Zacks Investment Research downgraded shares of Tower Group Inc. (TWGP) from NEUTRAL to UNDERPERFORM on August 22, 2012, with a target price of $17.00.
We are downgrading our recommendation on the shares of Tower Group Inc. to Underperform' from Neutral' following disappointing second quarter results, which was due to a charge related to reserve strengthening and weather-related losses. We also remain on the sidelines because of the huge execution risk associated with the recently announced merger transaction with Canopius Bermuda. A substantial exposure to catastrophe losses, low reinvestment yields and a competitive property and casualty insurance markets are other headwinds. On the positive side, upon successful completion of the merger, Tower will gain substantial scale and size advantages enabling it to access three major insurance markets, the U.S., Bermuda and London. The company also anticipates that the merger will add to the earnings. Tower's inorganic and organic growth initiatives undertaken over the recent years are also bearing fruit.
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