February 3, 2010 (FinancialWire) — Tower Group, Inc. (NASDAQ: TWGP) has entered into a definitive agreement to purchase the Personal Lines Division of OneBeacon Insurance Group (NYSE: OB).

The transaction involves the acquisition of two insurance companies, two management companies, certain renewal rights and other associated assets.

Under the deal, Tower will acquire Massachusetts Homeland Insurance Co., York Insurance Co. of Maine and two management companies for the purchase price of $32.5 million plus book value. The management companies are the attorneys-in-fact for Adirondack Insurance Exchange, a New York reciprocal insurer, and New Jersey Skylands Insurance Association, a New Jersey reciprocal insurer, and its New Jersey domiciled stock insurance subsidiary, New Jersey Skylands Insurance Co.

Tower will also purchase the surplus notes issued by the two reciprocal insurers for an amount equal to the statutory surplus in the exchanges (approximately $103 million at December 31, 2009). This transaction is subject to approvals by the appropriate regulatory agencies and is expected to close at the end of the second quarter of 2010.

According to Tower, the acquired insurance companies write around $250 million of annual premiums, and the acquired management companies are attorneys-in-fact that manage around $250 million in annual premium written through two reciprocal insurance companies.

Tower said it will write and manage the private passenger automobile, homeowners and package policies through the companies currently issuing these policies and combine its existing personal lines operations with the business being acquired.

Excluded from the transaction are AutoOne, specialty collector car and boat businesses, and Houston General companies. The Personal Lines Division writes business in the Northeastern United States.

New York-based Tower Group offers property and casualty insurance products and services through its operating subsidiaries.

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