Tower Group has reported net loss of $15.1m, or $0.39 per diluted share attributable to common shareholders in the second quarter of 2012, against a net income of $24.12m, or $0.58 per share during the same period last year.

Operating loss for the latest quarter period was $15.5m, or ($0.39) per diluted share, compared to operating income of $26m in the second quarter of 2011, or $0.63 per diluted share.

The firm’s operating loss included an after-tax charge of $42.3m, or $1.08 per share, associated with prior year reserve strengthening compared to $0.3m or $0.01 per share of favorable reserve development in the second quarter of 2011.

Tower Group president and chief executive officer Michael H Lee said during the quarter, the firm took an important step to establishing a diversified global specialty insurance company by entering into an agreement with Canopius to merge Tower with Canopius’ Bermuda operations.

"We believe this transaction will allow us to access U.S., Bermuda and Lloyd’s markets to enhance our profitability and create new business opportunities," Lee said.

"Excluding this reserve development, our operating results continue to be strong, and in the second quarter we experienced 15% top line growth and a 95.3% combined ratio.

"In summary, due to our transaction with Canopius, actions that we have taken this quarter with respect to our reserve position, the success of the organic growth initiative and improving market conditions, we have a positive outlook for the remainder of 2012 and 2013."