Tower Group International Ltd : A.M. Best Revises Under Review Status for Ratings of Tower Group International, Ltd. and Its Subsidiaries

A.M. Best Co. has maintained the under review status on the financial strength rating (FSR) of B (Fair) and issuer credit ratings (ICR) of "bb" of the pooled and reinsured members of the Tower US Pool; the ICR of "b-" and the debt rating of "b-" on $145.4 million 5.00% senior convertible notes due 2014 of the intermediate holding company, Tower Group, Inc.; the FSR of B (Fair) and ICR of "bb" of CastlePoint Reinsurance Company, Ltd. (Bermuda); and the ICR of "b-" of the ultimate parent, Tower Group International, Ltd. (Tower) (Bermuda) [NASDAQ: TWGP]. The implications have been revised to developing from negative for all of these ratings. All companies are headquartered in New York, NY, unless otherwise specified. (See below for detailed listing of the companies and ratings.)

The under review status follows the recent announcement by Tower that it entered into an agreement and plan of merger with ACP Re Ltd. (ACP Re) (Bermuda) and its wholly-owned subsidiary, with Tower as the surviving corporation in the merger. Pursuant to the terms of the merger agreement, each outstanding share of Tower's common stock will be converted into the right to receive $3.00 in cash with an aggregate value of approximately $172.1 million. The terms also stipulate that ACP Re will assume the existing debt. Tower entered into the merger agreement with ACP Re on January 3, 2014.

The under review status with developing implications reflects the potential benefits to be garnered from the transaction as well as the potential downside from any additional adverse reserve development and/or any unforeseen events that might transpire up until the close of the transaction, which is not expected to close until the summer of 2014. Based on the terms of the transaction, these ratings are likely to be upgraded if the merger closes; however, the ratings also could be downgraded if certain events or unforeseen circumstances occur, which would cause the merger to fall through. If the merger occurs, A.M. Best believes it gives Tower access to additional capital and liquidity that it otherwise would not have. This allows Tower some additional financial flexibility, which could lessen the strain on its risk-adjusted capital. The ratings will remain under review pending stockholder and various customary regulatory approvals and until the merger has been finalized.

The FSR of B (Fair) and ICRs of "bb" remain under review, and the implications have been revised to developing from negative 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.

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