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As part of the agreement, AequiCap's employees involved in the servicing of the workers' compensation business will become employees of Tower (NASDAQ: TWGP). The business is expected to contribute about $40 million in premiums annually, Tower said.
Under the deal, policies will be transferred to Tower Group as they renew over the next year, said Michael H. Lee, president and chief executive officer. "Renewal rights allow us to acquire the rights to the renewal business along with staff and facilities as necessary to service this business," he told BestWire. "So it's a way of capturing the business without the liabilities or the assets associated with the insurance company that has the balance sheet. It's a way to extract business without necessarily dealing with issues that you would often have to deal with when you acquire an insurance company."
Lee said in a statement that Tower has worked with AequiCap to provide insurance services since 2007 through its CastlePoint operations, and it is therefore familiar with the AequiCap business. He said the acquisition strengthens Tower's regional presence in the Southeast, where Tower now has offices in Fort Lauderdale and Mobile, Ala.
"Importantly, the producers and insureds alike will benefit from Tower's higher financial strength rating, our strong level of capitalization and the continuity of business relationships with the professionals they have worked with in the past who are now joining Tower."
Tower Group companies currently have a Best's Financial Strength Rating of A- (Excellent). In late morning trading on Oct. 16, Tower stock was trading at $25.35, down 0.43% from the previous close.
(By Ron Panko, senior associate editor, Best's Review: Ronald.Panko@ambest.com)
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