Argo Shareholders Approve Proposed Merger
with Brookfield Reinsurance
- Reduced Catastrophe Losses: Total catastrophe losses of
$3.6 million were 59% lower than the first quarter 2022; reflects
volatility reduction efforts through exiting businesses with
property catastrophe exposure.
- Disciplined Expense Focus: Expense ratio of 35.1%
improved 90 basis points from the prior year first quarter, driven
in part by ongoing cost reduction efforts.
- Continued Strategic Growth in U.S. Ongoing Business:
U.S. Operations earned premiums decreased 3% from the prior year
first quarter, while earned premiums from U.S. ongoing business1
grew approximately 6%, primarily attributable to business lines
where the company retains more of the risk on a net basis.
Argo Group International Holdings, Ltd. (NYSE: ARGO) ("Argo" or
the "company") today announced financial results for the three
months ended March 31, 2023.
($ in millions, except per share data)
Three Months Ended
March 31,
Y/Y
2023
2022
Change
Net loss attributable to common
shareholders
$
(36.4
)
$
(3.6
)
NM
Per diluted common share
$
(1.04
)
$
(0.11
)
NM
Operating (loss) earnings
$
(10.8
)
$
43.4
NM
Per diluted common share
$
(0.31
)
$
1.24
NM
Annualized return on average common
shareholders' equity
(13.3
)%
(0.9
)%
-12.4 pts
Annualized operating return on average
common shareholders' equity
(3.9
)%
11.4
%
-15.3 pts
"We are pleased with the overwhelming shareholder support
received for the announced merger with Brookfield Reinsurance at
Argo's special meeting of shareholders held on April 19, 2023,"
said Argo Executive Chairman and Chief Executive Officer, Thomas A.
Bradley. "The level of shareholder support reflects investor
confidence that this transaction maximizes shareholder value and
represents the best path forward for Argo. As we have started
working closely with Brookfield Reinsurance on integration
planning, we have developed an even greater appreciation for how
this partnership will enhance our strong franchise and future
growth prospects. While preparations for the merger's closing move
ahead, we remain focused on responding to the needs of customers
and business partners. We continue to expect to complete the merger
in the second half of 2023, subject to customary closing
conditions, including receipt of required regulatory
approvals."
____________________ 1U.S. ongoing business excludes the following
businesses the company has sold, including sales of Contract
Binding P&C in October 2021 and U.S. Specialty Property in
December 2021, and the exits of our grocery and retail business and
certain program business.
Consolidated Highlights
($ in millions)
Three Months Ended
March 31,
Y/Y
2023
2022
Change
Gross written premiums
$
596.7
$
720.6
-17.2
%
Net written premiums
335.9
440.5
-23.7
%
Earned premiums
$
389.9
$
480.6
-18.9
%
Loss and loss adjustment expenses
284.6
283.6
0.4
%
Acquisition expenses
61.7
82.6
-25.3
%
General and administrative expenses
75.3
90.3
-16.6
%
Underwriting (loss) income
$
(31.7
)
$
24.1
NM
Net investment income
$
29.7
$
37.7
-21.2
%
Loss ratio
73.0
%
59.0
%
14.0 pts
Acquisition expense ratio
15.8
%
17.2
%
-1.4 pts
General and administrative expense
ratio
19.3
%
18.8
%
0.5 pts
Expense ratio
35.1
%
36.0
%
-0.9 pts
Combined ratio
108.1
%
95.0
%
13.1 pts
CAY ex-CAT loss ratio
59.6
%
56.5
%
3.1 pts
First Quarter 2023 Results - Consolidated (All
comparisons vs. first quarter 2022, unless noted otherwise)
On February 2, 2023, the company completed the previously
announced sale of Argo Underwriting Agency Limited and its Lloyd's
Syndicate 1200 to Westfield. The financial highlights in this
release include results for Argo Underwriting Agency Limited and
its Lloyd’s Syndicate 1200 up to the closing date.
Premiums
Gross written premiums of $596.7 million decreased $123.9
million, or 17.2%, primarily due to businesses the company has
exited and sold.
- Gross written premiums within the company’s ongoing business2
were in line with the prior year first quarter.
Earned premiums of $389.9 million decreased $90.7 million, or
18.9%.
- Earned premiums increased approximately 6.7% within the
company’s ongoing business reflecting business mix shift towards
lines of business where the company retains more risk.
____________________ 2 Ongoing business excludes the following
businesses the company is exiting, plans to exit, or have sold,
including Contract Binding P&C which was sold in October 2021,
U.S. Specialty Property which the company exited in December 2021,
Argo Seguros Brasil which was sold in February 2022, ArgoGlobal
Holdings (Malta) which was sold in June 2022, Lloyd's Syndicate
1200 which was sold in February 2023, Italy, and the U.S. grocery
and retail business, and certain program business.
Underwriting
The combined ratio of 108.1% increased 13.1 percentage points,
driven by a higher loss ratio.
The loss ratio of 73.0% increased 14.0 percentage points,
compared to 59.0% for the prior year first quarter.
- The current accident year, excluding catastrophes ("CAY
ex-CAT") loss ratio of 59.6% increased 3.1 percentage points.
- Total catastrophe losses were $3.6 million or 0.9 percentage
points on the loss ratio. In comparison, catastrophe losses in the
prior year first quarter were $8.7 million or 1.8 percentage points
on the loss ratio.
- Net adverse prior year reserve development was $48.6 million,
or 12.5 percentage points on the loss ratio. In comparison, net
adverse prior year reserve development in the first quarter 2022
was $3.4 million, or 0.7 percentage points on the loss ratio.
The CAY ex-CAT combined ratio of 94.7% increased 2.2 percentage
points from the prior year first quarter.
Expenses
The expense ratio of 35.1% improved 0.9 percentage points. This
improvement was driven by lower underwriting expenses of $35.9
million.
Investment Income
Net investment income of $29.7 million decreased by $8.0
million. While investment income, excluding alternatives, increased
$5.8 million due to higher reinvestment rates, the reduction in
investment income was attributable to a $13.8 million decrease in
alternative investment income compared to the first quarter 2022.
The company continues to hold a high quality, relatively short
duration portfolio with an average credit quality of AA- and an
average duration of 2.6 years, when including cash.
Earnings
Net loss attributable to common shareholders was $36.4 million,
or $1.04 per diluted share, for the first quarter 2023, compared to
a net loss attributable to common shareholders of $3.6 million, or
$0.11 per diluted share for the first quarter 2022. Annualized
return on average common shareholders' equity was (13.3%), compared
to (0.9%) in the prior year first quarter.
- The net loss attributable to common shareholders in the first
quarter 2023 included pre-tax net realized investment and other
losses of $17.9 million, compared to $34.5 million of pre-tax net
realized investment and other losses in the prior year first
quarter. The pre-tax net realized investment and other losses for
the first quarter 2023 were mainly attributable to the realization
of unrealized investment losses associated with the sale of Argo
Underwriting Agency Limited and its Lloyd's Syndicate.
- In addition, the net loss attributable to common shareholders
in the first quarter 2023 included $11.6 million of non-operating
expenses, which were mainly attributable to non-operating legal
fees. In comparison, the prior year first quarter reported $7.4
million in non-operating expenses.
Operating loss for the quarter was $10.8 million or $0.31 per
diluted share, compared to operating income of $43.4 million or
$1.24 per diluted share. Annualized operating return on average
common shareholders' equity was (3.9%), a decrease of 15.3
percentage points year-over-year.
Shareholders' Equity
Book value per common share was $31.31 as of March 31, 2023, an
increase of approximately 1.0% from $31.06 at year-end 2022. The
higher book value per common share is largely attributable to an
improvement in accumulated other comprehensive income ("AOCI") in
the quarter, partially offset by a decrease in retained
earnings.
U.S. Operations Highlights
($ in millions)
Three Months Ended
March 31,
Y/Y
2023
2022
Change
Gross written premiums
$
437.2
$
475.2
-8.0
%
Net written premiums
286.5
312.9
-8.4
%
Earned premiums
$
325.6
$
336.4
-3.2
%
Loss and loss adjustment expenses
239.9
206.2
16.3
%
Acquisition expenses
54.3
57.5
-5.6
%
General and administrative expenses
52.4
50.2
4.4
%
Underwriting (loss) income
$
(21.0
)
$
22.5
NM
Loss ratio
73.7
%
61.3
%
12.4 pts
Acquisition expense ratio
16.7
%
17.1
%
-0.4 pts
General and administrative expense
ratio
16.0
%
14.9
%
1.1 pts
Expense ratio
32.7
%
32.0
%
0.7 pts
Combined ratio
106.4
%
93.3
%
13.1 pts
CAY ex-CAT loss ratio
60.5
%
58.6
%
1.9 pts
First Quarter 2023 Results - U.S. Operations (All
comparisons vs. first quarter 2022, unless noted otherwise)
Premiums
U.S. Operations gross written premiums of $437.2 million
decreased $38.0 million, or 8.0%, primarily due to businesses the
company has exited.
- While the company experienced low-double digit rate decreases
in its commercial D&O business, the remaining portfolio
achieved rate increases in the mid-single digits.
- Gross written premiums within the U.S. ongoing business
decreased 3.2% from the prior year first quarter.
Earned premiums of $325.6 million decreased $10.8 million, or
3.2%.
- Earned premiums increased approximately 6.3% within the
company’s U.S. ongoing business, reflecting business mix shift
towards lines of business where the company retains more risk.
Underwriting
The loss ratio of 73.7% increased 12.4 percentage points,
compared to the prior year first quarter.
- The CAY ex-CAT loss ratio of 60.5% increased 1.9 percentage
points from the first quarter 2022. The increase was primarily
driven by professional lines.
- Catastrophe losses were $3.1 million, or 1.0 percentage point
on the loss ratio, compared to $4.0 million or 1.2 percentage
points on the loss ratio in the prior year first quarter.
- Net adverse prior year reserve development was $39.7 million or
12.2 percentage points on the loss ratio. In comparison, net
adverse development in the prior year first quarter was $5.0
million, or 1.5 percentage points on the loss ratio. The adverse
development in the first quarter 2023 was primarily attributable to
losses from businesses the company has exited, and by a
reassessment of potential claims in professional lines, mostly from
accident years 2019 and prior.
Expenses
The expense ratio was 32.7%, an increase of 0.7 percentage
points. Underwriting expenses decreased approximately $1.0 million
from the prior year first quarter, but the reduction in net earned
premiums resulted in an increase in the expense ratio year over
year.
International Operations Highlights
($ in millions)
Three Months Ended
March 31,
Y/Y
2023
2022
Change
Gross written premiums
$
159.5
$
245.4
-35.0
%
Net written premiums
49.4
127.6
-61.3
%
Earned premiums
$
64.3
$
144.2
-55.4
%
Loss and loss adjustment expenses
43.6
76.0
-42.6
%
Acquisition expenses
7.3
25.1
-70.9
%
General and administrative expenses
14.1
29.8
-52.7
%
Underwriting (loss) income
$
(0.7
)
$
13.3
NM
Loss ratio
67.8
%
52.7
%
15.1 pts
Acquisition expense ratio
11.4
%
17.4
%
-6.0 pts
General and administrative expense
ratio
21.9
%
20.7
%
1.2 pts
Expense Ratio
33.3
%
38.1
%
-4.8 pts
Combined ratio
101.1
%
90.8
%
10.3 pts
CAY ex-CAT loss ratio
54.9
%
51.5
%
3.4 pts
First Quarter 2023 Results - International Operations
(All comparisons vs. first quarter 2022, unless noted
otherwise)
Premiums
Gross written premiums of $159.5 decreased $85.9 million, or
35.0% and earned premiums of $64.3 million decreased $79.9 million,
or 55.4%. The reduction of premiums was primarily due to businesses
the company has sold.
Underwriting
The loss ratio of 67.8% increased 15.1 percentage points,
compared to 52.7% in the prior year first quarter.
- The CAY ex-CAT loss ratio was 54.9%, an increase of 3.4
percentage points. The first quarter 2023 includes a different mix
of business from 2022 due to the dispositions of various
businesses.
- Catastrophe losses were $0.5 million, or 0.8 percentage points
on the loss ratio, compared to $4.7 million, or 3.3 percentage
points on the loss ratio in the prior year first quarter.
- Net adverse prior year reserve development was $7.8 million,
which increased the loss ratio by 12.1 percentage points. In
comparison, the prior year first quarter had $3.0 million of net
favorable development, which decreased the loss ratio 2.1
percentage points. The adverse development in the first quarter
2023 was primarily attributable to claim movements in professional
lines within the company's Bermuda operation.
Expenses
The expense ratio of 33.3% improved 4.8 percentage points,
driven by a $33.5 million reduction in expenses, partially offset
by lower earned premiums. These results were primarily due to the
sale of Argo Underwriting Agency Limited and its Lloyd's Syndicate
1200.
ABOUT ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
Argo Group International Holdings, Ltd. (NYSE: ARGO) is an
underwriter of specialty insurance products in the property and
casualty market. Argo offers a full line of products and services
designed to meet the unique coverage and claims-handling needs of
businesses in two primary segments. Argo and its insurance
subsidiaries are rated ‛A-’ by Standard and Poor’s. Argo’s
insurance subsidiaries are rated ‛A-’ by A.M. Best. More
information on Argo and its subsidiaries is available at
www.argogroup.com.
FORWARD-LOOKING STATEMENTS
This press release and related oral statements may include
forward-looking statements that reflect our current views with
respect to future events and financial performance. Forward-looking
statements include all statements that do not relate solely to
historical or current facts, and can be identified by the use of
words such as "expect," "intend," "plan," "believe," “do not
believe,” “aim,” "project," "anticipate," “seek,” "will," “likely,”
“assume,” “estimate,” "may," “continue,” “guidance,” “growth,”
“objective,” “remain optimistic,” “improve,” “progress,” "path
toward," "looking forward," “outlook,” “trends,” “future,” “could,”
“would,” “should,” “target,” “on track” and similar expressions of
a future or forward-looking nature.
Such statements are subject to certain risks and uncertainties
that could cause actual events or results to not occur or differ
materially, including, but not limited to, recent changes in
interest rates and inflation, the outcome of our exploration of
strategic alternatives and our ability to realize the anticipated
benefits of any actions taken in connection therewith, including
that the company and Brookfield Reinsurance may be unable to
complete their proposed transaction, the adequacy of our projected
loss reserves, employee retention and changes in key personnel, the
ability of our insurance subsidiaries to meet risk-based capital
and solvency requirements, the outcome of legal and regulatory
proceedings, investigations, inquiries, claims and litigation, and
other risks and uncertainties discussed in our filings with the
Securities and Exchange Commission (the "SEC"). For a more detailed
discussion of such risks and uncertainties, see Item 1A, “Risk
Factors” in Argo’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2022 and in other filings with the SEC. The
inclusion of a forward-looking statement herein should not be
regarded as a representation by Argo that its objectives will be
achieved. Any forward-looking statements speak only as of the date
of this press release. Argo undertakes no obligation to publicly
update forward-looking statements, whether as a result of new
information, future events or otherwise. You should not place undue
reliance on any such statements.
NON-GAAP FINANCIAL MEASURES
In presenting the company's results, management has included and
discussed in this press release certain non-generally accepted
accounting principles ("non-GAAP") financial measures within the
meaning of Regulation G as promulgated by the SEC. Management
believes that these non-GAAP financial measures, which may be
defined differently by other companies, better explain the
company's results of operations in a manner that allows for a more
complete understanding of the underlying trends in the company's
business. However, these measures should not be viewed as a
substitute for those determined in accordance with generally
accepted accounting principles ("U.S. GAAP").
“CAY ex-CAT combined ratio” and the “CAY ex-CAT loss ratio" are
internal measures used by the management of the company to evaluate
the performance of its underwriting activity and represents the net
amount of underwriting income excluding catastrophe related charges
and the impact of changes to prior year loss reserves. Although
this measure does not replace the GAAP combined ratio, it provides
management with a view of the quality of earnings generated by
underwriting activity for the current accident year.
“Operating income (loss)" is an internal performance measure
used in the management of the company's operations and represents
operating results after-tax (at an assumed effective tax rate of
19%) and preferred share dividends excluding, as applicable, net
realized investment and other gains or losses, net foreign exchange
gain or loss, non- operating expenses, and other similar
non-recurring items. The company excludes net realized investment
and other gains or losses, net foreign exchange gain or loss,
non-operating expenses, and other similar non-recurring items from
the calculation of operating income because these amounts are
influenced by and fluctuate in part, by market conditions that are
outside of management’s control. In addition to presenting net
income determined in accordance with U.S. GAAP, the company
believes that showing operating income enables investors, analysts,
rating agencies and other users of the company's financial
information to more easily analyze our results of operations and
underlying business performance.
"Annualized operating return on average common shareholders'
equity" is calculated using operating income (loss) (as defined
above and annualized in the manner described for net income (loss)
attributable to common shareholders ("ROACE")) and average common
shareholders' equity. In calculating ROACE, the net income
attributable to common shareholders for the period is multiplied by
the number of periods in a calendar year to arrive at annualized
net income available to common shareholders. In addition to
presenting ROACE determined in accordance with U.S. GAAP, the
company believes that showing annualized operating return on
average common shareholders' equity enables investors, analysts,
rating agencies and other users of the company's financial
information to more easily analyze our results of operations and
underlying business performance.
"Operating income (loss) per common share (diluted)" is
calculated using operating income (as defined above) and the
weighted average common shares (diluted) for the current period. In
addition to presenting net income (loss) per common share (diluted)
in accordance with U.S. GAAP, the company believes that showing the
operating income (loss) per common share (diluted) enables
investors, analysts, rating agencies and other users of the
company's financial information to more easily analyze our results
of operations and underlying business performance.
“Underwriting income (loss)” is an internal performance measure
used in the management of the company’s operations and represents
net amount earned from underwriting activities (net premium earned
less underwriting expenses and claims incurred). Underwriting
income is a financial measure that is commonly recognized as a
standard of performance by investors, analysts, rating agencies and
other users of its financial information. Although this measure of
profit (loss) does not replace net income (loss) computed in
accordance with U.S. GAAP as a measure of profitability, management
uses this measure of profit (loss) to focus our reporting segments
on generating underwriting income.
"Book value per common share excluding AOCI" is total common
shareholders’ equity excluding AOCI, net of tax, included in
shareholders’ equity, divided by the number of common shares
outstanding. In the opinion of the company’s management, book value
per common share excluding AOCI is useful in an analysis of a
property casualty company’s book value per share as it removes the
effect of changing prices on invested assets (i.e., net unrealized
investment gains (losses), net of tax), which do not have an
equivalent impact on unpaid claims and claim adjustment expense
reserves.
"Tangible book value per common share" is book value per share
excluding the after-tax value of goodwill and other intangible
assets divided by the number of common shares outstanding. In the
opinion of the company’s management, tangible book value per common
share is useful in an analysis of a property casualty company’s
book value on a nominal basis as it removes certain effects of
purchase accounting (i.e., goodwill and other intangible
assets).
"Tangible book value per common share excluding AOCI" is book
value per share excluding the after-tax value of goodwill and other
intangible assets and AOCI, net of tax. In the opinion of the
company's management, tangible book value per common share
excluding AOCI is useful in an analysis of a property casualty
company's book value per share as it removes certain aspects of
purchase accounting (i.e., goodwill and other intangible assets)
and the effect of changing prices on invested assets (i.e., net
unrealized investment gains (losses), net of tax).
The “percentage change in book value per common share” includes
(by adding) the effects of cash dividends paid per common share to
the calculated book value per common share for the current period.
This adjusted amount is then compared to the prior period’s book
value per common share to determine the period over period change.
The company believes that including the dividends paid per common
share allows users of its financial statements to more easily
identify the impact of the changes in book value per common share
from the perspective of investors.
Reconciliations of non-GAAP financial measures to their most
directly comparable U.S. GAAP measures are included in the
following tables and footnotes.
(financial tables follow)
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
CONSOLIDATED BALANCE
SHEETS
(in millions, except per share
amounts)
March 31,
December 31,
2023
2022
(unaudited)
Assets
Total investments
$
3,885.9
$
3,651.9
Cash
36.4
50.2
Accrued investment income
18.8
18.6
Receivables
3,288.0
3,321.1
Goodwill and intangible assets
118.6
118.6
Deferred acquisition costs, net
103.9
107.0
Ceded unearned premiums
367.8
375.5
Other assets
384.7
325.3
Assets held-for-sale
—
2,066.2
Total assets
$
8,204.1
$
10,034.4
Liabilities and Shareholders'
Equity
Reserves for losses and loss adjustment
expenses
$
5,184.1
$
5,051.6
Unearned premiums
994.3
1,039.9
Ceded reinsurance payable, net
174.7
158.7
Senior unsecured fixed rate notes
140.5
140.5
Junior subordinated debentures
258.7
258.6
Other liabilities
207.3
237.7
Liabilities held-for-sale
—
1,914.5
Total liabilities
6,959.6
8,801.5
Preferred shares
144.0
144.0
Common shares
46.5
46.4
Additional paid-in capital
1,396.6
1,395.4
Treasury shares
(455.1
)
(455.1
)
Retained earnings
370.9
407.3
Accumulated other comprehensive income,
net of taxes
(258.4
)
(305.1
)
Total shareholders' equity
1,244.5
1,232.9
Total liabilities and
shareholders' equity
$
8,204.1
$
10,034.4
Book value per common share
$
31.31
$
31.06
Tangible book value per common share
$
27.93
$
27.67
Book value per common share excluding
AOCI, net of tax
$
38.66
$
39.76
Tangible book value per common share
excluding AOCI, net of tax
$
35.29
$
36.38
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
CONSOLIDATED FINANCIAL
HIGHLIGHTS
(in millions, except per share
amounts)
(unaudited)
Three Months Ended
March 31,
2023
2022
Gross written premiums
$
596.7
$
720.6
Net written premiums
335.9
440.5
Earned premiums
389.9
480.6
Net investment income
29.7
37.7
Net investment and other gains
(losses):
Net realized investment and other gains
(losses)
(21.1
)
(40.2
)
Change in fair value recognized
3.3
6.7
Change in allowance for credit losses on
fixed maturity securities
(0.1
)
(1.0
)
Net realized investment and other gains
(losses)
(17.9
)
(34.5
)
Total revenue
401.7
483.8
Losses and loss adjustment expenses
284.6
283.6
Acquisition expenses
61.7
82.6
General and administrative expenses
75.3
90.3
Non-operating expenses
11.6
7.4
Interest expense
8.5
5.8
Fee and other (income) expense, net
(0.4
)
(0.8
)
Foreign currency exchange (gains)
losses
2.7
2.9
Total expenses
444.0
471.8
Income (loss) before income taxes
(42.3
)
12.0
Income tax provision (benefit)
(8.5
)
13.0
Net income (loss)
$
(33.8
)
$
(1.0
)
Dividends on preferred shares
2.6
2.6
Net income (loss) attributable to common
shareholders
$
(36.4
)
$
(3.6
)
Net income (loss) per common share
(basic)
$
(1.04
)
$
(0.11
)
Net income (loss) per common share
(diluted)
$
(1.04
)
$
(0.11
)
Weighted average common shares:
Basic
35.1
34.9
Diluted
35.1
34.9
Loss ratio
73.0
%
59.0
%
Acquisition expense ratio
15.8
%
17.2
%
General and administrative expense
ratio
19.3
%
18.8
%
Expense ratio
35.1
%
36.0
%
GAAP combined ratio
108.1
%
95.0
%
CAY ex-CAT combined ratio
94.7
%
92.5
%
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
SEGMENT DATA
(in millions)
(unaudited)
Three months ended
March 31,
2023
2022
U.S. Operations
Gross written premiums
$
437.2
$
475.2
Net written premiums
286.5
312.9
Earned premiums
325.6
336.4
Underwriting (loss) income
(21.0
)
22.5
Net investment income
24.4
25.6
Interest expense
(7.0
)
(3.9
)
Fee (expense), net
0.3
—
Operating (loss) income before taxes
$
(3.3
)
$
44.2
Loss ratio
73.7
%
61.3
%
Acquisition expense ratio
16.7
%
17.1
%
General and administrative expense
ratio
16.0
%
14.9
%
Expense Ratio
32.7
%
32.0
%
GAAP combined ratio
106.4
%
93.3
%
CAY ex-CAT combined ratio
93.2
%
90.6
%
International
Operations
Gross written premiums
$
159.5
$
245.4
Net written premiums
49.4
127.6
Earned premiums
64.3
144.2
Underwriting income (loss)
(0.7
)
13.3
Net investment income
4.6
11.4
Interest expense
(1.3
)
(1.7
)
Fee income, net
0.1
0.8
Operating income before taxes
$
2.7
$
23.8
Loss ratio
67.8
%
52.7
%
Acquisition expense ratio
11.4
%
17.4
%
General and administrative expense
ratio
21.9
%
20.7
%
Expense Ratio
33.3
%
38.1
%
GAAP combined ratio
101.1
%
90.8
%
CAY ex-CAT combined ratio
88.2
%
89.6
%
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
RECONCILIATION OF LOSS
RATIOS
(unaudited)
Three Months Ended
March 31,
2023
2022
U.S. Operations
Loss ratio
73.7
%
61.3
%
Prior accident year loss reserve
development
(12.2
)%
(1.5
)%
Catastrophe losses
(1.0
)%
(1.2
)%
CAY ex-CAT loss ratio
60.5
%
58.6
%
International
Operations
Loss ratio
67.8
%
52.7
%
Prior accident year loss reserve
development
(12.1
)%
2.1
%
Catastrophe losses
(0.8
)%
(3.3
)%
CAY ex-CAT loss ratio
54.9
%
51.5
%
Consolidated
Loss ratio
73.0
%
59.0
%
Prior accident year loss reserve
development
(12.5
)%
(0.7
)%
Catastrophe losses
(0.9
)%
(1.8
)%
CAY ex-CAT loss ratio
59.6
%
56.5
%
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
NET PRIOR-YEAR RESERVE
DEVELOPMENT & CATASTROPHE LOSSES BY SEGMENT
(in millions)
(unaudited)
Three Months Ended
March 31,
2023
2022
Net Prior-Year Reserve
Development
(Favorable)/Unfavorable
U.S. Operations
$
39.7
$
5.0
International Operations
7.8
(3.0
)
Run-off Lines
1.1
1.4
Total net prior-year reserve
development
$
48.6
$
3.4
Three Months Ended
March 31,
2023
2022
Catastrophe Losses
Catastrophe
losses
U.S. Operations
$
3.1
$
4.0
International Operations
0.5
4.7
Total catastrophe losses
3.6
8.7
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
RECONCILIATION OF UNDERWRITING
INCOME (LOSS) TO NET INCOME (LOSS)
CONSOLIDATED
(in millions)
(unaudited)
Three Months Ended
March 31,
2023
2022
Net income (loss)
$
(33.8
)
$
(1.0
)
Add (deduct):
Income tax provision (benefit)
(8.5
)
13.0
Net investment income
(29.7
)
(37.7
)
Net realized investment and other (gains)
losses
17.9
34.5
Interest expense
8.5
5.8
Fee and other (income) expense, net
(0.4
)
(0.8
)
Foreign currency exchange (gains)
losses
2.7
2.9
Non-operating expenses
11.6
7.4
Underwriting (loss) income
$
(31.7
)
$
24.1
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
RECONCILIATION OF OPERATING
INCOME (LOSS) TO NET INCOME (LOSS)
CONSOLIDATED
(in millions, except per share
amounts)
(unaudited)
Three Months Ended
March 31,
2023
2022
Net income (loss), as reported
$
(33.8
)
$
(1.0
)
Income tax provision (benefit)
(8.5
)
13.0
Net income (loss), before taxes
(42.3
)
12.0
Add (deduct):
Net realized investment and other (gains)
losses
17.9
34.5
Foreign currency exchange (gains)
losses
2.7
2.9
Non-operating expenses
11.6
7.4
Operating (loss) income before taxes and
preferred share dividends
(10.1
)
56.8
Income tax (benefit) provision, at assumed
rate (1)
(1.9
)
10.8
Preferred share dividends
2.6
2.6
Operating (loss) income
$
(10.8
)
$
43.4
Operating (loss) income per common share
(diluted)
$
(0.31
)
$
1.24
Weighted average common shares,
diluted
35.1
34.9
(1)
For the purpose of calculating Operating
Income, an assumed tax rate of 19% is used which represents our
expected weighted average statutory tax rate.
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
RECONCILIATION OF PRE-TAX
OPERATING INCOME (LOSS) BY SEGMENT TO NET INCOME (LOSS)
(in millions)
(unaudited)
Three Months Ended
March 31,
2023
2022
Operating income (loss) before income
taxes:
U.S. Operations
$
(3.3
)
$
44.2
International Operations
2.7
23.8
Run-off Lines
(0.7
)
(1.0
)
Corporate and Other
(8.8
)
(10.2
)
Total operating (loss) income before
income taxes
(10.1
)
56.8
Net realized investment and other gains
(losses)
(17.9
)
(34.5
)
Foreign currency exchange (losses)
gains
(2.7
)
(2.9
)
Non-operating expenses
(11.6
)
(7.4
)
Income (loss) before income taxes
(42.3
)
12.0
Income tax provision (benefit)
(8.5
)
13.0
Net income (loss)
$
(33.8
)
$
(1.0
)
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
PREMIUMS BY SEGMENT AND LINE
OF BUSINESS
(in millions)
U.S. Operations
Three months ended March 31,
2023
Three months ended March 31,
2022
Gross Written
Net Written
Net Earned
Gross Written
Net Written
Net Earned
Property
$
56.0
$
29.0
$
36.9
$
44.4
$
26.8
$
40.5
Liability
248.1
159.8
175.3
270.6
170.0
170.4
Professional
75.2
55.1
68.3
101.3
69.4
84.5
Specialty
57.9
42.6
45.1
58.9
46.7
41.0
Total
$
437.2
$
286.5
$
325.6
$
475.2
$
312.9
$
336.4
International Operations
Three months ended March 31,
2023
Three months ended March 31,
2022
Gross Written
Net Written
Net Earned
Gross Written
Net Written
Net Earned
Property
$
26.3
$
(12.1
)
$
5.8
$
52.1
$
10.0
$
29.4
Liability
28.7
11.0
16.2
49.4
28.2
35.6
Professional
34.5
11.0
18.8
48.1
28.0
31.8
Specialty
70.0
39.5
23.5
95.8
61.4
47.4
Total
$
159.5
$
49.4
$
64.3
$
245.4
$
127.6
$
144.2
Consolidated
Three months ended March 31,
2023
Three months ended March 31,
2022
Gross Written
Net Written
Net Earned
Gross Written
Net Written
Net Earned
Property
$
82.3
$
16.9
$
42.7
$
96.5
$
36.8
$
69.9
Liability
276.8
170.8
191.5
320.0
198.2
206.0
Professional
109.7
66.1
87.1
149.4
97.4
116.3
Specialty
127.9
82.1
68.6
154.7
108.1
88.4
Total
$
596.7
$
335.9
$
389.9
$
720.6
$
440.5
$
480.6
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
COMPONENTS OF NET INVESTMENT
INCOME & NET REALIZED INVESTMENT AND OTHER GAINS
(LOSSES)
CONSOLIDATED
(in millions)
(unaudited)
Three Months Ended
March 31,
2023
2022
Net Investment Income
Net investment income, excluding
alternative investments
$
29.9
$
24.1
Alternative investments
(0.2
)
13.6
Total net investment income
$
29.7
$
37.7
Three Months Ended
March 31,
2023
2022
Net Realized Investment and
Other Gains (Losses)
Net realized investment (losses) gains
$
(0.8
)
$
(11.7
)
Change in fair value recognized
3.3
6.7
Change in allowance for credit losses on
fixed maturity securities
(0.1
)
(1.0
)
Loss on the sale of business divestitures
including the realization of unrealized investment losses and
foreign exchange translation losses, respectively
(20.3
)
(28.5
)
Total net realized investments and other
gains (losses)
$
(17.9
)
$
(34.5
)
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
COMPONENTS OF INVESTMENT
PORTFOLIO
CONSOLIDATED
(in millions)
(unaudited)
March 31,
December 31,
2023
2022
U.S. Governments and government
agencies
$
387.9
$
380.7
States and political subdivisions
100.9
99.8
Foreign governments
28.2
28.4
Corporate – Financial
620.3
636.4
Corporate – Industrial
521.9
520.1
Corporate – Utilities
77.3
77.6
Asset-backed securities
137.1
139.2
Collateralized loan obligations
237.8
237.9
Mortgage-backed securities – Agency
257.5
259.1
Mortgage-backed securities –
Commercial
284.8
285.4
Mortgage-backed securities –
Residential
10.7
10.9
Total fixed maturities
2,664.4
2,675.5
Commercial Mortgage Loans
159.7
159.7
Common stocks
44.2
43.9
Total equity securities available for
sale
44.2
43.9
Private equity
263.7
264.6
Hedge fund
54.7
54.0
Other
4.6
4.6
Total other investments
323.0
323.2
Short term investments and cash
equivalents
694.6
449.6
Cash
36.4
50.2
Total cash and invested assets
$
3,922.3
$
3,702.1
March 31,
December 31,
2023
2022
U.S. Governments and government
agencies
$
387.9
$
639.8
AAA
617.8
364.6
AA
243.2
241.8
A
583.0
592.5
BBB
563.6
565.6
BB
64.1
64.1
B
56.7
60.6
Lower than B
14.2
14.9
Not rated
133.9
131.6
Total fixed maturities
$
2,664.4
$
2,675.5
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
RECONCILIATION OF COMMON
SHAREHOLDERS' EQUITY TO TANGIBLE SHAREHOLDERS' EQUITY
CONSOLIDATED
(in millions)
(unaudited)
March 31,
December 31,
2023
2022
Common shareholders' equity
$
1,100.5
$
1,088.9
Less: Accumulated other comprehensive
income (AOCI), net of taxes
(258.4
)
(305.1
)
Common shareholders' equity excluding
AOCI, net of tax
$
1,358.9
$
1,394.0
Common shareholders' equity
$
1,100.5
$
1,088.9
Less: Goodwill and intangible assets
118.6
118.6
Tangible common shareholders' equity
981.9
970.3
Less: AOCI, net of tax
(258.4
)
(305.1
)
Tangible common shareholders' equity
excluding AOCI, net of tax
$
1,240.3
$
1,275.4
Common shares outstanding - end of
period
35.151
35.061
Book value per common share
$
31.31
$
31.06
Tangible book value per common share
$
27.93
$
27.67
Book value per common share excluding
AOCI, net of tax
$
38.66
$
39.76
Tangible book value per common share
excluding AOCI, net of tax
$
35.29
$
36.38
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
SHAREHOLDER RETURN
ANALYSIS
(in millions, except per share
data)
(unaudited)
Three Months Ended
March 31,
2023
2022
Net income (loss) attributable to common
shareholders
$
(36.4
)
$
(3.6
)
Operating income (loss) (1)
(10.8
)
43.4
Common Shareholders' Equity - Beginning of
period
$
1,088.9
$
1,591.2
Common Shareholders' Equity - End of
period
1,100.5
1,466.8
Average Common Shareholders' Equity
$
1,094.7
$
1,529.0
Common shares outstanding - End of
period
35.15
34.95
Book value per common share
$
31.31
$
41.97
Book value per common share, prior
period
$
31.06
Change in book value per common share
during 2023
0.8
%
Annualized return on average common
shareholders' equity
(13.3
)%
(0.9
)%
Annualized operating return on average
common shareholders' equity
(3.9
)%
11.4
%
(1)
For the purpose of calculating Operating
Income, an assumed tax rate of 19% is used which represents our
expected weighted average statutory tax rate.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230508005444/en/
Andrew Hersom Head of Investor Relations 860.970.5845
andrew.hersom@argogroupus.com
David Snowden Senior Vice President, Communications
210.321.2104 david.snowden@argogroupus.com
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