Focused On Optimizing Business For
Profitable Growth
- Pending merger with Brookfield Reinsurance: The parties
have received a majority of the required regulatory approvals. The
merger agreement outside date for completing the transaction has
been automatically extended from today to February 8, 2024,
pursuant to the terms of the merger agreement, as all conditions to
closing are satisfied other than receipt of the remaining required
regulatory approvals. Both companies remain committed to closing
the transaction as expeditiously as possible, and expect the
transaction to close in 2023, subject to receipt of the remaining
required regulatory approvals.
Argo Group International Holdings, Ltd. (NYSE: ARGO) ("Argo" or
the "company") today announced financial results for the three and
nine months ended September 30, 2023.
($ in millions, except per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
Net loss attributable to common
shareholders
$
(49.5
)
$
(51.4
)
$
(86.4
)
$
(73.9
)
Per diluted common share
$
(1.41
)
$
(1.47
)
$
(2.46
)
$
(2.11
)
Operating (loss) income earnings
$
(21.1
)
$
15.5
$
(32.7
)
$
89.8
Per diluted common share
$
(0.60
)
$
0.44
$
(0.93
)
$
2.57
Annualized return on average common
shareholders' equity
(18.7
)%
(16.5
)%
(10.9
)%
(7.1
)%
Annualized operating return on average
common shareholders' equity
(8.0
)%
5.0
%
(4.1
)%
8.6
%
"We were pleased to receive a majority of the required
regulatory approvals for the merger with Brookfield Reinsurance,"
said Argo Executive Chairman and Chief Executive Officer, Thomas A.
Bradley. "As we wait to receive the remaining required regulatory
approvals, we continue to work diligently with Brookfield
Reinsurance on integration planning and anticipate an orderly
transition for our customers and business partners once the
transaction is completed.
"Argo's third quarter performance benefited from disciplined
expense management and increased investment returns. We are
encouraged by the progress of our ongoing efforts to optimize the
business to deliver improved profitability moving forward and
believe the company is well positioned to capitalize on its
enhanced future growth prospects as part of Brookfield
Reinsurance."
Consolidated Highlights
($ in millions)
Three Months Ended
September 30,
Q/Q
Nine Months Ended
September 30,
Y/Y
2023
2022
Change
2023
2022
Change
Gross written premiums
$
528.3
$
750.9
-29.6
%
$
1,686.9
$
2,203.6
-23.4
%
Net written premiums
348.0
505.2
-31.1
%
1,032.8
1,414.8
-27.0
%
Net earned premiums
$
342.7
$
455.0
-24.7
%
$
1,062.5
$
1,389.9
-23.6
%
Loss and loss adjustment expenses
280.9
298.8
-6.0
%
806.9
858.4
-6.0
%
Acquisition expenses
52.4
77.2
-32.1
%
165.3
237.6
-30.4
%
General and administrative expenses
63.7
83.8
-24.0
%
198.7
257.3
-22.8
%
Underwriting income (loss)
$
(54.3
)
$
(4.8
)
NM
$
(108.4
)
$
36.6
NM
Net investment income
$
40.4
$
34.0
18.8
%
$
102.9
$
100.9
2.0
%
Loss ratio
82.0
%
65.7
%
16.3 pts
75.9
%
61.8
%
14.1 pts
Acquisition expense ratio
15.3
%
17.0
%
-1.7 pts
15.6
%
17.1
%
-1.5 pts
General and administrative expense
ratio
18.5
%
18.4
%
0.1 pts
18.7
%
18.5
%
0.2 pts
Expense ratio
33.8
%
35.4
%
-1.6 pts
34.3
%
35.6
%
-1.3 pts
Combined ratio
115.8
%
101.1
%
14.7 pts
110.2
%
97.4
%
12.8 pts
CAY ex-CAT loss ratio
59.9
%
58.0
%
1.9 pts
61.0
%
57.0
%
4.0 pts
Third Quarter 2023 Results - Consolidated
(All comparisons vs. third quarter 2022, unless noted
otherwise)
On February 3, 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 $528.3 million decreased $222.6
million, or 29.6%, primarily due to businesses the company has sold
and exited.
- Gross written premiums within the company’s ongoing business1
decreased approximately 9.1% from the prior year third quarter,
primarily due to proactive actions taken in certain lines to
prioritize improving profitability, partially offset by growth in
several other businesses.
Earned premiums of $342.7 million decreased $112.3 million, or
24.7%.
- Earned premiums increased approximately 0.5% within the
company’s ongoing business reflecting business mix shift towards
lines of business where the company retains more risk.
_________________________________
1 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 115.8% increased 14.7 percentage points,
driven by a higher loss ratio.
The loss ratio of 82.0% increased 16.3 percentage points,
compared to 65.7% for the prior year third quarter.
- The current accident year, excluding catastrophes ("CAY
ex-CAT") loss ratio of 59.9% increased 1.9 percentage points.
- Total catastrophe losses were $24.7 million or 7.2 percentage
points on the loss ratio. In comparison, catastrophe losses in the
prior year third quarter were $23.4 million or 5.1 percentage
points on the loss ratio.
- Net adverse prior year reserve development was $51.0 million,
or 14.9 percentage points on the loss ratio. In comparison, net
adverse prior year reserve development in the third quarter 2022
was $11.9 million, or 2.6 percentage points on the loss ratio.
The CAY ex-CAT combined ratio of 93.7% increased 0.3 percentage
points from the prior year third quarter.
Expenses
The expense ratio of 33.8% improved 1.6 percentage points. This
improvement was driven by the change in business mix resulting from
the sale of Argo Underwriting Agency Limited and its Lloyd's
Syndicate 1200.
Investment Income
Net investment income of $40.4 million increased by $6.4 million
or 18.8% from the prior year third quarter. The increase was driven
by higher interest rates and improved returns on alternative
investments. The company continues to hold a high quality,
relatively short duration portfolio with an average credit quality
of AA- and an average duration of 2.2 years including cash and cash
equivalents.
Earnings
Net loss attributable to common shareholders was $49.5 million,
or $1.41 per diluted share, for the third quarter 2023, compared to
a net loss attributable to common shareholders of $51.4 million, or
$1.47 per diluted share for the third quarter 2022. The annualized
return on average common shareholders' equity was (18.7%), compared
to (16.5%) in the prior year third quarter.
- The net loss attributable to common shareholders in the third
quarter 2023 included pre-tax net realized investment and other
losses of $4.7 million, compared to $44.7 million of pre-tax net
realized investment and other losses in the prior year third
quarter.
- The net loss attributable to common shareholders in the third
quarter 2023 included $5.1 million of non-operating expenses, which
were mainly attributable to non-operating legal fees for the
company's pending merger with Brookfield Reinsurance. In
comparison, the prior year third quarter reported $11.0 million in
non-operating expenses which were primarily driven by non-operating
legal and advisory fees.
- In addition, the effective tax rate, calculated as the income
tax provision divided by income before taxes, was (60.1%), compared
to 7.6% in the prior year quarter. The effective tax rate in the
third quarter 2023 reflects tax exposure related to the company's
sharing of risk across its U.S. and Bermuda operations. Excluding
this tax exposure, the effective tax rate for the third quarter
2023 was more aligned with statutory tax rates.
Operating loss for the third quarter 2023 was $21.1 million or
$0.60 per diluted common share, compared to operating earnings of
$15.5 million or $0.44 per diluted common share. The annualized
operating return on average common shareholders' equity was (8.0%),
compared to 5.0% in the third quarter 2022.
Shareholders' Equity
Book value per common share was $29.18 as of September 30, 2023,
a decrease of 6.1% from $31.06 at year-end 2022.
U.S. Operations Highlights
($ in millions)
Three Months Ended
September 30,
Q/Q
Nine Months Ended
September 30,
Y/Y
2023
2022
Change
2023
2022
Change
Gross written premiums
$
462.9
$
500.4
-7.5
%
$
1,356.2
$
1,476.7
-8.2
%
Net written premiums
319.3
354.0
-9.8
%
905.5
998.8
-9.3
%
Earned premiums
$
314.1
$
329.3
-4.6
%
$
950.9
$
998.5
-4.8
%
Loss and loss adjustment expenses
246.9
217.0
13.8
%
716.0
625.7
14.4
%
Acquisition expenses
56.2
55.8
0.7
%
167.1
164.7
1.5
%
General and administrative expenses
48.4
47.2
2.5
%
151.5
148.1
2.3
%
Underwriting income (loss)
$
(37.4
)
$
9.3
NM
$
(83.7
)
$
60.0
NM
Loss ratio
78.6
%
65.9
%
12.7 pts
75.3
%
62.7
%
12.6 pts
Acquisition expense ratio
17.9
%
16.9
%
1.0 pts
17.6
%
16.5
%
1.1 pts
General and administrative expense
ratio
15.4
%
14.4
%
1.0 pts
15.9
%
14.8
%
1.1 pts
Expense ratio
33.3
%
31.3
%
2.0 pts
33.5
%
31.3
%
2.2 pts
Combined ratio
111.9
%
97.2
%
14.7 pts
108.8
%
94.0
%
14.8 pts
CAY ex-CAT loss ratio
59.3
%
59.7
%
-0.4 pts
61.5
%
59.0
%
2.5 pts
Third Quarter 2023 Results - U.S. Operations
(All comparisons vs. third quarter 2022, unless noted
otherwise)
Premiums
U.S. Operations gross written premiums of $462.9 million
decreased $37.5 million, or 7.5%, primarily due to proactive
actions taken in certain lines to prioritize improving
profitability, partially offset by growth in several other
businesses.
- 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.
Earned premiums of $314.1 million decreased $15.2 million, or
4.6%. Within the company’s U.S. ongoing business2 earned premiums
decreased approximately 1.4%.
Underwriting
The loss ratio of 78.6% increased 12.7 percentage points,
compared to the prior year third quarter.
- The CAY ex-CAT loss ratio of 59.3% improved 0.4 percentage
points, compared to 59.7% in the prior year third quarter.
- Catastrophe losses were $14.0 million, or 4.5 percentage points
on the loss ratio, compared to $4.2 million or 1.3 percentage
points on the loss ratio in the prior year third quarter.
Catastrophe losses in the third quarter 2023 were mainly due to
Tropical Storm Ophelia, Hurricane Idalia, and other U.S.
storms.
- Net adverse prior year reserve development was $46.6 million or
14.8 percentage points on the loss ratio. In comparison, net
adverse development in the prior year third quarter was $16.2
million, or 4.9 percentage points on the loss ratio. The adverse
development in the third quarter 2023 was primarily attributable to
businesses the company has exited and unfavorable loss experience
in professional lines.
Expenses
The expense ratio was 33.3%, an increase of 2.0 percentage
points mainly due to the decrease in earned premiums.
_________________________________
2 U.S. ongoing business excludes the
following businesses the company has sold, including sales of
Contract Binding P&C in October 2021 and U.S. Specialty
Property in December 2021, and the exits of our grocery and retail
business and certain program business.
International Operations Highlights
($ in millions)
Three Months Ended
September 30,
Q/Q
Nine Months Ended
September 30,
Y/Y
2023
2022
Change
2023
2022
Change
Gross written premiums
$
65.3
$
250.1
-73.9
%
$
330.6
$
726.3
-54.5
%
Net written premiums
28.6
150.7
-81.0
%
127.2
415.3
-69.4
%
Earned premiums
$
28.5
$
125.2
-77.2
%
$
111.4
$
390.7
-71.5
%
Loss and loss adjustment expenses
33.1
81.7
-59.5
%
88.3
229.8
-61.6
%
Acquisition expenses
(3.9
)
21.2
-118.4
%
(2.0
)
71.9
-102.8
%
General and administrative expenses
6.6
25.8
-74.4
%
27.1
83.4
-67.5
%
Underwriting income (loss)
$
(7.3
)
$
(3.5
)
-108.6
%
$
(2.0
)
$
5.6
-135.7
%
Loss ratio
116.1
%
65.3
%
50.8 pts
79.3
%
58.8
%
20.5 pts
Acquisition expense ratio
-13.7
%
16.9
%
-30.6 pts
-1.8
%
18.4
%
-20.2 pts
General and administrative expense
ratio
23.2
%
20.6
%
2.6 pts
24.3
%
21.4
%
2.9 pts
Expense Ratio
9.5
%
37.5
%
-28.0 pts
22.5
%
39.8
%
-17.3 pts
Combined ratio
125.6
%
102.8
%
22.8 pts
101.8
%
98.6
%
3.2 pts
CAY ex-CAT loss ratio
66.3
%
53.5
%
12.8 pts
58.7
%
52.1
%
6.6 pts
Third Quarter 2023 Results - International Operations
(All comparisons vs. third quarter 2022, unless noted
otherwise)
Premiums
Gross written premiums of $65.3 million decreased $184.8
million, or 73.9% from $250.1 million, and earned premiums of $28.5
million decreased $96.7 million, or 77.2% from $125.2 million. The
reduction of premiums was primarily due to businesses the company
has sold.
Underwriting
The loss ratio of 116.1% increased 50.8 percentage points,
compared to 65.3% in the prior year third quarter.
- The CAY ex-CAT loss ratio was 66.3%, an increase of 12.8
percentage points. The third quarter 2023 reflects a different mix
of business from 2022 due to businesses the company has sold and
exited.
- Catastrophe losses were $10.7 million, or 37.5 percentage
points on the loss ratio, compared to $19.2 million or 15.3
percentage points on the loss ratio in the prior year third
quarter. Catastrophe losses in the third quarter 2023 were mainly
due to Hawaii wildfires, Hurricane Idalia, Tropical Storm Ophelia,
and other U.S. storms.
- Net adverse prior year reserve development was $3.5 million,
which increased the loss ratio by 12.3 percentage points. In
comparison, the prior year third quarter had $4.4 million of net
favorable prior year reserve development, which lowered the loss
ratio 3.5 percentage points. The net adverse development in the
third quarter 2023 was primarily attributable to a reassessment of
potential claims exposure in professional and casualty lines within
the company's Bermuda operation.
Expenses
The expense ratio of 9.5% improved 28.0 percentage points due
mainly to the reduction in the acquisition expense ratio and the
change in business mix resulting from the sale of 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 Part I, Item 1A,
“Risk Factors” in Argo’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2022, Part II, Item 1A, “Risk Factors” in
Argo’s Quarterly Report on Form 10-Q for the period ended June 30,
2023 and Argo’s 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 (loss)
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)
September 30,
December 31,
2023
2022
(unaudited)
Assets
Total investments
$
4,257.7
$
3,651.9
Cash
64.2
50.2
Accrued investment income
20.1
18.6
Receivables
3,159.3
3,321.1
Goodwill and intangible assets
118.6
118.6
Deferred acquisition costs, net
108.5
107.0
Ceded unearned premiums
337.4
375.5
Other assets
373.7
325.3
Assets held-for-sale
—
2,066.2
Total assets
$
8,439.5
$
10,034.4
Liabilities and Shareholders'
Equity
Reserves for losses and loss adjustment
expenses
$
5,328.7
$
5,051.6
Unearned premiums
987.6
1,039.9
Ceded reinsurance payable, net
180.6
158.7
Senior unsecured fixed rate notes
140.6
140.5
Junior subordinated debentures
258.8
258.6
Other liabilities
371.9
237.7
Liabilities held-for-sale
—
1,914.5
Total liabilities
7,268.2
8,801.5
Preferred shares
144.0
144.0
Common shares
46.5
46.4
Additional paid-in capital
1,396.1
1,395.4
Treasury shares
(455.1
)
(455.1
)
Retained earnings
321.1
407.3
Accumulated other comprehensive income,
net of taxes
(281.3
)
(305.1
)
Total shareholders' equity
1,171.3
1,232.9
Total liabilities and shareholders'
equity
$
8,439.5
$
10,034.4
Book value per common share
$
29.18
$
31.06
Tangible book value per common share
$
25.81
$
27.67
Book value per common share excluding
AOCI, net of tax
$
37.17
$
39.76
Tangible book value per common share
excluding AOCI, net of tax
$
33.80
$
36.38
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,
2023
2022
2023
2022
Gross written premiums
$
528.3
$
750.9
$
1,686.9
$
2,203.6
Net written premiums
348.0
505.2
1,032.8
1,414.8
Net earned premiums
342.7
455.0
1,062.5
1,389.9
Net investment income
40.4
34.0
102.9
100.9
Net investment and other gains
(losses):
Net realized investment and other gains
(losses)
7.4
(42.3
)
(21.0
)
(119.2
)
Change in fair value recognized
(10.1
)
(1.1
)
2.1
2.5
Change in allowance for credit losses on
fixed maturity securities
(2.0
)
(1.3
)
(2.1
)
(2.9
)
Net realized investment and other gains
(losses)
(4.7
)
(44.7
)
(21.0
)
(119.6
)
Total revenue
378.4
444.3
1,144.4
1,371.2
Losses and loss adjustment expenses
280.9
298.8
806.9
858.4
Acquisition expenses
52.4
77.2
165.3
237.6
General and administrative expenses
63.7
83.8
198.7
257.3
Non-operating expenses
5.1
11.0
23.5
33.9
Interest expense
8.7
6.8
25.4
18.7
Fee and other (income) expense, net
0.2
0.1
(0.3
)
(1.8
)
Foreign currency exchange (gains)
losses
(3.3
)
(9.1
)
0.1
(16.5
)
Impairment of goodwill
—
28.5
—
28.5
Total expenses
407.7
497.1
1,219.6
1,416.1
Income (loss) before income taxes
(29.3
)
(52.8
)
(75.2
)
(44.9
)
Income tax provision (benefit)
17.6
(4.0
)
3.3
21.1
Net income (loss)
$
(46.9
)
$
(48.8
)
$
(78.5
)
$
(66.0
)
Dividends on preferred shares
2.6
2.6
7.9
7.9
Net loss attributable to common
shareholders
$
(49.5
)
$
(51.4
)
$
(86.4
)
$
(73.9
)
Net income (loss) per common share
(basic)
$
(1.41
)
$
(1.47
)
$
(2.46
)
$
(2.11
)
Net income (loss) per common share
(diluted)
$
(1.41
)
$
(1.47
)
$
(2.46
)
$
(2.11
)
Weighted average common shares:
Basic
35.2
35.0
35.2
35.0
Diluted
35.2
35.0
35.2
35.0
Loss ratio
82.0
%
65.7
%
75.9
%
61.8
%
Acquisition expense ratio
15.3
%
17.0
%
15.6
%
17.1
%
General and administrative expense
ratio
18.5
%
18.4
%
18.7
%
18.5
%
Expense ratio
33.8
%
35.4
%
34.3
%
35.6
%
GAAP combined ratio
115.8
%
101.1
%
110.2
%
97.4
%
CAY ex-CAT combined ratio
93.7
%
93.4
%
95.3
%
92.6
%
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
SEGMENT DATA
(in millions)
(unaudited)
Three Months Ended
Nine months ended
September 30,
September 30,
2023
2022
2023
2022
U.S. Operations
Gross written premiums
$
462.9
$
500.4
$
1,356.2
$
1,476.7
Net written premiums
319.3
354.0
905.5
998.8
Earned premiums
314.1
329.3
950.9
998.5
Underwriting income
(37.4
)
9.3
(83.7
)
60.0
Net investment income
33.2
23.1
84.7
68.7
Interest expense
(7.2
)
(4.7
)
(20.9
)
(12.8
)
Fee (expense), net
(0.2
)
0.1
0.1
—
Operating (loss) income before taxes
$
(11.6
)
$
27.8
$
(19.8
)
$
115.9
Loss ratio
78.6
%
65.9
%
75.3
%
62.7
%
Acquisition expense ratio
17.9
%
16.9
%
17.6
%
16.5
%
General and administrative expense
ratio
15.4
%
14.4
%
15.9
%
14.8
%
Expense Ratio
33.3
%
31.3
%
33.5
%
31.3
%
GAAP combined ratio
111.9
%
97.2
%
108.8
%
94.0
%
CAY ex-CAT combined ratio
92.6
%
91.0
%
95.0
%
90.3
%
International
Operations
Gross written premiums
$
65.3
$
250.1
$
330.6
$
726.3
Net written premiums
28.6
150.7
127.2
415.3
Earned premiums
28.5
125.2
111.4
390.7
Underwriting income (loss)
(7.3
)
(3.5
)
(2.0
)
5.6
Net investment income
6.2
10.3
15.8
30.4
Interest expense
(1.3
)
(2.1
)
(3.9
)
(5.7
)
Fee income, net
—
(0.2
)
0.2
1.8
Operating income before taxes
$
(2.4
)
$
4.5
$
10.1
$
32.1
Loss ratio
116.1
%
65.3
%
79.3
%
58.8
%
Acquisition expense ratio
(13.7
)%
16.9
%
(1.8
)%
18.4
%
General and administrative expense
ratio
23.2
%
20.6
%
24.3
%
21.4
%
Expense Ratio
9.5
%
37.5
%
22.5
%
39.8
%
GAAP combined ratio
125.6
%
102.8
%
101.8
%
98.6
%
CAY ex-CAT combined ratio
75.8
%
91.0
%
81.2
%
91.9
%
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
RECONCILIATION OF LOSS
RATIOS
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
U.S. Operations
Loss ratio
78.6
%
65.9
%
75.3
%
62.7
%
Prior accident year loss reserve
development
(14.8
)%
(4.9
)%
(11.7
)%
(2.8
)%
Catastrophe losses
(4.5
)%
(1.3
)%
(2.1
)%
(0.9
)%
CAY ex-CAT loss ratio
59.3
%
59.7
%
61.5
%
59.0
%
International
Operations
Loss ratio
116.1
%
65.3
%
79.3
%
58.8
%
Prior accident year loss reserve
development
(12.3
)%
3.5
%
(10.5
)%
(0.2
)%
Catastrophe losses
(37.5
)%
(15.3
)%
(10.1
)%
(6.5
)%
CAY ex-CAT loss ratio
66.3
%
53.5
%
58.7
%
52.1
%
Consolidated
Loss ratio
82.0
%
65.7
%
75.9
%
61.8
%
Prior accident year loss reserve
development
(14.9
)%
(2.6
)%
(11.9
)%
(2.3
)%
Catastrophe losses
(7.2
)%
(5.1
)%
(3.0
)%
(2.5
)%
CAY ex-CAT loss ratio
59.9
%
58.0
%
61.0
%
57.0
%
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,
2023
2022
2023
2022
Net Prior-Year Reserve
Development
(Favorable)/Unfavorable
U.S. Operations
$
46.6
$
16.2
$
111.7
$
27.9
International Operations
3.5
(4.4
)
11.7
0.8
Run-off Lines
0.9
0.1
2.6
2.9
Total net prior-year reserve
development
$
51.0
$
11.9
$
126.0
$
31.6
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Catastrophe Losses
Catastrophe
losses
U.S. Operations
$
14.0
$
4.2
$
20.2
$
9.2
International Operations
10.7
19.2
11.2
25.4
Total catastrophe losses
24.7
23.4
31.4
34.6
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,
2023
2022
2023
2022
Net income (loss)
$
(46.9
)
$
(48.8
)
$
(78.5
)
$
(66.0
)
Add (deduct):
Income tax provision (benefit)
17.6
(4.0
)
3.3
21.1
Net investment income
(40.4
)
(34.0
)
(102.9
)
(100.9
)
Net realized investment and other (gains)
losses
4.7
44.7
21.0
119.6
Interest expense
8.7
6.8
25.4
18.7
Fee and other (income) expense, net
0.2
0.1
(0.3
)
(1.8
)
Foreign currency exchange (gains)
losses
(3.3
)
(9.1
)
0.1
(16.5
)
Non-operating expenses
5.1
11.0
23.5
33.9
Impairment of goodwill
—
28.5
—
28.5
Underwriting income (loss)
$
(54.3
)
$
(4.8
)
$
(108.4
)
$
36.6
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,
2023
2022
2023
2022
Net income (loss), as reported
$
(46.9
)
$
(48.8
)
$
(78.5
)
$
(66.0
)
Income tax provision (benefit)
17.6
(4.0
)
3.3
21.1
Net income (loss), before taxes
(29.3
)
(52.8
)
(75.2
)
(44.9
)
Add (deduct):
Net realized investment and other (gains)
losses
4.7
44.7
21.0
119.6
Foreign currency exchange (gains)
losses
(3.3
)
(9.1
)
0.1
(16.5
)
Non-operating expenses
5.1
11.0
23.5
33.9
Impairment of goodwill
—
28.5
—
28.5
Operating income (loss) before taxes and
preferred share dividends
(22.8
)
22.3
(30.6
)
120.6
Income tax provision (benefit), at assumed
rate (1)
(4.3
)
4.2
(5.8
)
22.9
Preferred share dividends
2.6
2.6
7.9
7.9
Operating (loss) income
$
(21.1
)
$
15.5
$
(32.7
)
$
89.8
Operating (loss) income per common share
(diluted)
$
(0.60
)
$
0.44
$
(0.93
)
$
2.57
Weighted average common shares,
diluted
35.2
35.0
35.2
35.0
(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
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Operating income (loss) before income
taxes:
U.S. Operations
$
(11.6
)
$
27.8
$
(19.8
)
$
115.9
International Operations
(2.4
)
4.5
10.1
32.1
Run-off Lines
(0.1
)
0.7
(1.1
)
(1.9
)
Corporate and Other
(8.7
)
(10.7
)
(19.8
)
(25.5
)
Total operating income (loss) before
income taxes
(22.8
)
22.3
(30.6
)
120.6
Net realized investment and other gains
(losses)
(4.7
)
(44.7
)
(21.0
)
(119.6
)
Foreign currency exchange (losses)
gains
3.3
9.1
(0.1
)
16.5
Non-operating expenses
(5.1
)
(11.0
)
(23.5
)
(33.9
)
Impairment of goodwill
—
(28.5
)
—
(28.5
)
Income (loss) before income taxes
(29.3
)
(52.8
)
(75.2
)
(44.9
)
Income tax provision (benefit)
17.6
(4.0
)
3.3
21.1
Net income (loss)
$
(46.9
)
$
(48.8
)
$
(78.5
)
$
(66.0
)
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
PREMIUMS BY SEGMENT AND LINE
OF BUSINESS
(in millions)
U.S. Operations
Three months ended September
30, 2023
Three months ended September
30, 2022
Gross
Written
Net
Written
Net
Earned
Gross
Written
Net
Written
Net
Earned
Property
$
58.8
$
38.5
$
36.9
$
57.6
$
43.4
$
33.5
Liability
285.4
199.3
171.5
288.1
196.1
178.0
Professional
77.2
57.7
62.8
97.7
72.1
74.8
Specialty
41.5
23.8
42.9
57.0
42.4
43.0
Total
$
462.9
$
319.3
$
314.1
$
500.4
$
354.0
$
329.3
Nine months ended September
30, 2023
Nine months ended September
30, 2022
Gross
Written
Net
Written
Net
Earned
Gross
Written
Net
Written
Net
Earned
Property
$
180.5
$
106.9
$
110.5
$
159.5
$
110.0
$
113.1
Liability
778.2
517.0
514.9
833.2
537.6
520.1
Professional
230.9
170.3
196.4
308.7
218.2
239.3
Specialty
166.6
111.3
129.1
175.3
133.0
126.0
Total
$
1,356.2
$
905.5
$
950.9
$
1,476.7
$
998.8
$
998.5
International Operations
Three months ended September
30, 2023
Three months ended September
30, 2022
Gross
Written
Net
Written
Net
Earned
Gross
Written
Net
Written
Net
Earned
Property
$
21.4
$
13.9
$
13.5
$
56.1
$
13.4
$
11.8
Liability
28.9
6.8
5.5
63.6
36.0
30.4
Professional
12.0
4.9
5.2
54.7
44.7
35.5
Specialty
3.0
3.0
4.3
75.7
56.6
47.5
Total
$
65.3
$
28.6
$
28.5
$
250.1
$
150.7
$
125.2
Nine months ended September
30, 2023
Nine months ended September
30, 2022
Gross
Written
Net
Written
Net
Earned
Gross
Written
Net
Written
Net
Earned
Property
$
114.8
$
42.0
$
28.0
$
169.1
$
45.0
$
60.0
Liability
86.7
24.8
27.4
170.9
102.0
95.1
Professional
59.1
20.9
29.0
157.2
103.9
97.7
Specialty
70.0
39.5
27.0
229.1
164.4
137.9
Total
$
330.6
$
127.2
$
111.4
$
726.3
$
415.3
$
390.7
Consolidated
Three months ended September
30, 2023
Three months ended September
30, 2022
Gross
Written
Net
Written
Net
Earned
Gross
Written
Net
Written
Net
Earned
Property
$
80.3
$
52.5
$
50.6
$
113.7
$
56.8
$
45.3
Liability
314.3
206.1
176.9
352.1
232.6
208.9
Professional
89.2
62.6
68.0
152.4
116.8
110.3
Specialty
44.5
26.8
47.2
132.7
99.0
90.5
Total
$
528.3
$
348.0
$
342.7
$
750.9
$
505.2
$
455.0
Nine months ended September
30, 2023
Nine months ended September
30, 2022
Gross
Written
Net
Written
Net
Earned
Gross
Written
Net
Written
Net
Earned
Property
$
295.4
$
149.0
$
138.7
$
328.6
$
155.0
$
173.1
Liability
864.9
541.8
542.3
1,004.7
640.3
615.9
Professional
290.0
191.2
225.4
465.9
322.1
337.0
Specialty
236.6
150.8
156.1
404.4
297.4
263.9
Total
$
1,686.9
$
1,032.8
$
1,062.5
$
2,203.6
$
1,414.8
$
1,389.9
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
COMPONENTS OF NET INVESTMENT
INCOME & NET REALIZED INVESTMENT AND OTHER GAINS
(LOSSES)
CONSOLIDATED
(in millions)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Net Investment Income
Net investment income, excluding
alternative investments
$
34.1
$
30.8
$
94.0
$
80.0
Alternative investments
6.3
3.2
8.9
20.9
Total net investment income
$
40.4
$
34.0
$
102.9
$
100.9
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Net Realized Investment and
Other Gains (Losses)
Net realized investment (losses) gains
$
7.4
$
(40.9
)
$
(21.0
)
$
(64.1
)
Change in fair value recognized
(10.1
)
(1.1
)
2.1
2.5
Change in allowance for credit losses on
fixed maturity securities
(2.0
)
(1.3
)
(2.1
)
(2.9
)
Loss on the sale of business divestitures
including the realization of foreign exchange translation
losses
—
(1.4
)
—
(55.1
)
Total net realized investments and other
gains (losses)
$
(4.7
)
$
(44.7
)
$
(21.0
)
$
(119.6
)
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
COMPONENTS OF INVESTMENT
PORTFOLIO
CONSOLIDATED
(in millions)
(unaudited)
September 30,
December 31,
2023
2022
U.S. Governments and government
agencies
$
364.5
$
380.7
States and political subdivisions
94.8
99.8
Foreign governments
27.9
28.4
Corporate – Financial
604.0
636.4
Corporate – Industrial
497.8
520.1
Corporate – Utilities
75.9
77.6
Asset-backed securities
130.3
139.2
Collateralized loan obligations
231.1
237.9
Mortgage-backed securities – Agency
230.2
259.1
Mortgage-backed securities –
Commercial
271.4
285.4
Mortgage-backed securities –
Residential
9.5
10.9
Total fixed maturities
2,537.4
2,675.5
Commercial Mortgage Loans
159.7
159.7
Common stocks
11.6
43.9
Preferred stocks
—
—
Total equity securities available for
sale
11.6
43.9
Private equity
264.8
264.6
Hedge fund
56.3
54.0
Overseas deposits
—
—
Other
5.2
4.6
Total other investments
326.3
323.2
Short term investments and cash
equivalents
1,222.7
449.6
Cash
64.2
50.2
Total cash and invested assets
$
4,321.9
$
3,702.1
September 30,
December 31,
2023
2022
U.S. Governments and government
agencies
$
364.5
$
639.8
AAA
573.7
364.6
AA
213.0
241.8
A
517.7
592.5
BBB
704.9
565.6
BB
70.1
64.1
B
60.3
60.6
Lower than B
31.2
14.9
Not rated
2.0
131.6
Total fixed maturities
$
2,537.4
$
2,675.5
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD.
RECONCILIATION OF COMMON
SHAREHOLDERS' EQUITY TO TANGIBLE SHAREHOLDERS' EQUITY
CONSOLIDATED
(in millions)
(unaudited)
September 30,
December 31,
2023
2022
Common shareholders' equity
$
1,027.3
$
1,088.9
Less: Accumulated other comprehensive
income (AOCI), net of taxes
(281.3
)
(305.1
)
Common shareholders' equity excluding
AOCI, net of tax
$
1,308.6
$
1,394.0
Common shareholders' equity
$
1,027.3
$
1,088.9
Less: Goodwill and intangible assets
118.6
118.6
Tangible common shareholders' equity
908.7
970.3
Less: AOCI, net of tax
(281.3
)
(305.1
)
Tangible common shareholders' equity
excluding AOCI, net of tax
$
1,190.0
$
1,275.4
Common shares outstanding - end of
period
35.202
35.061
Book value per common share
$
29.18
$
31.06
Tangible book value per common share
$
25.81
$
27.67
Book value per common share excluding
AOCI, net of tax
$
37.17
$
39.76
Tangible book value per common share
excluding AOCI, net of tax
$
33.80
$
36.38
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,
2023
2022
2023
2022
Net loss attributable to common
shareholders
$
(49.5
)
$
(51.4
)
$
(86.4
)
$
(73.9
)
Operating income (loss) (1)
(21.1
)
15.5
(32.7
)
89.8
Common Shareholders' Equity - Beginning of
period
$
1,090.8
$
1,316.7
$
1,088.9
$
1,591.2
Common Shareholders' Equity - End of
period
1,027.3
1,180.9
1,027.3
1,180.9
Average Common Shareholders' Equity
$
1,059.1
$
1,248.8
$
1,058.1
$
1,386.1
Common shares outstanding - End of
period
35.202
35.021
35.202
35.021
Book value per common share
$
29.18
$
33.72
$
29.18
$
33.72
Book value per common share, prior
period
$
31.00
$
31.06
Change in book value per common share
during 2023
(5.9
)%
(6.1
)%
Annualized return on average common
shareholders' equity
(18.7
)%
(16.5
)%
(10.9
)%
(7.1
)%
Annualized operating return on average
common shareholders' equity
(8.0
)%
5.0
%
(4.1
)%
8.6
%
(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/20231108489197/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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