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Nasdaq was up significantly this early morning while this pos scam was only up two cents, LOL! I bet $2.5 will be the forever top and $1.65 ~ $1.67 will be tested again very soon...
Wow, this pos scam stuck at $2.15 ~ $2.21 now! Which means all the those ridiculous buys at $2.22 ~ $3.01 are losing the money now...
No clue V.I. I'm anxiously waiting and holding.... GLTY
Weird, the Nasdaq de-listing bad news only took the price down four cents! What makes this insurance pos scam such strong now? New high $2.21 very soon?
Bad news --- TWGP's Nasdaq de-listing press just kicked in! Deep red on next Monday is expected...
Yeah. The so-called offer failed yesterday due to TWGP's rejection! So $2.5 will be the forever top price and those stupid buys above $2.5 will lose the money forever...
It's not fake, Tower is not pursuing the offer. "Tower will not pursue the proposal contained in the letter from EIG. Tower continues to be bound by the terms of the merger agreement with ACP Re."
It is very hard to believe TWGP has crashed 27.6% to $2.18 today after it just hit the new high $3.01 the day before yesterday! We should see another new low $2.15 or even $2.07 tomorrow...
In the AH of yesterday TWGP rose to $2.5 from $2.34! Today no any price rising at all in the AH? So that $3.75 bid must be fake!
LOL, If the so-called $3.75 deal is true why the price crashed to $2.2 today after it hit $3.01 yesterday? Bogus news obviously!
Two deals offering here: $3.75 per share from yesterday's new deal and $2.5 per share from the existing deal! I don't know which one would go through finally or both could fail at the end?
That's what I want to know VI. What's the deal here?
Wow, the price crashed to $2.2 from yesterday's high $3.01! What happened here after that ridiculous high $3.75 Per Share Buy-Out Offering which is 50% higher than the current $2.5 Per Share BO Deal?
I think they were the buyers who bought the shares at $1.65 ~ $2.32 during the past few sessions! They sold those shares at $2.33 ~ $3.01 to make easy quick gains...
My guess, is those that hung on after last weeks crash, took a great opportunity to get out while they could with no/minimal loss. I thought about it haha! But they'll buy back in... That's my theory.
If that is the real case why over twelve millions of shares dumped below $3 today? Despite the fluff news the price still quickly crashed to $2.33 so far...
I will short at $2.7 ~ $3.0 again if the stupid spikes start again... Those $3.01 buys already lost 22.6% at the current low $2.33! Any buying price above $2.5 is extremely stupid!
I had shorted 10K shares at $3.01 and just covered at $2.34. $6,700 quick gain from the fluff news...
I sure wish I had sold them at $3.01.
Anyone who bought the shares above $2.5 will lose the money quickly! Those stupid buys at $3.01 already lost 21.26% principle...
And back down like the ground I guess....
We going up like the sky!
What's going on here???? $2.20 one second then news of buyout at $3.75 and we jump to $3 then news of a deal at $2.50 and we drop to $2.50....
Tower Group Has Deal to be Acquired by ACP Re For $2.50 A Share TWGP
Tower Group: Euroins Insurance Group announces offer for Tower Group International at $3.75 per share TWGP
The all time low $1.65 was created on 05/07/2014 (1,400 shares dumped at $1.65 in the AH) while the 52-week low was $1.67 (created in the same day)! As I predicted three months ago the $3 deal finally failed last week! The reason is due to the significant book value decline from the previous quarter's $3.88 per share to the current quarter's $1.76 per share! Here are all the past four quarter's BV numbers: $21.23 on 12/31/2012, $10.29 on 03/31/2013, $3.88 on 06/30/2013, and $1.76 on 12/31/2013! So the BV on 03/31/2014 (the next 10-Q) should be $0.66 ~ $0.85...
A.M. Best Downgrades Ratings of Tower Group International, Ltd. and Its Subsidiaries
Business Wire
A.M. Best Company, Inc. 25 minutes ago
OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Best has downgraded the financial strength ratings (FSR) to C++ (Marginal) from B (Fair) and issuer credit ratings (ICR) to “b” from “bb” of the pooled and reinsured members of the Tower US Pool (Tower) and CastlePoint Reinsurance Company, Ltd. (Bermuda). Concurrently, A.M. Best has downgraded the ICR to “cc” from “b-” and the debt rating on the $150 million par 5.00% senior unsecured convertible notes due September of 2014, for the intermediate holding company, Tower Group, Inc. Additionally, A.M. Best has downgraded the ICR to “cc” from “b-” of the ultimate parent, Tower Group International, Ltd. (TWGP) (Bermuda) [NASDAQ:TWGP]. All ratings are under review with developing implications. All companies are headquartered in New York, NY, unless otherwise specified. (See below for detailed listing of the companies and ratings.)
The rating actions take into consideration TWGP’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 rating factors are in addition to the diminished shareholders’ equity and reserve actions already taken by TWGP during the year.
These rating actions also consider the material adverse impact these charges had on all of TWGP’s entities in terms of their ability to operate as going concerns.
In addition, these rating downgrades reflect the group’s significantly elevated financial leverage, constrained liquidity and heightened uncertainty around TWGP’s ability to repay its senior debt holders in the event its pending merger with ACP Re Ltd. (ACP Re) (Bermuda) does not occur. Continued delays in TWGP reporting its quarterly filings are another concern.
The ratings will remain under review pending the planned merger with ACP Re, which is expected to close in the summer of 2014, but has a merger termination date of November 15, 2014. The under review with developing implications status acknowledges the potential benefits to be garnered from the transaction, as well as the potential downside from any additional adverse reserve development (in the event that the merger does not close) or any unforeseen event that might occur up until the close of the transaction. Additionally, the ratings could be downgraded further if certain events and/or unforeseen circumstances occur, which could cause the merger to fall through.
The FSR of B (Fair) has been downgraded to C++ (Marginal) and the ICRs have been downgraded to “b” from “bb” for the following pooled and reinsured members of Tower US Pool:
CastlePoint Insurance Company
CastlePoint National Insurance Company
Tower Insurance Company of New York
Tower National Insurance Company
Preserver Insurance Company
North East Insurance Company
Hermitage Insurance Company
CastlePoint Florida Insurance Company
Kodiak Insurance Company
York Insurance Company of Maine
Massachusetts Homeland Insurance Company
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
Contact:
A.M. Best
Kenneth Monahan, 908-439-2200, ext. 5342
Financial Analyst
kenneth.monahan@ambest.com
or
Daniel Ryan, 908-439-2200, ext. 5325
Vice President
daniel.ryan@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com
Note, The all time low $1.65 was created on 05/07/2014 (1,400 shares dumped at $1.65 in the AH) while the 52-week low is $1.67 which is the current book value! The next quarter's BV should decline to $0.77 or even $0.55 based on the past three quarter's BV declines pattern...
TWGP has declined to $2.2 so far! We should see the supports test at $1.67 ~ $1.73 again in the coming week(s)...
Thousands of shares dumped at $2.27 (down -$0.04) in the AH of yesterday! Testing $1.67 ~ $1.73 again today or next week?
The all time low $1.65 was created yesterday (1,400 shares dumped at $1.65 in the AH of 05/07/2014) while the 52-week low is $1.67 which is the current book value! The next quarter's BV will decline to $0.77 or lower based on the past two quarter's decline pattern...
9:41 EDT - We asked 4 months ago, when Tower Group (TWGP) found its white knight, whether its $172M distressed sale to Bermuda reinsurer ACP would get to the finish line. Today, it announces the price is falling from $3/share to $2.50 and that the termination fee TWGP would pay if the deal falls through has been cut "under certain circumstances." But to help get the buyout closed, dropped has been the prior requirement that no more than 15% of TWGP shares vote no on the deal. The stock had swooned lately amid apparent concerns about the deal happening, but TWGP jumps 27% to $2.16, cutting the week's slide to 16%. (kevin.kingsbury@dowjones.com; @kevinkingsbury)
$2.31 just hit!
The deal price is $2.5 per share cash now!
No. There is no any news regarding to the planed merger deal yet!
Gap up this early morning! $1.8 just hit!
Tower Group: An Arbitrage Opportunity With A Potential Annualized Return Over 100%
May. 7, 2014 8:48 AM ET
Disclosure: I am long TWGP. (More...)
Summary
Tower Group currently trades at a 26% Discount to the $3 Takeover Price.
Merger with ACP Re, an affiliate of AmTrust Financial, is Expected to be Completed by mid-September 2014.
If the Merger is Completed at $3 as per the Merger Agreement, the Annualized Return is in Excess of 100%.
Tower Group (TWGP) represents an interesting arbitrage opportunity for brave investors. The company is set to be taken over by ACP Re, an affiliate of AmTrust Financial (AFSI), at $3 per share in cash. However, TWGP trades at only $2.23 per share as of the close of business on May 6, 2014. The spread is thus a whopping $0.77, or nearly 35% of the current market price. Assuming that TWGP would be worthless if the merger fails, the market is assuming only a 74% chance that the merger will be completed at $3. This appears to be too low, as further discussed below.
The amended preliminary proxy statement for the merger was filed a month ago and can be found here. On page 2 of the proxy, we learn that TWGP expects the merger to be completed during Q3 of 2014 (or between July 1, 2014 and September 30, 2014). In addition, the proxy notes that TWGP has $150.0 million principal amount of 5.0% convertible senior notes that mature on September 15, 2014. Thus, we can safely assume that the merger must be completed ahead of that date. This indicates a maximum holding period, if the merger is completed as scheduled, of approximately 4 months.
Market Seems Excessively Skeptical of the Merger's Completion
Based on TWGP's current stock price, the market appears quite skeptical that ACP will actually go through with the merger at the agreed-upon $3 per share. This seems too pessimistic, however, for the following reasons:
AFSI's management recently stated on their Q1 2014 earnings call that they were pleased with the performance of the Tower reinsurance lines and expect to close the Tower transaction during the summer of 2014: "[The] Tower transaction is progressing and is already contributing to our first quarter results. The cut-through reinsurance agreement we entered into at the beginning of this year with Tower International generated significant gross written premiums in the small commercial business segment. The agreement also contributed to operating earnings in the quarter. We look forward to closing this transaction in the summer of '14."
As explained here, the Tower deal is expected to be highly accretive to ACP, AFSI and their affiliates going forward; hence, they do not appear to have a financial incentive to back out of the deal
TWGP's stock price has recently been negatively affected by a downgrade by Keefe Bruyette, dropping over 8% on May 6, the date of the downgrade; however, one analyst's opinion has no bearing on whether the merger will go through or not
The trading volume since the issuance of TWGP's 10-K has not been materially higher than normal (1.25MM/day versus 3-month run rate of ~1MM), indicating that large holders are not liquidating their stock; as of May 6, only about 4% of the outstanding shares have turned over since the 10-K filing
The various deficiencies in statutory capital as of December 31, 2013 referenced in TWGP's 10-K filing with respect to its insurance subsidiaries either have already been remedied through the January 2014 reinsurance agreements executed with AFSI and its affiliates in connection with the merger agreement or are expected to be remedied upon TWGP's merger with and into ACP. Therefore, TWGP's insurance regulators do not have an incentive to put these subsidiaries into receivership, since the existing capital deficiencies are expected to be addressed within a relatively short time period (i.e., by September 15, 2014)
TWGP's recent price action may, at least partially, be the result of speculators attempting to drive the stock price down in order to profit from bearish option contracts. For example, there is a large open interest in $2 put contracts, which expire on May 17, 2014. This negative pressure on TWGP's stock price would likely be relieved by the May options expiration date, which is next Friday.
TWGP's Reserves Continue to be a Black Cloud over the Merger
On the flip side, TWGP has clearly experienced massive negative reserving issues over the past 4 quarters. For example, p. 17 of the 2013 10-K reveals that TWGP had to increase its reserves for insured events of prior years by over $538MM during 2013. Yet TWGP's reserving issues were well documented at the time ACP entered into the merger agreement with the company (indeed, TWGP was forced into the deal precisely because of the reserving problems; had it not found a buyer, it would have likely gone bankrupt).
The market apparently believes that ACP may either terminate the merger or renegotiate the merger price because of TWGP's reserving issues. In order for ACP to terminate the merger agreement, it would need to show that there had occurred a "Material Adverse Event" (MAE) with respect to TWGP (see Section 6.02(d) of the merger agreement). The definition of an MAE in the merger agreement is as follows:
"Material Adverse Effect" means any effect, change, event or occurrence that, individually or in the aggregate with all other effects, changes, events or occurrences, has a material adverse effect on the business, results of operations or financial condition of the Company and its Subsidiaries taken as a whole; provided, that none of the following, and no effect, change, event or occurrence arising out of, or resulting from, the following, shall constitute or be taken into account, individually or in the aggregate, in determining whether a Material Adverse Effect has occurred or may occur except, with respect to items i, ii, v and viii, to the extent such item has a disproportionate effect on the Company or any of its Subsidiaries as compared to the companies listed in the most recent proxy statement filed by the Company with the SEC prior to the date hereof as the Company's "peer group": *i* any effect, change, event or occurrence that results from or arises in connection with changes or conditions generally affecting the property catastrophe insurance industry in the geographic regions in which the Company and its Subsidiaries operate or underwrite insurance, including natural disasters and catastrophe events, *ii* general economic or regulatory, legislative or political conditions or securities, credit, financial or other capital markets conditions in any jurisdiction, *iii* any change or announcement of a potential change, in and of itself, in the Company's or any of its Subsidiaries' credit, financial strength or claims paying ratings or such ratings of any of the Company's or its Subsidiaries' businesses, *iv* any failure, in and of itself, by the Company to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics for any period, *v* geopolitical conditions, the outbreak or escalation of hostilities, any acts of war (whether or not declared), sabotage, terrorism or man-made disaster, or any escalation or worsening of any such hostilities, acts of war (whether or not declared), sabotage, terrorism or man-made disaster, *vi* the execution and delivery of this Agreement or the public announcement or pendency of the Transactions and the Related Transactions, including the impact thereof on the relationships of the Company or any of its Subsidiaries with employees, labor unions, customers, brokers, agents, financing sources, business partners, regulators or reinsurance providers, and including any lawsuit, action or other proceeding with respect to the Transactions, *vii* any change, in and of itself, in the market price or trading volume of the Company's or any of its Subsidiaries' securities, *viii* any change in applicable Law, regulation, GAAP (or authoritative interpretation thereof) or in Applicable SAP, including accounting and financial reporting pronouncements by the SEC and the Financial Accounting Standards Board, *ix* any action required to be taken by the Company, or that the Company is required to cause one of its Subsidiaries to take, pursuant to, or any failure of the Company or any of its Subsidiaries to take an action prohibited by, the terms of this Agreement or the Quota Share Reinsurance Agreements, *x* the cancellation or termination of any policies or contracts of insurance written by any of the Company Insurance Subsidiaries, the termination or commutation of any reinsurance assumed by any Company Insurance Subsidiary or the failure of any Company Insurance Subsidiary, or all of them, to write or renew any insurance or reinsurance business or *xi* any failure by the Company to file or furnish any report, schedule, form, statement or other document or information required to be filed by the Company with, or furnished by the Company to, the SEC; provided, however, that with respect to clauses iii, iv, vii and ix, the underlying reasons for *w* the change or announcement of potential change in the Company's or any of its Subsidiaries' credit, financial strength or claim paying ratings or such ratings of any of the Company's or its Subsidiaries' businesses, *x* the failure to meet such projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics, *y* the change in the market price or trading volume of Company's or any of its Subsidiaries' securities or *z* the failure by the Company to file or furnish any report, schedule, form, statement or other document or information required to be filed by the Company with, or furnished by the Company to, the SEC, may be considered.
Has an MAE occurred with respect to TWGP since the signing of the merger agreement in January 2014? First, neither ACP re nor AmTrust apparently had any issues with the reserves or financials set forth in TWGP's Q3 2013 10-Q filing (filed on February 12, 2014), since ACP issued this press release at the time and AFSI only one week ago reiterated that the merger is expected to close in the summer of 2014. Second, on AFSI's Q1 2014 earnings conference call, the following exchange occurred, indicating that ACP and AFSI likely were aware of TWGP's 2013 year-end reserve levels prior to the filing of TWGP's 10-K several days later:
Ken Billingsley - Compass Point
And then since you'll be administrating the run off, in the past you said you were aware of Tower Group's third quarter '13 reserve increase. I would imagine you're still working on behalf of ACP Re right now looking at Tower Group's current reserve rate.
Barry Zyskind - President & CEO
Yes.
TWGP's Q3 10-Q stated that "ncurred losses and [loss adjustment expense] attributable to insured events of prior years were $483.6 million for the nine months ended September 30, 2013." As noted above, this figure was revised higher to $538.1MM in the 2013 10-K, representing an increase of $54.5MM quarter over quarter. Even if ACP and AFSI were unaware as of May 2nd that this additional reserve strengthening was forthcoming from TWGP (which seems unlikely, in light of Barry Zyskind's statement above), it hardly seems to constitute an MAE worth blowing up the deal over.
Possibility of Deal Repricing
It should also be noted that TWGP's 10-K included language, which did not appear in TWGP's Q3 10-Q, that there can be no assurance that the merger with ACP "will close under the same terms and conditions contained in the ACP Re Merger Agreement." One could interpret this as hinting that a reduction in the merger consideration may be in the cards. However, if ACP and TWGP were to agree on a $0.50 reduction in the merger consideration (from $3 to $2.50), for example, ACP would save less than $30MM, based on the 57MM shares outstanding per TWGP's 10-K. Any reduction in the consideration would also likely give rise to lawsuits by disgruntled TWGP shareholders, additional votes against the deal by such shareholders and/or a higher number of TWGP shareholders dissenting from the deal (one of the conditions to closing is that less than 15% of TWGP's shareholders are dissenting). In light of the fact that the current market cap of AFSI is in excess of $3.2B, it would seem unlikely that ACP and AFSI would risk forfeiting a profitable deal over such a comparatively small amount (less than 1% of AFSI's market cap).
Expected Value for TWGP
Even if one is highly pessimistic and assumes a 40% chance that the ACP / TWGP deal gets repriced at $2.50, a 20% chance that the deal collapses altogether (wiping out TWGP shareholders) and only a 40% chance that the deal goes through at the contracted price of $3, the expected value for TWGP stock is still $2.20 (.40 X $2.50 plus .40 X $3). This would seem to be the floor for TWGP.
If one takes a slightly less pessimistic view and assumes a 20% chance that the deal gets repriced at $2.50, a 10% chance that the deal collapses altogether and a 70% chance that the deal goes through at $3, the expected value for TWGP stock is $2.60 (.40 X $2.50 plus .40 X $3).
For the reasons described above, my view remains that the transaction will be completed at $3 during the summer of 2014. If that is the case, TWGP shareholders will earn annualized returns in excess of 100% from the stock price of $2.23 as of May 6th. Obviously, nothing is guaranteed in the stock market; deals can and do fall apart or reprice lower from time to time. At its current depressed price, however, TWGP appears to present a compelling risk/reward scenario for the brave investor.
I haven't been keeping up with TWGP that closely but I'm not liking what I am seeing. Anyone got an idea of where we might be heading?
I agree, this is too quite. something is up. They have stopped paying dividends and its been down substantially this quarter. I need answers to stay in. GLTA. .
I like the accumulation, I am watching this stock like a hawk, the sky is really the limit, this is a more long term for me.
RJ
Any thoughts on today's apparent accumulation?
2.78 Heck of a lot of accumulation today.
out for now, but it remains on my "watch list"
best of luck to you
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