Tower Group Earnings: Profit and Revenue Climb Higher

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Tower Group Inc. (NASDAQ:TWGP) reported its results for the first quarter. Tower Group, through its subsidiaries, offers property and casualty insurance products and insurance services and products.

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Tower Group Earnings Cheat Sheet for the First Quarter

Results: Net income for Tower Group Inc. rose to $29.6 million (52 cents per share) vs. $26.5 million (61 cents per share) in the same quarter a year earlier. This marks a rise of 11.8% from the year-earlier quarter.

Revenue: Rose 8.4% to $466.5 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Tower Group Inc. reported adjusted net income of 56 cents per share. By that measure, the company fell short of mean estimate of 58 cents per share. It beat the average revenue estimate of $431.8 million.

Quoting Management: Michael H. Lee, President and Chief Executive Officer of Tower Group, Inc., said, “During the first quarter, we were able to achieve strong top line growth and meaningful rate increases due to improved market conditions across several areas of our business. We also continued to execute our organic growth strategy by enhancing our product offerings to drive our strong top line growth. In addition, we successfully initiated implementation of our personal lines technology platform and expect all new personal lines business to be written through this new system by the middle of this year. We expect to retire the existing system by next year. Finally, we are very pleased with our recently announced commitment to invest in Canopius Group Ltd. as well the options we will receive with this investment to access, subject to the approval of Lloyd’s and the FSA, the Lloyd’s market to underwrite profitable specialty and international business and to combine Tower with a Bermuda reinsurance business currently operated by Canopius. With the improvement in our core business in the United States and the opportunities from our transaction with Canopius, we expect our operating results and return on equity to continue to improve throughout the remainder of 2012 and beyond.”

Key Stats:

Revenue has risen the past four quarters. Revenue increased 8.4% to $454.9 million in the fourth quarter of the last fiscal year. The figure rose 7.5% in the third quarter of the last fiscal year from the year earlier and climbed 39.9% in the second quarter of the last fiscal year from the year-ago quarter.

The company fell short of estimates last quarter after beating the mark the quarter before with net income of 63 cents versus a mean estimate of net income of 62 cents per share.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the second quarter has moved down from 70 cents a share to 65 cents over the last ninety days. For the fiscal year, the average estimate has moved down from $2.82 a share to $2.60 over the last ninety days.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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