Last week, rating agency A.M. Best affirmed the ratings of Tower Group Inc. ( TWGP ) and its subsidiaries. The ratings action includes the affirmation of issuer credit ratings (ICR) of “bbb-" on Tower Group Inc. A.M.Best views favorably the acquisitions made by Tower Group over the last few years, enabling the company to diversify its business mix. The acquisitions made last year -- CastlePoint, Hermitage and Specialty Underwriters Alliance -- have helped the company to expand outside the Northeast, which accounts for a major chunk of business. Other positives are adequate loss reserves, solid capitalization moderate leverage, strong operating performance and disciplined underwriting. The rating agency is also optimistic about the pending acquisition of OneBeacon Insurance Group Ltd.’s personal lines business, which Tower announced in Feb 2010. The acquisition is expected to combine Tower’s personal lines business with that of the acquired company, which will lead to the creation of a separate business segment within the group. Regardless of the announcement of first quarter loss from catastrophes, the rating agency is upbeat about the company’s strong operating results for fiscal year 2010. The offsetting factors to the ratings include the soft property and casualty market, intense competition and business concentration in Northeast U.S. Though the company has successfully integrated past acquisitions, there remains an uncertainty about the integration of future procurements, given the uncertain economic environment. Moreover, any new acquisition will require external financing, which may not be available to the company. The rating action also included the affirmation of financial strength ratings (FSR) of “A-“ and ICR of “a-“ of CastlePoint Reinsurance Company, Ltd (“CPRe"). The rating agency acknowledges CPRe’s role within the Tower Group as captive reinsurance provider to Tower. CastlePoint’s solid capitalization and profitable operating performance also aids the ratings. A.M. Best has assigned each of Tower Group’s insurance company subsidiaries -- CastlePoint Insurance Company, CastlePoint National Insurance Company, Tower Insurance Company of New York, Tower National Insurance Company, Preserver Insurance Company, Mountain Valley Indemnity Company, North East Insurance Company, Hermitage Insurance Company, CastlePoint Florida Insurance Company and Kodiak Insurance Company -- a financial strength rating of “A-" (Excellent) which is the fourth highest of fifteen rating levels. The ICRs of “a-" of these subsidiaries have also been affirmed. The outlook on all the ratings is “stable." Read the full analyst report on "TWGP" Zacks Investment Research