NEW YORK (AP) — Insurer Tower Group said Monday it will add $365 million to its loss reserves and will take a $215 goodwill impairment charge. Its stock tumbled more than 25 percent in extended trading.
Tower Group said it is taking the $365 million charge after conducting a review of its loss reserves with its independent actuarial consultants. It found additional losses and changes in judgment. The charge covers several different commercial lines of business including workers' compensation, multi-peril insurance, and auto insurance. The results include $185 million in losses from its U.S. insurance businesses. Most of the losses took place between 2009 and 2011.
The company will also take a $215 million non-cash goodwill impairment charge connected to its commercial and specialty reinsurance businesses. Tower Group said it is evaluating other intangible assets connected to the commercial and specialty and reinsurance segments and its personal insurance segment. It will take that charge in its second quarter results.
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The company said it has been changing its business mix since 2010 and is de-emphasizing the insurance lines connected to the charges.
Fitch Ratings slashed Tower Group's credit rating to "B" from "BBB." It said the company's financial profile has gotten significantly weaker over the last two months.
The company postponed its second-quarter results on Aug. 7 because it needed to review its loss reserves, and since then, its share price has plunged about 66 percent through Monday's regular-session close. Fitch said the lower share price and a lack of new capital are hurting Tower Group's financial position, and the company may have trouble writing new business.
The Fitch downgrade is a hefty one: The new rating is five notches into non-investment grade or "junk" status. A "BBB" rating is investment grade and is two notches above junk status.
Shares of Tower Group International Ltd. gave up $1.89 cents to $5.52 in aftermarket trading Monday following the company announcement and the Fitch downgrade.
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