Net Income EPS of $0.56 per diluted common
share and Operating Income EPS of $0.91 per diluted common share
driven by continued strong growth in the ongoing business, reduced
catastrophe exposure and increased investment income
- Continued Growth: Strong growth from the ongoing
business in both the U.S. and International segments reflecting
underwriting actions; market conditions remain favorable for
continued growth
- Reduced Catastrophe Losses: Total catastrophe losses of
$27.3 million, down from $71.2 million in the third quarter of
2020
- Improved Underwriting Margin: The combined ratio
improved 9.8 points, reflecting continued growth in strategic
lines, reduced impact of ceded reinsurance on net earned premiums
and lower catastrophe losses
Argo Group International Holdings, Ltd. (NYSE: ARGO) ("Argo" or
the "Company") today announced financial results for the three and
nine months ended September 30, 2021. Argo reported third quarter
2021 net income attributable to common shareholders of $19.8
million or $0.56 per diluted common share, compared to a net loss
attributable to common shareholders of $(25.1) million or $(0.72)
per diluted common share for the 2020 third quarter. Operating
income in the third quarter of 2021 was $31.7 million or $0.91 per
diluted common share, compared to an operating loss of $(10.0)
million or $(0.29) per diluted common share for the 2020 third
quarter.
"Argo continues to pursue profitable growth, improve
underwriting margins, reduce volatility and maintain disciplined
expense management," said Argo Chief Executive Officer Kevin J.
Rehnberg. "The successful implementation of our strategy is
evidenced in our financial performance. As we continue to optimize
our business mix, the underlying strength of our core lines of
business is more clear."
“We are particularly pleased that our efforts to reduce property
catastrophe exposure have led to a significant improvement in our
results, against the backdrop of the elevated catastrophe losses
the insurance industry experienced this quarter.”
Third Quarter Consolidated Operating Highlights
$ in millions
Three Months Ended
September 30,
Q/Q
Nine Months Ended
September 30,
Y/Y
Consolidated
2021
2020
Change
2021
2020
Change
Gross written premiums
$
875.6
$
890.2
-1.6
%
$
2,447.4
$
2,515.7
-2.7
%
Net written premiums
583.7
533.9
9.3
%
1,498.3
1,370.5
9.3
%
Earned premiums
487.5
445.5
9.4
%
1,423.9
1,313.9
8.4
%
Underwriting income (loss)
$
(1.3
)
$
(45.3
)
NM
$
2.2
$
(58.9
)
NM
Net investment income
46.1
42.0
NM
143.2
79.0
81.3
%
Net income (loss) attributable to common
shareholders
$
19.8
$
(25.1
)
NM
$
114.1
$
(55.2
)
NM
Operating income (loss)
$
31.7
$
(10.0
)
NM
$
103.4
$
(1.1
)
NM
Loss ratio
64.0
%
73.8
%
-9.8 pts
62.5
%
67.2
%
-4.7 pts
Acquisition expense ratio
17.1
%
17.1
%
0 pts
17.2
%
16.5
%
0.7 pts
General and administrative expense
ratio*
19.2
%
19.2
%
0 pts
20.1
%
20.7
%
-0.6 pts
Expense ratio*
36.3
%
36.3
%
0 pts
37.3
%
37.2
%
0.1 pts
Combined ratio
100.3
%
110.1
%
-9.8 pts
99.8
%
104.4
%
-4.6 pts
CAY ex-CAT loss ratio**
57.1
%
57.4
%
-0.3 pts
56.1
%
56.9
%
-0.8 pts
*See footnote 1 in the Consolidated
Financial Highlights below.
**See footnote 2 in the Consolidated
Financial Highlights below.
- Gross written premiums decreased 1.6% to $875.6 million during
the third quarter of 2021, compared to the third quarter of 2020.
The decrease in gross written premiums is attributable to the
businesses we are exiting, plan to exit or have sold, including
sales of Ariel Re in November 2020 and businesses in Italy, Malta
and the U.S. grocery business, and re-underwriting actions across
our catastrophe exposed lines of business. In the ongoing
businesses, premiums grew approximately 17% during the third
quarter of 2021 when compared to the third quarter of 2020.
- The combined ratio was 100.3% during the third quarter of 2021,
compared to 110.1% in the third quarter of 2020. The improved
combined ratio was driven by lower COVID-19 losses and natural
catastrophes, as well as an improved current accident year,
ex-catastrophe ("CAY ex-CAT"), loss ratio.
- Total catastrophe losses in the third quarter of 2021 were
$27.3 million or 5.6 points on the loss ratio. In the third quarter
of 2021, natural catastrophes accounted for $24.3 million and
losses related to the COVID-19 pandemic accounted for $3.0 million
of the total catastrophe losses. Catastrophe losses in the third
quarter of 2020 were $71.2 million or 16.0 points on the loss ratio
and included $16.9 million related to the COVID-19 pandemic.
- Net unfavorable reserve development for the 2021 third quarter
was $6.2 million, or 1.3 points on the loss ratio. Net unfavorable
reserve development of $1.6 million added 0.4 points to the loss
ratio in the third quarter of 2020.
- The CAY ex-CAT loss ratio was 57.1% in the third quarter of
2021 compared to 57.4% in the prior year third quarter. The
improvement was driven by U.S. Operations and is primarily a result
of recent re-underwriting actions and rate increases earning
through the results.
- The expense ratio of 36.3% in the third quarter of 2021 was
flat compared to the prior year third quarter as improvement in
U.S. Operations was offset by a higher expense ratio in
International Operations. The acquisition expense ratio of 17.1%
and general and administrative expense ratio of 19.2% were both
flat compared to the prior year third quarter.
- The CAY ex-CAT combined ratio was 93.4% in the third quarter of
2021, compared to 93.7% in the prior year third quarter.
- Net investment income was $46.1 million in the 2021 third
quarter compared to $42.0 million in the prior year third quarter.
Investment income from alternative investments was $24.2 million in
the third quarter of 2021 and included gains from both private
equity and hedge fund investments. Results for the prior year third
quarter included gains from alternative investments of $19.3
million. Net investment income excluding alternative investments
was $21.9 million in the third quarter of 2021 and decreased 3.5%
from the prior year third quarter due primarily to lower interest
rates.
- Net income attributable to common shareholders was $19.8
million, or $0.56 per diluted share, for the third quarter of 2021,
compared to a net loss attributable to common shareholders of
$(25.1) million, or $(0.72) per diluted share, for the 2020 third
quarter. The 2021 third quarter result benefited from $1.3 million
of pre-tax foreign currency exchange gains compared to foreign
currency exchange losses of $8.4 million in the prior year third
quarter. The 2021 third quarter included $5.3 million of pre-tax
net realized investment losses, while the prior year third quarter
included $5.7 million of pre-tax net realized investment losses.
The third quarter of 2021 included $8.2 million of non-operating
expenses compared to $3.0 million, as adjusted, in the prior year
quarter with the increase due to costs associated with the
reduction in the Company's real estate footprint. Annualized return
on average common shareholders' equity was 4.5% in the third
quarter of 2021 compared to (5.9%) in the prior year third
quarter.
- Operating income was $31.7 million or $0.91 per diluted share
in the third quarter of 2021, compared to an operating loss of
$(10.0) million or $(0.29) per diluted share in the prior year
quarter. The primary driver of the increased operating income was
improved underwriting income resulting from a lower level of
catastrophe losses in the third quarter of 2021. Annualized
operating return on average common shareholders' equity was 7.3% in
the third quarter of 2021 compared to (2.3%) in the prior year
third quarter.
U.S. Operations:
$ in millions
Three Months Ended
September 30,
Q/Q
Nine Months Ended
September 30,
Y/Y
U.S. Operations
2021
2020
Change
2021
2020
Change
Gross written premiums
$
562.5
$
542.4
3.7
%
$
1,564.9
$
1,499.1
4.4
%
Net written premiums
375.0
349.2
7.4
%
985.2
922.2
6.8
%
Earned premiums
323.5
298.7
8.3
%
952.4
902.8
5.5
%
Losses and loss adjustment expenses
203.9
205.5
-0.8
%
583.1
566.3
3.0
%
Acquisition expenses
49.0
46.3
5.8
%
149.6
130.8
14.4
%
General and administrative expenses
55.7
51.9
7.3
%
168.6
158.8
6.2
%
Underwriting income
$
14.9
$
(5.0
)
NM
$
51.1
$
46.9
9.0
%
Loss ratio
63.0
%
68.8
%
-5.8 pts
61.2
%
62.7
%
-1.5 pts
Acquisition expense ratio
15.2
%
15.5
%
-0.3 pts
15.7
%
14.5
%
1.2 pts
General and administrative expense
ratio*
17.2
%
17.4
%
-0.2 pts
17.7
%
17.6
%
0.1 pts
Expense ratio*
32.4
%
32.9
%
-0.5 pts
33.4
%
32.1
%
1.3 pts
Combined ratio
95.4
%
101.7
%
-6.3 pts
94.6
%
94.8
%
-0.2 pts
CAY ex-CAT loss ratio**
59.8
%
61.1
%
-1.3 pts
57.8
%
58.1
%
-0.3 pts
*See footnote 1 in the Segment Data
below.
**See footnote 2 in the Segment Data
below.
- In our U.S. Operations, gross written premiums increased 3.7%
compared to the third quarter of 2020 due mainly to growth in
Liability and Professional lines, while premiums in Property lines
declined. Growth in the third quarter of 2021 was driven by
strategic growth businesses that include Argo Pro, Casualty,
Construction, Environmental, Inland Marine and Surety. These
businesses, which represent approximately 60% of U.S. Operations
gross written premiums, in total, were up approximately 20% during
the quarter. Offsetting this growth was the impact of planned
reductions in Property lines and other re-underwriting actions,
including the exit of our grocery and restaurant business. Rates on
average were up in the mid-single digits, with pricing increases
remaining stable in most of our strategic growth businesses.
- The loss ratio for the third quarter of 2021 was 63.0% compared
to 68.8% in the prior year third quarter. The decrease in the loss
ratio was primarily driven by a $16.3 million reduction in
catastrophe losses and improvement in the CAY ex-CAT loss ratio
compared to the prior year third quarter.
- Net unfavorable prior-year reserve development in the third
quarter of 2021 was $0.2 million compared to $3.2 million of
favorable development in the prior year third quarter.
- Catastrophe losses were $10.0 million, or 3.1 points on the
loss ratio, in the third quarter of 2021 compared to $26.3 million
or 8.8 points on the loss ratio in the prior year third quarter
with the current third quarter losses primarily related to
Hurricane Ida.
- The CAY ex-CAT loss ratio was 59.8% in the third quarter of
2021 compared to 61.1% in the prior year third quarter. The
improvement reflects the benefit of pricing and underwriting
actions in addition to a reduced number of large losses compared to
the prior year third quarter.
- The acquisition expense ratio for the third quarter of 2021 was
15.2%, a decrease of 0.3 points compared to the 2020 third quarter.
The decrease was primarily driven by changes in business mix.
- The general and administrative expense ratio was 17.2% in the
third quarter of 2021, an improvement of 0.2 points from the prior
year third quarter.
International Operations:
$ in millions
Three Months Ended
September 30,
Q/Q
Nine Months Ended
September 30,
Y/Y
International Operations
2021
2020
Change
2021
2020
Change
Gross written premiums
$
312.9
$
347.7
-10.0
%
$
881.9
$
1,016.2
-13.2
%
Net written premiums
208.5
184.6
12.9
%
512.5
447.9
14.4
%
Earned premiums
163.9
146.7
11.7
%
471.1
410.8
14.7
%
Losses and loss adjustment expenses
103.8
113.0
-8.1
%
301.2
305.6
-1.4
%
Acquisition expenses
34.2
29.7
15.2
%
94.5
86.4
9.4
%
General and administrative expenses
30.5
27.2
12.1
%
94.3
88.4
6.7
%
Underwriting income (loss)
$
(4.6
)
$
(23.2
)
NM
$
(18.9
)
$
(69.6
)
NM
Loss ratio
63.3
%
77.1
%
-13.8 pts
63.9
%
74.4
%
-10.5 pts
Acquisition expense ratio
20.9
%
20.2
%
0.7 pts
20.1
%
21.0
%
-0.9 pts
General and administrative expense
ratio*
18.6
%
18.5
%
0.1 pts
20.0
%
21.5
%
-1.5 pts
Expense Ratio*
39.5
%
38.7
%
0.8 pts
40.1
%
42.5
%
-2.4 pts
Combined ratio
102.8
%
115.8
%
-13 pts
104.0
%
116.9
%
-12.9 pts
CAY ex-CAT loss ratio**
51.6
%
50.3
%
1.3 pts
52.7
%
54.5
%
-1.8 pts
*See footnote 3 in the Segment Data
below.
**See footnote 4 in the Segment Data
below.
- In our International Operations gross written premiums declined
(10.0)% in the third quarter of 2021 compared to the third quarter
of 2020. The decrease in gross written premiums is attributable to
businesses we are exiting, plan to exit or have sold, including the
sale of Ariel Re in November 2020, and the planned exits of
businesses in Italy and Malta. In the ongoing business, excluding
the increased share of Syndicate 1200's capacity, gross written
premiums were up approximately 19% primarily due to higher rates,
and growth in Marine and Specialty lines. Rate increases averaged
low-double digits during the 2021 third quarter.
- Net written and earned premium in the third quarter of 2021
increased 12.9% and 11.7%, respectively, compared to the 2020 third
quarter with the increase attributable to Syndicate 1200. The
increase in Syndicate 1200 was driven by changes in ceded
reinsurance, rate increases achieved over the last several quarters
and reductions in third party capital participation, partially
offset by $5.1 million of reinstatement premiums associated with
natural catastrophes during the third quarter of 2021.
Reinstatement premiums were $0.7 million in the third quarter of
2020.
- The loss ratio for the third quarter of 2021 was 63.3% compared
to 77.1% in the prior year third quarter. The improvement in the
loss ratio is primarily the result of a reduction in catastrophe
losses compared to the third quarter of 2020.
- Catastrophe losses totaled 10.5 points on the loss ratio in the
third quarter of 2021, attributed to natural catastrophes and
losses related to COVID-19, as compared to 30.6 points on the loss
ratio for the third quarter of 2020.
- The CAY ex-CAT loss ratio was 51.6% in the third quarter of
2021 compared to 50.3% in the prior year third quarter. The
increase in the loss ratio in the third quarter of 2021 is mainly
due to the impact from the reinstatement premiums associated with
the natural catastrophe events in the third quarter of 2021.
- Net unfavorable prior year reserve development in the third
quarter of 2021 was $2.0 million or 1.2 points on the loss ratio,
compared to favorable development of $5.6 million in prior year
third quarter.
- The acquisition ratio increased 0.7 points to 20.9% during the
third quarter of 2021 and is attributable largely to reinstatement
premiums associated with the natural catastrophe events in the
third quarter of 2021.
- The general and administrative expense ratio of 18.6% increased
slightly in the third quarter of 2021 when compared to the prior
year third quarter primarily due to the impact from reinstatement
premiums associated with the natural catastrophe events in the
third quarter of 2021.
Balance Sheet:
- Book value per common share was $50.01 at September 30, 2021,
compared to $50.34 at June 30, 2021. Including dividends paid, book
value per common share was flat relative to June 30, 2021 as
retained earnings were offset by changes in interest rates and net
unrealized losses on fixed maturity securities.
CONFERENCE CALL
Argo management will conduct an investor conference call
starting at 10 a.m. EST on Wednesday, November 3, 2021.
Participants in the U.S. can access the call by dialing (844)
200-6205 (access code 199691). Callers dialing from outside the
U.S. can access the call by dialing (929) 526-1599 (access code
199691). Please ask the operator for the Argo earnings call. A live
webcast of the conference call can be accessed at
https://events.q4inc.com/attendee/225554513.
A webcast replay will be available shortly after the live
conference call and can be accessed at
https://events.q4inc.com/attendee/225554513. A telephone replay of
the conference call will be available through November 16, 2021, to
callers in the U.S. by dialing (866) 813-9403 (access code 467489)
and to callers outside the U.S. by dialing +44-204-525-0658 (access
code 467489).
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: U.S. Operations and
International Operations. 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 includes 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,” “objective,” “remain optimistic,”
“improve,” “progress,” "path toward," “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 differ materially. 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, 2020 and in other filings with
the Securities and Exchange Commission (“SEC”). The inclusion of a
forward-looking statement herein should not be regarded as a
representation by Argo that Argo’s 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 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
15%) and preferred share dividends excluding, as applicable, net
realized investment gains or losses, net foreign exchange gain or
loss, non- operating expenses, and other similar non-recurring
items. The Company excludes net realized investment 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)" or
"Operating Income EPS" 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). 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. The
Company presents underwriting income as a measure that is commonly
recognized as a standard of performance by investors, analysts,
rating agencies and other users of its financial information.
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 attached
tables and footnotes.
(financial tables follow)
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
CONSOLIDATED BALANCE
SHEETS
(in millions, except per share
amounts)
September 30,
December 31,
2021
2020
(unaudited)
Assets
Total investments
$
5,313.5
$
5,255.8
Cash
202.0
148.8
Accrued investment income
20.9
21.8
Receivables
3,655.9
3,688.8
Goodwill and intangible assets
207.8
207.8
Deferred acquisition costs, net
175.7
163.6
Ceded unearned premiums
572.1
575.1
Other assets
370.2
404.1
Total assets
$
10,518.1
$
10,465.8
Liabilities and Shareholders'
Equity
Reserves for losses and loss adjustment
expenses
$
5,439.5
$
5,406.0
Unearned premiums
1,540.2
1,464.8
Ceded reinsurance payable, net
763.8
950.4
Senior unsecured fixed rate notes
140.3
140.2
Other indebtedness
58.7
60.7
Junior subordinated debentures
258.1
257.8
Other liabilities
429.9
328.1
Total liabilities
8,630.5
8,608.0
Preferred shares
144.0
144.0
Common shareholders’ equity
1,743.6
1,713.8
Total shareholders' equity
1,887.6
1,857.8
Total liabilities and
shareholders' equity
$
10,518.1
$
10,465.8
Book value per common share
$
50.01
$
49.40
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
CONSOLIDATED FINANCIAL
HIGHLIGHTS
(in millions, except per share
amounts)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Gross written premiums
$
875.6
$
890.2
$
2,447.4
$
2,515.7
Net written premiums
583.7
533.9
1,498.3
1,370.5
Earned premiums
487.5
445.5
1,423.9
1,313.9
Net investment income
46.1
42.0
143.2
79.0
Net realized investment gains (losses)
(5.3
)
(5.7
)
32.5
(24.0
)
Total revenue
528.3
481.8
1,599.6
1,368.9
Losses and loss adjustment expenses
311.7
328.9
890.9
883.0
Acquisition expenses
83.4
76.2
244.3
217.2
General and administrative expenses
93.7
85.7
286.5
272.6
Non-operating expenses
8.2
3.0
20.9
9.8
Interest expense
5.5
6.9
16.3
21.7
Fee and other (income) expense, net
(1.1
)
(0.8
)
(1.8
)
(2.7
)
Foreign currency exchange (gains)
losses
(1.3
)
8.4
4.4
13.6
Total expenses
500.1
508.3
1,461.5
1,415.2
Income (loss) before income taxes
28.2
(26.5
)
138.1
(46.3
)
Income tax provision (benefit)
5.8
(3.4
)
16.1
6.9
Net income (loss)
$
22.4
$
(23.1
)
$
122.0
$
(53.2
)
Dividends on preferred shares
2.6
2.0
7.9
2.0
Net income (loss) attributable to common
shareholders
$
19.8
$
(25.1
)
$
114.1
$
(55.2
)
Net income (loss) per common share
(basic)
$
0.57
$
(0.72
)
$
3.28
$
(1.60
)
Net income (loss) per common share
(diluted)
$
0.56
$
(0.72
)
$
3.26
$
(1.60
)
Weighted average common shares:
Basic
34.9
34.7
34.8
34.6
Diluted
35.0
34.7
35.1
34.6
Loss ratio
64.0
%
73.8
%
62.5
%
67.2
%
Acquisition expense ratio
17.1
%
17.1
%
17.2
%
16.5
%
General and administrative expense
ratio1
19.2
%
19.2
%
20.1
%
20.7
%
Expense ratio1
36.3
%
36.3
%
37.3
%
37.2
%
GAAP combined ratio
100.3
%
110.1
%
99.8
%
104.4
%
CAY ex-CAT combined ratio2
93.4
%
93.7
%
93.4
%
94.1
%
1 The Company’s calculations of these
expense ratios have been modified to reflect the Company’s updated
accounting practices impacting the classification of non-operating
expenses. The adjusted calculations have been applied to all
periods presented. For the three months ended September 30, 2020
and the nine months ended September 30, 2020, General and
Administrative Expense Ratio and the Expense Ratio decreased from
the previously reported ratios by 60 basis points and 40 basis
points, respectively, to reflect these updates.
2 The Company’s calculation of CAY ex-CAT
loss ratio has been modified to reflect the Company’s updated
definition of this ratio which no longer includes an adjustment for
reinstatement premiums. The adjusted calculation has been applied
to all periods presented. For the three months ended September 30,
2020 and the nine months ended September 30, 2020 CAY ex-CAT
combined ratio increased from the previously reported ratio by 50
basis points and 20 basis points, respectively, to reflect this
update.
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
SEGMENT DATA
(in millions)
(unaudited)
Three Months Ended
Nine months ended
September 30,
September 30,
2021
2020
2021
2020
U.S. Operations
Gross written premiums
$
562.5
$
542.4
$
1,564.9
$
1,499.1
Net written premiums
375.0
349.2
985.2
922.2
Earned premiums
323.5
298.7
952.4
902.8
Underwriting income
14.9
(5.0
)
51.1
46.9
Net investment income
29.2
30.1
91.7
56.1
Interest expense
(3.5
)
(4.0
)
(10.6
)
(13.1
)
Fee income (expense), net
(0.1
)
(0.1
)
(0.6
)
(0.5
)
Operating income before taxes
$
40.5
$
21.0
$
131.6
$
89.4
Loss ratio
63.0
%
68.8
%
61.2
%
62.7
%
Acquisition expense ratio
15.2
%
15.5
%
15.7
%
14.5
%
General and administrative expense
ratio1
17.2
%
17.4
%
17.7
%
17.6
%
Expense Ratio1
32.4
%
32.9
%
33.4
%
32.1
%
GAAP combined ratio
95.4
%
101.7
%
94.6
%
94.8
%
CAY ex-CAT combined ratio2
92.2
%
94.0
%
91.2
%
90.2
%
International
Operations
Gross written premiums
$
312.9
$
347.7
$
881.9
$
1,016.2
Net written premiums
208.5
184.6
512.5
447.9
Earned premiums
163.9
146.7
471.1
410.8
Underwriting income (loss)
(4.6
)
(23.2
)
(18.9
)
(69.6
)
Net investment income
12.3
9.9
38.2
19.0
Interest expense
(1.3
)
(1.9
)
(4.2
)
(6.2
)
Fee income (expense), net
1.0
0.7
1.5
2.5
Operating income (loss) before taxes
$
7.4
$
(14.5
)
$
16.6
$
(54.3
)
Loss ratio
63.3
%
77.1
%
63.9
%
74.4
%
Acquisition expense ratio
20.9
%
20.2
%
20.1
%
21.0
%
General and administrative expense
ratio3
18.6
%
18.5
%
20.0
%
21.5
%
Expense Ratio3
39.5
%
38.7
%
40.1
%
42.5
%
GAAP combined ratio
102.8
%
115.8
%
104.0
%
116.9
%
CAY ex-CAT combined ratio4
91.1
%
89.0
%
92.8
%
97.0
%
1 The Company’s calculations of these
expense ratios have been modified to reflect the Company’s updated
accounting practices impacting the classification of non-operating
expenses. The adjusted calculations have been applied to all
periods presented. For the three months ended September 30, 2020
and the nine months ended September 30, 2020, General and
Administrative Expense Ratio and the Expense Ratio decreased from
the previously reported ratios by 30 basis points and 10 basis
points, respectively, to reflect these updates.
2 For the three months ended September 30,
2020 and the nine months ended September 30, 2020 CAY ex-CAT loss
ratio increased from the previously reported ratio by 60 basis
points and 20 basis points, respectively, to reflect the update
described in footnote 2 to the Consolidated Financial Highlights
above.
3 The Company’s calculations of these
expense ratios have been modified to reflect the Company’s updated
accounting practices impacting the classification of non-operating
expenses. The adjusted calculations have been applied to all
periods presented. For the three months ended September 30, 2020
and the nine months ended September 30, 2020, General and
Administrative Expense Ratio and the Expense Ratio decreased from
the previously reported ratios by 20 basis points and 10 basis
points, respectively, to reflect these updates.
4 For the three months ended September 30,
2020 and the nine months ended September 30, 2020 CAY ex-CAT loss
ratio increased from the previously reported ratio by 30 basis
points and 30 basis points, respectively, to reflect the update
described in footnote 2 to the Consolidated Financial Highlights
above.
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
RECONCILIATION OF LOSS
RATIOS
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
U.S. Operations
Loss ratio
63.0
%
68.8
%
61.2
%
62.7
%
Prior accident year loss reserve
development
(0.1)
%
1.1
%
0.1
%
0.1
%
Catastrophe losses
(3.1)
%
(8.8)
%
(3.5)
%
(4.7)
%
CAY ex-CAT loss ratio
59.8
%
61.1
%
57.8
%
58.1
%
International
Operations
Loss ratio
63.3
%
77.1
%
63.9
%
74.4
%
Prior accident year loss reserve
development
(1.2)
%
3.8
%
—
%
1.1
%
Catastrophe losses
(10.5)
%
(30.6)
%
(11.2)
%
(21.0)
%
CAY ex-CAT loss ratio
51.6
%
50.3
%
52.7
%
54.5
%
Consolidated
Loss ratio
64.0
%
73.8
%
62.5
%
67.2
%
Prior accident year loss reserve
development
(1.3)
%
(0.4)
%
(0.4)
%
(0.5)
%
Catastrophe losses
(5.6)
%
(16.0)
%
(6.0)
%
(9.8)
%
CAY ex-CAT loss ratio
57.1
%
57.4
%
56.1
%
56.9
%
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
NET PRIOR-YEAR RESERVE
DEVELOPMENT & CATASTROPHE LOSSES BY SEGMENT
(in millions)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Net Prior-Year Reserve
Development
(Favorable)/Unfavorable
U.S. Operations
$
0.2
$
(3.2
)
$
(0.7
)
$
(0.5
)
International Operations
2.0
(5.6
)
0.1
(4.5
)
Run-off Lines
4.0
10.4
6.6
11.1
Total net prior-year reserve
development
$
6.2
$
1.6
$
6.0
$
6.1
Three Months Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Catastrophe & COVID-19
Losses
Catastrophe
losses
U.S. Operations
$
10.0
$
28.3
$
32.9
$
35.8
International Operations
14.3
26.0
41.0
31.9
Total catastrophe losses
24.3
54.3
73.9
67.7
COVID-19
losses
U.S. Operations
—
(2.0
)
—
6.5
International Operations
3.0
18.9
12.0
54.0
Total COVID-19 losses
3.0
16.9
12.0
60.5
Catastrophe &
COVID-19 losses
U.S. Operations
10.0
26.3
32.9
42.3
International Operations
17.3
44.9
53.0
85.9
Total catastrophe & COVID-19
losses
$
27.3
$
71.2
$
85.9
$
128.2
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
RECONCILIATION OF UNDERWRITING
INCOME (LOSS) TO NET INCOME (LOSS)
CONSOLIDATED
(in millions)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Net income (loss)
$
22.4
$
(23.1
)
$
122.0
$
(53.2
)
Add (deduct):
Income tax provision (benefit)
5.8
(3.4
)
16.1
6.9
Net investment income
(46.1
)
(42.0
)
(143.2
)
(79.0
)
Net realized investment (gains) losses
5.3
5.7
(32.5
)
24.0
Interest expense
5.5
6.9
16.3
21.7
Fee and other (income) expense, net
(1.1
)
(0.8
)
(1.8
)
(2.7
)
Foreign currency exchange (gains)
losses
(1.3
)
8.4
4.4
13.6
Non-operating expenses
8.2
3.0
20.9
9.8
Underwriting income (loss)
$
(1.3
)
$
(45.3
)
$
2.2
$
(58.9
)
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
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Net income (loss), as reported
$
22.4
$
(23.1
)
$
122.0
$
(53.2
)
Income tax provision (benefit)
5.8
(3.4
)
16.1
6.9
Net income (loss), before taxes
28.2
(26.5
)
138.1
(46.3
)
Add (deduct):
Net realized investment (gains) losses
5.3
5.7
(32.5
)
24.0
Foreign currency exchange (gains)
losses
(1.3
)
8.4
4.4
13.6
Non-operating expenses
8.2
3.0
20.9
9.8
Operating income before taxes and
preferred share dividends
40.4
(9.4
)
130.9
1.1
Income tax provision, at assumed rate
(1)
6.1
(1.4
)
19.6
0.2
Preferred share dividends
2.6
2.0
7.9
2.0
Operating income (loss)
$
31.7
$
(10.0
)
$
103.4
$
(1.1
)
Operating income (loss) per common share
(diluted)
$
0.91
$
(0.29
)
$
2.95
$
(0.03
)
Weighted average common shares,
diluted
35.0
34.7
35.1
34.6
(1) For the purpose of calculating
Operating Income, an assumed tax rate of 15% was used for all
periods presented.
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
RECONCILIATION OF PRE-TAX
OPERATING INCOME BY SEGMENT TO NET INCOME (LOSS)
(in millions)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Operating income (loss) before income
taxes:
U.S. Operations
$
40.5
$
21.0
$
131.6
$
89.4
International Operations
7.4
(14.5
)
16.6
(54.3
)
Run-off Lines
(3.6
)
(10.2
)
(4.5
)
(11.0
)
Corporate and Other
(3.9
)
(5.7
)
(12.8
)
(23.0
)
Total operating income (loss) before
income taxes
40.4
(9.4
)
130.9
1.1
Net realized investment gains (losses)
(5.3
)
(5.7
)
32.5
(24.0
)
Foreign currency exchange (losses)
gains
1.3
(8.4
)
(4.4
)
(13.6
)
Non-operating expenses
(8.2
)
(3.0
)
(20.9
)
(9.8
)
Income (loss) before income taxes
28.2
(26.5
)
138.1
(46.3
)
Income tax provision (benefit)
5.8
(3.4
)
16.1
6.9
Net income (loss)
$
22.4
$
(23.1
)
$
122.0
$
(53.2
)
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
PREMIUMS BY SEGMENT AND LINE
OF BUSINESS
(in millions)
(unaudited)
U.S. Operations
Three months ended September
30, 2021
Three months ended September
30, 2020
Gross
Written
Net
Written
Net
Earned
Gross
Written
Net
Written
Net
Earned
Property
$
73.5
$
54.2
$
35.7
$
90.8
$
62.3
$
36.6
Liability
306.3
192.4
170.1
291.6
183.7
165.2
Professional
129.8
89.4
81.3
111.7
71.9
63.3
Specialty
52.9
39.0
36.4
48.3
31.3
33.6
Total
$
562.5
$
375.0
$
323.5
$
542.4
$
349.2
$
298.7
Nine months ended September
30, 2021
Nine months ended September
30, 2020
Gross
Written
Net
Written
Net
Earned
Gross
Written
Net
Written
Net
Earned
Property
$
203.2
$
108.6
$
116.5
$
237.5
$
124.5
$
117.3
Liability
837.8
514.7
501.2
804.4
505.8
507.4
Professional
362.0
242.7
227.7
312.7
193.8
177.4
Specialty
161.9
119.2
107.0
144.5
98.1
100.7
Total
$
1,564.9
$
985.2
$
952.4
$
1,499.1
$
922.2
$
902.8
International Operations
Three months ended September
30, 2021
Three months ended September
30, 2020
Gross
Written
Net
Written
Net
Earned
Gross
Written
Net
Written
Net
Earned
Property
$
87.3
$
45.0
$
28.3
$
161.0
$
66.2
$
44.3
Liability
69.2
38.8
33.5
73.4
32.6
26.7
Professional
62.5
52.4
43.8
49.7
37.7
29.9
Specialty
93.9
72.3
58.3
63.6
48.1
45.8
Total
$
312.9
$
208.5
$
163.9
$
347.7
$
184.6
$
146.7
Nine months ended September
30, 2021
Nine months ended September
30, 2020
Gross
Written
Net
Written
Net
Earned
Gross
Written
Net
Written
Net
Earned
Property
$
247.8
$
93.5
$
104.2
$
416.5
$
128.9
$
115.6
Liability
192.0
107.8
99.2
185.8
81.7
73.0
Professional
168.7
120.0
113.3
156.7
88.0
88.0
Specialty
273.4
191.2
154.4
257.2
149.3
134.2
Total
$
881.9
$
512.5
$
471.1
$
1,016.2
$
447.9
$
410.8
Consolidated
Three months ended September
30, 2021
Three months ended September
30, 2020
Gross Written
Net
Written
Net
Earned
Gross Written
Net
Written
Net
Earned
Property
$
160.8
$
99.2
$
64.0
$
251.8
$
128.5
$
80.9
Liability
375.7
231.4
203.7
365.1
216.4
192.0
Professional
192.3
141.8
125.1
161.4
109.6
93.2
Specialty
146.8
111.3
94.7
111.9
79.4
79.4
Total
$
875.6
$
583.7
$
487.5
$
890.2
$
533.9
$
445.5
Nine months ended September
30, 2021
Nine months ended September
30, 2020
Gross
Written
Net
Written
Net
Earned
Gross
Written
Net
Written
Net
Earned
Property
$
451.0
$
202.1
$
220.7
$
654.0
$
253.4
$
232.9
Liability
1,030.4
623.1
600.8
990.6
587.9
580.7
Professional
530.7
362.7
341.0
469.4
281.8
265.4
Specialty
435.3
310.4
261.4
401.7
247.4
234.9
Total
$
2,447.4
$
1,498.3
$
1,423.9
$
2,515.7
$
1,370.5
$
1,313.9
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
COMPONENTS OF NET INVESTMENT
INCOME & NET REALIZED INVESTMENT GAINS (LOSSES)
CONSOLIDATED
(in millions)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Net Investment Income
Net investment income, excluding
alternative investments
$
21.9
$
22.7
$
68.4
$
80.6
Alternative investments
24.2
19.3
74.8
(1.6
)
Total net investment income
$
46.1
$
42.0
$
143.2
$
79.0
Three Months Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Net Realized Investment Gains
(Losses)
Net realized investment (losses) gains
$
0.6
$
(5.7
)
$
14.8
$
0.9
Change in fair value of equity
securities
(5.1
)
10.5
30.7
(13.7
)
Credit losses on fixed maturity
securities
(0.8
)
(10.5
)
(1.5
)
(43.0
)
Gain (loss) on sale of Trident assets
—
—
(11.5
)
31.8
Total net realized investments gains
(losses)
$
(5.3
)
$
(5.7
)
$
32.5
$
(24.0
)
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
COMPONENTS OF INVESTMENT
PORTFOLIO
CONSOLIDATED
(in millions)
(unaudited)
September 30,
December 31,
2021
2020
U.S. Governments and government
agencies
$
410.1
$
399.8
States and political subdivisions
175.8
170.4
Foreign governments
229.1
294.8
Corporate – Financial
926.3
917.8
Corporate – Industrial
901.6
826.6
Corporate – Utilities
195.0
237.4
Asset-backed securities
112.8
122.8
Collateralized loan obligations
343.4
289.6
Mortgage-backed securities – Agency
463.4
453.4
Mortgage-backed securities –
Commercial
409.2
339.7
Mortgage-backed securities –
Residential
30.6
54.8
Total fixed maturities
4,197.3
4,107.1
Common stocks
181.2
175.1
Preferred stocks
0.6
1.6
Total equity securities available for
sale
181.8
176.7
Private equity
254.3
211.4
Hedge fund
102.1
111.2
Overseas deposits
64.6
102.1
Other
4.8
4.7
Total other investments
425.8
429.4
Short term investments and cash
equivalents
508.6
542.6
Cash
177.0
148.8
Total cash and invested assets
$
5,490.5
$
5,404.6
September 30,
December 31,
2021
2020
U.S. Governments and government
agencies
$
873.5
$
853.2
AAA
818.9
899.1
AA
391.7
382.0
A
885.9
869.9
BBB
832.8
739.4
BB
188.9
209.5
B
82.6
77.9
Lower than B
22.0
24.8
Not rated
101.0
51.3
Total fixed maturities
$
4,197.3
$
4,107.1
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
SHAREHOLDER RETURN
ANALYSIS
(in millions, except per share
data)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Net income (loss) attributable to common
shareholders
$
19.8
$
(25.1
)
$
114.1
$
(55.2
)
Operating income (loss) (1)
31.7
(10.0
)
103.4
(1.1
)
Common Shareholders' Equity - Beginning of
period
$
1,753.9
$
1,707.7
$
1,713.8
$
1,763.7
Common Shareholders' Equity - End of
period
1,743.6
1,704.7
1,743.6
1,704.7
Average Common Shareholders' Equity
$
1,748.8
$
1,706.2
$
1,728.7
$
1,734.2
Common shares outstanding - End of
period
34.863
34.670
34.863
34.670
Book value per common share
$
50.01
$
49.17
$
50.01
$
49.17
Cash dividends paid per common share
during 2021
0.31
0.93
Book value per common share, June 30, 2021
- including cash dividends paid
$
50.32
$
50.94
Book value per common share, prior period
(2)
$
50.34
$
49.40
Change in book value per common share
during 2021
(0.6
)%
1.2
%
Change in book value per common share
including cash dividends paid, during 2021 (2)
—
%
3.1
%
Annualized return on average common
shareholders' equity
4.5
%
(5.9
)%
8.8
%
(4.2
)%
Annualized operating return on average
common shareholders' equity
7.3
%
(2.3
)%
8.0
%
(0.1
)%
(1)
For the purpose of calculating
Operating Income, an assumed tax rate of 15% was used for all
periods presented.
(2)
The percentage change in book
value per common share is calculated by including cash dividends of
$0.31 per common share and $0.93 per common share paid to
shareholders during the three and nine months ended September 30,
2021, respectively. This adjusted amount (Book value per common
share, including dividends) is then compared to the book value per
common share as of June 30, 2021 and December 31, 2020,
respectively, to determine the change for the three and nine months
ended September 30, 2021.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211102006407/en/
Gregory Charpentier AVP, Investor Relations and Corporate
Finance 978.387.4150 gregory.charpentier@argogroupus.com
David Snowden Senior Vice President, Communications 210.321.2104
david.snowden@argogroupus.com
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