A.M. Best Comments on CastlePoint Holdings Planned Acquisition of Hermitage Insurance Group, Inc.OLDWICK, N.J. -- A.M. Best Co. has commented that all ratings and the under review with negative implications status of CastlePoint Insurance Company (CPIC CPIC Canadian Police Information Centre CPIC China Pacific Insurance (Group) Co. Ltd. CPIC Capital Planning & Investment Control CPIC Combined Press Information Center CPIC Coalition Press Information Center ) (New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of ), CastlePoint Reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. Company, Limited (CPRe) (Bermuda) and CastlePoint Holdings, LTD LTD 1 Laron-type dwarfism 2 Leukotriene D 3 Long-term depression, see there 4. Long-term disability (CastlePoint) (Bermuda) [NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : CPHL CPHL Central Public Health Laboratory (London, UK) CPHL Central Professional Hockey League CPHL Calgary Puck Hockey League ] remain unchanged following the announcement that it has entered into a definitive agreement to purchase Hermitage Insurance Group, Inc. and its members. This transaction is subject to regulatory approval and is expected to close in December 2008. All of CastlePoint's ratings were placed under review with negative implications following the August 5, 2008 announcement that it was being acquired by Tower Group, Inc. (TWGP) (headquartered in New York, NY). The under review status reflects A.M. Best's concerns with the strategic change in CastlePoint's original business plan, the potential re-allocation of capital post-transaction and the execution risks associated with the transaction. However, should the transaction close as planned, it will greatly reduce A.M. Best's concerns regarding CastlePoint's corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. and enterprise risk management. Notably, it will eliminate the dual chief executive officer (CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. ) role of Michael Lee, who currently is the CEO of TWGP and CastlePoint. Should the transaction close as presented to A.M. Best by CastlePoint's management, A.M. Best expects to affirm the ratings of CPIC and CPRe. Alternatively, if the transaction does not close and CPIC and CPRe continue with their original business plans as presented to A.M. Best, the ratings for both companies are expected to still be affirmed. Since inception, CastlePoint has derived over 70% of its revenues from TWGP as its primary reinsurance client. In its first two years of operation, CastlePoint reported combined ratios of 87.5% and 88.1% in years 2007 and 2006, respectively. Hermitage is a specialty property/casualty holding company offering insurance products to small customers throughout the United States. The total cash consideration is expected to be $135 million with no external financing required. A.M. Best will monitor the closing of this transaction as well as the acquisition of CastlePoint by TWGP and assess the impact of closing on all rated entities' risk-adjusted capitalization and operational structure. For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings. Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com. |
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