Castlepoint Holdings Ltd (MM) (NASDAQ:CPHL)
Historical Stock Chart
From Jun 2019 to Jun 2024
Tower Group, Inc. (“Tower”;
NASDAQ: TWGP) and CastlePoint Holdings, Ltd. (“CastlePoint”;
NASDAQ: CPHL) have announced today that CastlePoint Reinsurance Company,
Ltd., a Bermuda-based subsidiary of CastlePoint, has entered into a
definitive agreement to acquire HIG, Inc. (“Hermitage”).
CastlePoint will pay the seller, a subsidiary of Brookfield Asset
Management Inc., $27 million in cash plus the adjusted closing book
value of Hermitage. The total cash consideration is expected to be
approximately $135 million with no external financing required.
On August 5, 2008, Tower entered into a definitive agreement to acquire
CastlePoint and they expect to close that transaction in early December
2008. Tower and CastlePoint expect that the acquisition of Hermitage
will close in late December 2008, after the closing of the
Tower-CastlePoint acquisition.
Hermitage Overview
Hermitage is a specialty property and casualty insurance holding
company offering both admitted and excess and surplus (“E&S”)
products to small commercial customers throughout the eastern United
States. Hermitage has two operating subsidiaries: Hermitage Insurance
Company and Kodiak Insurance Company.
The Hermitage transaction represents the acquisition of a profitable
book of business and an E&S lines platform covering 29 states and the
District of Columbia. The Hermitage subsidiaries also have admitted
licenses in 10 states.
The Hermitage transaction will provide access to 150 new retail agents
in the Southeast who have no overlap with CastlePoint’s
or Tower’s existing producers and will also
further strengthen CastlePoint’s and Tower’s
wholesale distribution in the eastern U.S.
Hermitage is expected to produce approximately $100 million in gross
written premiums for 2008, and its net loss ratio is 52.3% through the
first six months of 2008. The transaction is expected to be slightly
accretive to earnings per share in 2009 for both Tower and CastlePoint
on a combined or standalone basis.
Michael H. Lee, Chairman and CEO of both Tower and CastlePoint, stated, “The
Hermitage acquisition reinforces the post-CastlePoint acquisition
strategy that we outlined when we announced the acquisition of
CastlePoint by Tower on August 5th. Through
this transaction, Tower and CastlePoint will be able to acquire a very
profitable business similar to Tower’s
business by utilizing CastlePoint’s capital.
In addition, CastlePoint will be able to shift more of CastlePoint
Reinsurance Company’s capital from
reinsurance to insurance in response to current market conditions. The
transaction further supports Tower’s national
expansion plans by focusing on underserved market segments through
wholesale agents while expanding its retail distribution system in the
Southeast.”
Tower Acquisition of Renewal Rights and Operating Assets if Tower’s
Acquisition of CastlePoint is not Consummated or is Delayed:
Tower and CastlePoint also entered into a separate agreement pursuant to
which, following CastlePoint’s acquisition of
Hermitage as outlined above for $135 million, Tower has agreed to buy
Hermitage’s operating assets including rights
to policy renewals and producer appointments from CastlePoint for $16
million in cash. Tower and CastlePoint do not expect to consummate this
renewal rights transaction unless Tower’s
acquisition of CastlePoint is not consummated or is delayed. If this
renewal rights transaction were to close, Tower and CastlePoint have
also agreed to extend all of the reinsurance, management and service
agreements between the two companies or their respective subsidiaries
for one additional year upon their expiration, currently scheduled for
March 31, 2010, at commission and management fee terms which have been
set to approximate current market terms, provided that, under certain
limited circumstances, the extension will be for 6 months.
Upon the sale of the operating assets to Tower, CastlePoint will retain
Hermitage’s financial assets including
capital in the operating insurance companies, insurance licenses, loss
reserves and unearned premium reserves. In addition, Tower’s
managing general agency, Tower Risk Management, will manage Hermitage’s
operating insurance companies on behalf of CastlePoint based upon the
terms of existing management and service agreements between Tower and
CastlePoint.
If this renewal rights transaction were to be consummated, it would
benefit each of Tower and CastlePoint on a standalone basis. Tower would
be able to expand its wholesale and retail agency distribution and
increase its management fee income from managing the Hermitage business.
CastlePoint would be able to more effectively deploy its capital by
shifting from reinsurance to primary insurance underwriting and by
increasing business from Tower through its insurance risk sharing
solution rather than its quota share reinsurance solution. Further, as
noted above, CastlePoint would benefit from the one year extension of
its agreements with Tower whereby Tower reinsures a substantial portion
of its profitable brokerage business with CastlePoint through a quota
share agreement and a risk sharing agreement.
The terms of this transaction between Tower and CastlePoint were
negotiated and approved by the independent board members of both
companies.
The transactions between Hermitage and CastlePoint and those between
Tower and CastlePoint, including any ancillary agreements, are subject
to customary regulatory approvals.
2008 and 2009 Earnings Guidance:
The Hermitage acquisition will not affect Tower’s
earnings guidance for 2008. Therefore, Tower is maintaining its diluted
earnings per share guidance to be in the range of $2.90 to $3.00 for the
full year 2008.
Tower expects the Hermitage acquisition will be accretive to its
shareholders in 2009 after Tower completes the acquisitions of
CastlePoint and Hermitage. Both transactions are expected to close in
December 2008. Tower is maintaining its diluted earnings per share
guidance for 2009 in the range of $3.20 to $3.40 that was provided on
August 5th, but Tower expects the Hermitage
acquisition to increase its earnings towards the upper end of that range.
Investor Call and Presentation
Tower and CastlePoint will jointly host a conference call today at 2:00
P.M. (Eastern Time) to discuss the transaction. The Call-in number is:
877-545-1488; international 719-325-4942. This conference call will also
be broadcast live over the Internet. To access the presentation and a
listen-only webcast over the Internet, please visit the Investor
Information section of Tower’s website, www.twrgrp.com,
or CastlePoint’s website, www.castlepoint.bm,
or use these links: http://investor.twrgrp.com/events.cfm
or http://ir.castlepoint.bm/events.cfm
Please access the website at least 15 minutes prior to the call to
register and to download any necessary audio software. If you are unable
to participate during the live conference call, a listen-only webcast
will be archived in the Investor Information section of both companies’
websites.
About Tower
Tower offers property and casualty insurance products and services
through its operating subsidiaries. Its insurance company subsidiaries
offer insurance products to individuals and small to medium-sized
businesses. Tower’s insurance services
subsidiaries provide underwriting, claims and reinsurance brokerage
services to other insurance companies.
About CastlePoint
CastlePoint, a Bermuda-based holding company, through its subsidiaries,
CastlePoint Reinsurance Company, CastlePoint Management Corp., and
CastlePoint Insurance Company, provides property and casualty insurance
and reinsurance business solutions, products and services to small
insurance companies and program underwriting agents in the United States.
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. This press release or any other
written or oral statements made by or on behalf of CastlePoint and Tower
may include forward-looking statements that reflect CastlePoint’s
and Tower’s current views with respect to
future events and financial performance. All statements other than
statements of historical fact included in this press 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,” “project,”
“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 the
actual results of CastlePoint, Tower, Hermitage and the combined
companies to differ materially from those indicated in these statements.
The following factors, among others, could cause or contribute to such
material differences: the ability to obtain governmental approvals or
rulings on or regarding the Hermitage transactions or the
Tower-CastlePoint merger on the proposed terms and schedule; the failure
of the shareholders of CastlePoint or the stockholders of Tower to
approve the Tower-CastlePoint merger; the failure to satisfy the closing
conditions to the Hermitage acquisition or the Tower-CastlePoint merger;
the risk that the businesses will not be integrated successfully or that
such integration may be more difficult, time-consuming or costly than
expected; the risk that the revenue opportunities, cost savings and
other anticipated synergies from the Hermitage acquisition or the
Tower-CastlePoint merger may not be fully realized or may take longer to
realize than expected; disruption from the Hermitage acquisition or the
Tower-CastlePoint merger making it difficult to maintain relationships
with customers, employees, brokers and managing general agents; the risk
that the U.S. or Bermuda tax authorities may view the tax treatment of
the Hermitage acquisition or Tower-CastlePoint merger and/or the other
transactions contemplated by the Hermitage stock purchase agreement or
the Tower-CastlePoint merger agreement differently from CastlePoint and
Tower’s tax advisors; costs relating to the
transactions; ineffectiveness or obsolescence of the 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
the underwriting, reserving or investment practices of Hermitage,
CastlePoint or Tower anticipate based on historical experience or
industry data; the ability to obtain necessary governmental licenses;
the ability to hire and retain executive officers and other key
personnel; the effects of acts of terrorism or war; developments in the
world's financial and capital markets that adversely affect the
performance of Hermitage’s, CastlePoint’s
and Tower’s investments; changes in
regulations or laws applicable to Hermitage, CastlePoint, Tower and
their respective subsidiaries, brokers or customers, including tax laws
in Bermuda and the United States; acceptance of products and services,
including new products and services; changes in the availability, cost
or quality of reinsurance and failure of Hermitage’s,
CastlePoint’s or Tower’s
reinsurers to pay claims timely or at all; decreased demand for Hermitage’s,
CastlePoint’s or Tower’s
insurance or reinsurance products; the effects of mergers, acquisitions
and divestitures in the insurance and reinsurance sectors; changes in
rating agency policies or practices; changes in legal theories of
liability under Hermitage’s, CastlePoint’s
and Tower’s insurance policies or the
policies that it reinsures; 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 assumptions underlying our pro forma
projections and/or earnings guidance could prove incorrect due to, among
other things, the foregoing factors, and neither CastlePoint nor Tower
undertake any obligation to update publicly or revise any
forward-looking statement, whether as a result of new information,
future developments or otherwise.
Additional Information
Although the acquisition of Hermitage by CastlePoint and sale of
Hermitage operating assets by CastlePoint to Tower is not subject to
approval by either Tower or CastlePoint shareholders, information
regarding the transaction will be included in the joint proxy
statement/prospectus regarding the proposed Tower-CastlePoint merger.
Shareholders of Tower and CastlePoint are urged to read the joint proxy
statement/prospectus regarding the proposed Tower-CastlePoint merger
when it becomes available because it will contain important information.
Shareholders will be able to obtain a free copy of the joint proxy
statement/prospectus, as well as other filings containing information
about Tower and CastlePoint, without charge, at the Securities Exchange
Commission’s Internet site (www.sec.gov).
Copies of the joint proxy statement/prospectus and the filings with the
Securities and Exchange Commission that will be incorporated by
reference in the joint proxy statement/prospectus can also be obtained,
without charge, by accessing the companies’
websites: http://www.twrgrp.com/ or http://www.castlepoint.bm/
Tower and CastlePoint, their respective directors and executive officers
and other persons may be deemed to be participants in the solicitations
of proxies from the shareholders of Tower and/or CastlePoint in respect
of the proposed Tower-CastlePoint merger. Information regarding Tower’s
directors and executive officers is available in its proxy statement
filed with the Securities and Exchange Commission by Tower on April 11,
2008, and information regarding CastlePoint’s
directors and executive officers is available in it proxy statement
filed with the Securities and Exchange Commission by CastlePoint on
April 29, 2008. Additional information regarding the participants in the
proxy solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in the
joint proxy statement/prospectus when it becomes available.
This press release shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to buy
any securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of such
jurisdiction. No offering of securities shall be made except by means of
a joint proxy statement/prospectus meeting the requirements of Section
10 of the Securities Act of 1933, as amended.
For more information visit Tower's website at http://www.twrgrp.com/.
or CastlePoint’s website at: http://www.castlepoint.bm/
CPHL-F