Tower Group has entered into a definitive agreement to purchase the personal lines division of OneBeacon Insurance Group. The transaction involves the acquisition of two insurance companies, two management companies, certain renewal rights and other associated assets.

The acquired insurance companies write approximately $250m annual premiums, and the acquired management companies are attorneys-in-fact that manage approximately $250m in annual premium written through two reciprocal insurance companies. The transaction excludes AutoOne, specialty collector car and boat businesses, and Houston General companies.

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

The company maintains its annual operating earnings guidance of $3.50 to $3.70 per diluted share for 2010 which includes the effects of the transaction. The transaction combines the personal lines businesses of Tower and OneBeacon to create a separate business segment with annualized premiums written and managed of approximately $700m.

Tower Group said that the transaction provides access to over 900 retail agencies in the Northeast with cross-selling of non-personal lines products to new agents through its existing companies. It will expand its personal lines product offerings to territories outside the Northeast, and increases product diversification, underwriting profitability and return on equity through the allocation of capital.

Michael Lee, president and CEO of Tower, said: “This transaction provides us with a unique opportunity to add a very high quality franchise to Tower’s group of companies.

“The transaction is consistent with our long term strategic plan to expand our diversified platform through acquisitions by strengthening our personal lines product offering, generating additional fee income from the management of the reciprocals and delivering greater value to our producers and customers.”