New York-based insurer Tower Group Inc. announced today that it has reached an agreement to acquire the outstanding stock of Preserver Group for $68 million.
Paramus, N.J.-based Preserver is a privately held company that specializes in small commercial and personal lines insurance in the Northeast. The company offers similar products and has a similar risk appetite as Tower's.
Tower said that a portion of the cash consideration of approximately $68 million will be allocated to repay all shareholder owned debt, and that it will assume $12 million of trust preferred securities.
The transaction is subject to regulatory approval.
According to NAIC data compiled by Highline Data, the data affiliate of National Underwriter, Preserver wrote net premiums of $73.8 million in 2005, while Tower Group wrote more that $200 million.
Tower said that acquisition will give it access to up to 300 retail agencies working with Preserver that have little or no overlap with Tower's existing distribution partners.
The transaction enhances Tower's Northeast expansion plans with additional premium volume and scale, Tower said, noting that Preserver writes business in New Jersey, Maine, New York, New Hampshire, Massachusetts, Vermont, Rhode Island and Pennsylvania.
It is expected that Preserver will enter into a loss portfolio transfer agreement to reinsure its historical loss reserves with CastlePoint Re. CastlePoint Re is a reinsurance subsidiary of CastlePoint Holdings, Ltd., the formation of which was sponsored by Tower earlier this year.
Michael Lee, president and chief executive officer of Tower Group Inc., said in a statement, "We are pleased to announce this transaction which represents an extremely good fit for our regional strategy in the Northeast."
He added, "Preserver has a similar underwriting appetite, and we plan to work closely with the Preserver management team and employees to deliver higher value to our combined agents and customers."
"We anticipate expense ratio improvements from our larger scale and infrastructure," said Mr. Lee.
To ensure continuity, Mr. Lee announced that Patrick Haveron, president and CEO of Preserver, will be joining Tower as senior vice president and chief operating officer.
Tower will host a Thursday conference call to discuss the transaction.
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