of $26.8 million from subordinated debentures underlying
trust preferred securities in December 2004 and net proceeds of $107.8
million from our IPO and concurrent private placement in October 2004.
On a tax equivalent basis, the yield was 5.1% for invested assets held
at September 30, 2005 and 4.7% as of September 30, 2004.
Interest expense increased to $1.3 million in the third quarter of
2005 from $0.8 million in the third quarter of 2004 primarily a result
of $0.5 million interest on the subordinated debentures issued in
December, 2004 partially offset by a $0.1 million reduction of
interest expense on other borrowings and preferred stock that were
repaid in the fourth quarter of 2004.
The effective income tax rate was 35.0% and 31.7% for the third
quarter of 2005 and third quarter of 2004, respectively. A lower
applicable Federal statutory tax rate of 34% in 2004 versus 35% in
2005 contributed to the lower effective income tax rate in 2004.
Additionally, the effective tax rates are impacted by a recovery of
prior period taxes in 2004 and higher state income taxes in 2005.
First Nine Months 2005 Financial Highlights:
Total revenues increased 106% to $152.9 million in the first nine
months of 2005 as compared to $74.4 million in the same period of the
prior year. This increase was driven primarily by increases in net
premiums earned and investment income partially offset by lower total
commission and fee income. Net premiums earned represented 74% of
total revenues for the first nine months of 2005 as compared to 40%
for the same period of 2004. Ceding commission and fee income
represented 19% of total revenue for the first nine months of 2005 as
compared to 56% in the same period of 2004. This decline reflects the
reduced ceding percentage under the quota share reinsurance agreement
to 25% beginning October 1, 2004 from 60% for the first nine months of
2004. Net investment income, excluding realized gains, comprised 7% of
total revenues in the first nine months of 2005 and 4% in the same
period of 2004.
Return on average equity was 14.1% in the first nine months of
2005 as compared with 49.1% in the same period of 2004. Although net
income was significantly higher in the nine months of 2005 as compared
to the similar period in the prior year, the lower return on average
equity resulted from the significant increase in average stockholders'
equity resulting primarily from capital raised from the initial public
offering in October 2004. The return on average equity for the first
nine months of 2005 was calculated by dividing annualized net income
of $18.9 million by average stockholders' equity of $134.7 million.
For the first nine months of 2004, the return was calculated by
dividing annualized net income of $7.7 million by average
stockholders' equity of $15.8 million.
Gross premiums written in the insurance and reinsurance segments
increased by 75.4% to $221.5 million for the nine months ended
September 30, 2005 compared to $126.3 million for the same period in
2004. Gross premiums earned increased by 48.6% to $165.8 million for
the nine months ended September 30, 2005 compared to $111.6 million
for the same period in 2004. Factors contributing to these increases
from the insurance segment include a 28.9% increase in the number of
policies in force as of September 30, 2005 compared to September 30,
2004 and premium increases on renewed business which averaged 8.3% in
personal lines and 5.0% in commercial lines for the first nine months
of 2005. The retention rate was 90% for personal lines and 84% for
commercial lines. Additionally, business subject to the OneBeacon
renewal rights agreement, entered into in September 2004, amounted to
$31.0 million during the first nine months of 2005. New business
during the first nine months of 2005 through former OneBeacon
producers that we appointed in connection with the renewal rights
transaction amounted to $13.6 million. Also, due to the rating upgrade
in TICNY's rating from A.M. Best to "A-" (Excellent) from "B++" (Very
Good), certain policies in the more rating sensitive large lines and
middle market programs in our Insurance Services Segment were renewed
in our Insurance Segment.
Net premiums written increased 232% to $155.9 million in the first
nine months of 2005 as compared to $47.0 million in the same period of
2004. The increase was driven by the growth in gross premiums written
and a reduction in the quota share ceding percentage of 25% beginning
October 1, 2004 from 60% in the first nine months of 2004.
Net premiums earned increased 283% to $112.9 million for the first
nine months of 2005 as compared to $29.5 million in the same period of
2004 due to overall growth in gross premiums written and the reduced
ceding percentage. In addition, net premiums earned in the first nine
months of 2005 included approximately $11.0 million from the $13.1
million of retained unearned premiums as of December 31, 2004 that
would have been ceded to Converium Reinsurance (North America) Inc.
absent a novation of the reinsurance agreement in 2004.
Ceding commission revenue declined 41% to $18.0 million in the
first nine months of 2005 as compared to $30.4 million in the same
period of 2004 reflecting the significant reduction in the quota share
ceding percentage.
The net loss ratio improved to 59.0% for the first nine months of
2005 as compared to 62.1% for the first nine months of 2004. The
improvement resulted primarily from the increase in net premiums
earned which reduced the proportional effect of catastrophe
reinsurance premiums on the net loss ratio.
The gross expense ratio was 30.9% for the first nine months of
2005 and for the same period of 2004.
The net expense ratio increased to 29.3% for the first nine months
of 2005 as compared to 13.6% in the same period in 2004 primarily due
to the lower ceding commission revenue discussed above.
The net combined ratio increased to 88.3% in the first nine months
of 2005 from 75.7% in the same period in the prior year primarily due
to the increase in the net expense ratio driven by the lower ceding
commission revenue. As in the third quarter, although the combined
ratio increased, underwriting profits increased due to the
significantly higher base of net premiums earned in 2005 as compared
to the first nine months of 2004.
Pre-tax income in the insurance services segment increased to $2.3
million in the first nine months of 2005 from $1.0 million in the same
period of 2004 primarily as a result of an increase in the direct
commission revenue rate.
Net investment income contributed significantly to revenue growth
in the first nine months of 2005, increasing 240% to $10.5 million
versus $3.1 million in the first nine months of 2004. The increase in
net investment income was primarily due to the growth in invested
assets provided by operating cash flow, net proceeds from subordinated
debentures and net proceeds of $107.8 million from our IPO and
concurrent private placement in October 2004. On a tax equivalent
basis, the investment yield was 5.1% on investments held as of
September 30, 2005 and 4.7% as of September 30, 2004.
Net realized capital gains were $0.2 million for the first nine
months of 2005 as compared to a modest capital gain in the same period
of the prior year. The increase in net realized capital gains was the
result of the sale of common stocks and corporate bonds from which the
proceeds were reinvested into higher yielding securities.
Interest expense increased to $3.6 million for the first nine
months of 2005 from $2.1 million in the first nine months of 2004.
This increase was primarily a result of interest of $1.4 million on
subordinated debentures and a $0.3 million increase in interest
expense as a result of crediting reinsurers on funds withheld in
segregated trusts as collateral for reinsurance recoverables. These
increases were offset by reductions of $0.4 million of interest
expense on other borrowings and preferred stock that were repaid in
the fourth quarter of 2004.
The effective income tax rate was 34.6% and 36.1% for the first
nine months of 2005 and 2004, respectively. The effective tax rate in
2005 was lower due to a proportionally larger benefit of $2.4 million
of tax-exempt interest income in the first nine months of 2005
compared to $0.3 million in the same period of 2004. This was
partially offset by a higher Federal statutory rate of 35% in 2005 as
compared to 34% in 2004.
Third Quarter and First Nine Months Highlights
Third Third First Nine First Nine
Quarter Quarter Months Months
2005 2004 2005 2004
------- ------- ---------- ----------
Total Underwriting Profit $5,523 $2,932 $13,213 $7,192
Insurance Services Segment Pre-
Tax Income 675 217 2,343 982
Net Investment Income 4,131 1,224 10,479 3,087
Net Realized Investment (Loss)
Gains (15) 35 214 33
Corporate Expenses (234) (27) (980) (86)
Interest Expense (1,296) (752) (3,567) (2,127)
Income Before Income Taxes 8,784 3,629 21,702 9,081
Income Tax Expense 3,076 1,151 7,512 3,282
Net Income $5,708 $2,478 $14,190 $5,799
EPS - Basic $0.29 $0.55 $0.73 $1.31
EPS - Diluted $0.28 $0.43 $0.71 $1.01
Book Value Per Share $7.07 $3.99 $7.07 $3.99
Dividend Declaration:
Tower Group, Inc. announced today that the Company's Board of
Directors approved a quarterly dividend on November 4, 2005 of $0.025
per share payable December 27, 2005 to stockholders of record as of
December 15, 2005.
2005 Guidance:
We continue to believe that strong growth opportunities remain in
our targeted markets despite price softening in the broad P&C market.
Although we have experienced some price softening in select market
segments, we expect overall market conditions to remain favorable for
some of our products for the remainder of 2005 and remain on target
with our guidance for the full year of 2005 at the upper half of our
previously provided range. For the full year, we anticipate net
income, excluding realized capital gains, to increase to a range
between $20.1 million and $20.5 million and diluted earnings per
share, excluding realized capital gains, to be between $1.00 and $1.02
per diluted share.
About Tower Group, Inc.
Tower Group, Inc., headquartered in New York City, offers property
and casualty insurance products and services through its insurance
company and insurance service subsidiaries. Its two insurance company
subsidiaries are Tower Insurance Company of New York which is rated A-
(Excellent) by A.M. Best Company and offers commercial insurance
products to small to medium-size businesses and personal insurance
products to individuals and Tower National Insurance Company which is
also rated A- (Excellent) by A.M. Best Company. Its insurance services
subsidiary, Tower Risk Management, acts as a managing general agency,
adjusts claims and negotiates reinsurance terms on behalf of other
insurance companies.
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for forward-looking statements. This release or any
other written or oral statements made by or on behalf of the Company
may include forward-looking statements that reflect the Company's
current views with respect to future events and financial performance.
All statements other than statements of historical fact included in
this release are forward-looking statements. Forward-looking
statements can generally be identified by the use of forward-looking
terminology such as "may," "will," "plan," "expect," "intend,"
"estimate," "anticipate," "believe" or "continue" or their negative or
variations or similar terminology. All forward-looking statements
address matters that involve risks and uncertainties. Accordingly,
there are or will be important factors that could cause our actual
results to differ materially from those indicated in these statements.
We believe that these factors include but are not limited to
ineffectiveness or obsolescence of our business strategy due to
changes in current or future market conditions; increased competition
on the basis of pricing, capacity, coverage terms or other factors;
greater frequency or severity of claims and loss activity, including
as a result of natural or man-made catastrophic events, than our
underwriting, reserving or investment practices anticipate based on
historical experience or industry data; the effects of acts of
terrorism or war; developments in the world's financial and capital
markets that adversely affect the performance of our investments;
changes in regulations or laws applicable to us, our subsidiaries,
brokers or customers; changes in the level of demand for our insurance
and reinsurance products and services, including new products and
services; changes in the availability, cost or quality of reinsurance
and failure of our reinsurers to pay claims timely or at all; loss of
the services of any of our executive officers or other key personnel;
the effects of mergers, acquisitions and divestitures; changes in
rating agency policies or practices; changes in legal theories of
liability under our insurance policies; changes in accounting policies
or practices; and changes in general economic conditions, including
inflation and other factors. Forward-looking statements speak only as
of the date on which they are made, and the Company undertakes no
obligation to update publicly or revise any forward-looking statement,
whether as a result of new information, future developments or
otherwise.
For more information visit Tower's website at
http://www.twrgrp.com/.
Insurance Overall Results of Operations
Insurance and Reinsurance Segments
Third Quarter
Third Third
Quarter Quarter %
2005 2004 Change
Revenues:
Earned Premiums:
Gross Premiums Earned $64,859 $38,325 69.2%
Less: Ceded Premiums Earned (19,535)(26,243) -25.6%
----------------
Net Premiums Earned 45,324 12,082 275.1%
Ceded Commission Revenue 6,845 9,375 -27.0%
Policy Billing Fees 227 172 32.0%
----------------
Total 52,396 21,629 142.2%
Expenses:
Loss & Loss Adjustment Expenses
Gross Loss & Loss Adjustment Expenses 36,333 21,340 70.3%
Less: Ceded Loss & Loss Adjustment Expenses (9,821)(13,920) -29.44%
----------------
Net Loss & Loss Adjustment Expenses 26,512 7,420 257.3%
Underwriting Expenses
Commissions Paid to Producers 10,135 6,313 60.5%
Other Underwriting Expenses 10,226 4,964 106.0%
----------------
Total Underwriting Expenses 20,361 11,277 80.6%
----------------
Total Expenses 46,873 18,697 150.7%
----------------
Underwriting Profit $5,523 $2,932 88.3%
================
Key Measures:
Written Premiums
Gross $72,821 $42,399 71.8%
Ceded (21,430)(26,696) -19.7%
----------------
Net $51,391 $15,703 227.3%
================
Loss Ratios
Gross 56.0% 55.7%
Net 58.5% 61.4%
Accident Year Loss Ratios
Gross 56.5% 57.4%
Net 59.0% 61.4%
Expense Ratios
Gross 31.0% 29.0%
Net 29.3% 14.3%
Combined Ratios (GAAP)
Gross 87.0% 84.7%
Net 87.8% 75.7%
Insurance Overall Results of Operations
Insurance and Reinsurance Segments
First Nine Months
First Nine First Nine %
Months 2005 Months 2004 Change
Revenues:
Earned Premiums:
Gross Premiums Earned $165,787 $111,589 48.6%
Less: Ceded Premiums Earned (52,854) (82,062) -35.6%
------------------------
Net Premiums Earned 112,933 29,527 282.5%
Ceded Commission Revenue 18,021 30,426 -40.8%
Policy Billing Fees 653 504 29.6%
------------------------
Total 131,607 60,457 117.7%
Expenses:
Loss & Loss Adjustment Expenses
Gross Loss & Loss Adjustment
Expenses 93,828 63,749 47.2%
Less: Ceded Loss & Loss Adjustment
Expenses (27,241) (45,420) -40.0%
------------------------
Net Loss & Loss Adjustment Expenses 66,587 18,329 263.3%
Underwriting Expenses
Commissions Paid to Producers 27,211 18,530 46.8%
Other Underwriting Expenses 24,596 16,406 49.9%
------------------------
Total Underwriting Expenses 51,807 34,936 48.3%
------------------------
Total Expenses 118,394 53,265 122.3%
------------------------
Underwriting Profit $13,213 $7,192 83.7%
========================
Key Measures:
Written Premiums
Gross $221,495 $126,259 75.4%
Ceded (65,558) (79,274) -17.3%
------------------------
Net $155,937 $46,985 231.9%
========================
Loss Ratios
Gross 56.6% 57.1%
Net 59.0% 62.1%
Accident Year Loss Ratios
Gross 57.2% 57.4%
Net 59.2% 62.1%
Expense Ratios
Gross 30.9% 30.9%
Net 29.3% 13.6%
Combined Ratios (GAAP)
Gross 87.5% 88.0%
Net 88.3% 75.7%
Insurance Services Segment Results of Operations
Third Quarter
Third Third
Quarter Quarter %
2005 2004 Change
Revenues:
Direct Commission Revenue from MGA $2,022 $2,043 -1.0%
Claims Administration Revenue 1,137 1,352 -15.9%
Reinsurance Intermediary Fees 259 178 45.5%
Policy Billing Fees 7 3 133.3%
----------------
Total 3,425 3,576 -4.2%
Expenses:
Direct Commission Expense Paid to Producers 1,143 1,438 -20.5%
Other Insurance Services Expenses 472 576 -18.1%
Claims Expense Reimbursement to TICNY 1,135 1,345 -15.6%
----------------
Total Expenses 2,750 3,359 -18.1%
----------------
Insurance Services Pre-tax Income (Loss) $675 $217 211.1%
================
Insurance Services Segment Results of Operations
First Nine Months
First Nine First Nine %
Months 2005 Months 2004 Change
Revenues:
Direct Commission Revenue from MGA $6,713 $7,095 -5.4%
Claims Administration Revenue 3,287 3,067 7.2%
Reinsurance Intermediary Fees 541 615 -12.0%
Policy Billing Fees 18 4 350.0%
------------------------
Total 10,559 10,781 -2.1%
Expenses:
Direct Commission Expense Paid to
Producers 3,528 4,875 -27.6%
Other Insurance Services Expenses 1,412 1,937 -27.1%
Claims Expense Reimbursement to TICNY 3,276 2,987 9.7%
------------------------
Total Expenses 8,216 9,799 -16.2%
------------------------
Insurance Services Pre-tax Income
(Loss) $2,343 $982 138.6%
========================
Tower Group, Inc.
Consolidated Statements of Income and
Comprehensive Net Income
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2005 2004 2005 2004
----------- ---------- ----------- ----------
($ in thousands, except share and per share
amounts)
Revenues
Net premiums earned $45,324 $12,082 $112,933 $29,527
Ceding commission
revenue 6,845 9,375 18,021 30,426
Insurance services
revenue 3,418 3,572 10,541 10,777
Net investment income 4,131 1,224 10,479 3,087
Net realized (losses)
gains on investments (15) 35 214 33
Policy billing fees 234 176 671 508
----------- ---------- ----------- ----------
Total revenues 59,937 26,464 152,859 74,358
----------- ---------- ----------- ----------
Expenses
Loss and loss
adjustment expenses 26,512 7,420 66,587 18,329
Direct commission
expense 11,277 7,751 30,738 23,405
Other operating
expenses 12,068 6,912 30,265 21,416
Interest expense 1,296 752 3,567 2,127
----------- ---------- ----------- ----------
Total expenses 51,153 22,835 131,157 65,277
----------- ---------- ----------- ----------
Income before income
taxes 8,784 3,629 21,702 9,081
Income tax expense 3,076 1,151 7,512 3,282
----------- ---------- ----------- ----------
Net Income $5,708 $2,478 $14,190 $5,799
=========== ========== =========== ==========
Comprehensive Net Income
Net income $5,708 $2,478 $14,190 $5,799
Other comprehensive
income:
Gross unrealized
investment holding
(losses) gains
arising during
period (4,765) 2,145 (4,424) (99)
Less:
reclassification
adjustment for
gains (losses)
included in net
income 15 (35) (214) (33)
----------- ---------- ----------- ----------
(4,750) 2,110 (4,638) (132)
Income tax benefit
(expense) related
to items of other
comprehensive
income 1,669 (717) 1,630 45
----------- ---------- ----------- ----------
Total other
comprehensive net
(loss) income (3,081) 1,393 (3,008) (87)
----------- ---------- ----------- ----------
Comprehensive
Net Income $2,627 $3,871 $11,182 $5,712
=========== ========== =========== ==========
Earnings Per Share
Basic earnings per
common share $0.29 $0.55 $0.73 $1.31
=========== ========== =========== ==========
Diluted earnings per
common share $0.28 $0.43 $0.71 $1.01
=========== ========== =========== ==========
Weighted Average Common
Shares Outstanding:
Basic 19,575,728 4,502,831 19,550,722 4,439,233
Diluted 20,161,873 5,858,366 20,119,280 5,794,807
Tower Group, Inc.
Consolidated Balance Sheets
(Unaudited)
September 30, 2005 December 31, 2004
------------------ -----------------
($ in thousands, except par value
and share amounts)
Assets
Fixed-maturity securities,
available-for-sale, at fair value
(amortized cost $313,435 in 2005
and $223,562 in 2004) $ 310,880 $ 224,523
Equity securities, available for
sale, at fair value (cost $6,681
in 2005 and $1,827 in 2004) 6,196 2,485
Equity securities, at cost 24,020 -
Common trust securities -
statutory business trusts, equity
method 1,426 1,426
------------------ -----------------
Total investments 342,522 228,434
------------------ -----------------
Cash and cash equivalents 30,608 55,201
Investment income receivable 3,234 1,975
Agents' balances receivable 37,204 33,473
Assumed premiums receivable 1,077 1,197
Ceding commission receivable 8,727 8,329
Reinsurance recoverable 100,578 101,173
Receivable - claims paid by agency 3,767 1,622
Prepaid reinsurance premiums 41,095 28,391
Deferred acquisition costs net of
deferred ceding commission
revenue 27,720 18,740
Federal income taxes and state
taxes recoverable 1,819 1,975
Deferred income taxes 1,395 -
Intangible assets 5,868 4,978
Fixed assets, net of accumulated
depreciation 7,135 5,420
Other assets 3,186 3,239
------------------ -----------------
Total Assets $615,935 $494,147
================== =================
Liabilities
Loss and loss adjustment expenses $175,517 $128,722
Unearned premium 151,213 95,505
Reinsurance balances payable 18,363 2,735
Payable to issuing carriers 12,489 18,652
Funds held as agent 773 785
Funds held under reinsurance
agreements 54,783 54,152
Accounts payable and accrued
expenses 10,958 12,410
Checks outstanding 2,568 2,726
Payable for securities 1,969 -
Deferred income taxes - 1,587
Subordinated debentures 47,426 47,426
------------------ -----------------
Total Liabilities 476,059 364,700
------------------ -----------------
Stockholders' Equity
Common stock ($0.01 par value per
share; 40,000,000 shares
authorized; 19,866,553 and
19,826,135 shares issued in 2005
and 2004) 199 198
Paid-in-capital 112,769 112,375
Accumulated other comprehensive
net (loss) income (1,956) 1,052
Retained earnings 30,947 18,224
Unearned compensation - restricted
stock (1,566) (1,908)
Treasury stock (91,661 shares in
2005 and 88,967 in 2004) (517) (494)
------------------ -----------------
Total Stockholders' Equity 139,876 129,447
------------------ -----------------
Total Liabilities and
Stockholders' Equity $615,935 $494,147
================== =================
CONTACT: Investor Relations:
Makovsky & Co. for Tower Group, Inc.
Gene Marbach, 212-508-9645
gmarbach@makovsky.com
OR
Tower Group, Inc.
Thomas Song, 212-655-4789
tsong@twrgrp.com