UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549
 
FORM 8-K
 
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 

Date of Report (Date of earliest event reported): August 3, 2020
 
Argo Group International Holdings, Ltd.
(Exact name of registrant as specified in its charter)
 
Bermuda
 
001-15259
 
98-0214719
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)
 
110 Pitts Bay Road
Pembroke HM 08
Bermuda
P.O. Box HM 1282
Hamilton HM FX
Bermuda
(Address, Including Zip Code,
of Principal Executive Offices)
(Mailing Address)
 
Registrant’s telephone number, including area code:  (441) 296-5858
 
Not Applicable
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

   Written communications pursuant to Rule 425 under the Securities Act  (17 CFR 230.425)

   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
  Trading Symbol(s)
 
Name of each exchange
on which registered
Common Stock, par value of $1.00 per share
  ARGO
  New York Stock Exchange
Guarantee of Argo Group U.S., Inc. 6.500%
  ARGD
  New York Stock Exchange
Depositary Shares, Each Representing a 1/1,000th Interest in a 7.00% Resettable Fixed Rate Preference Share, Series A, Par Value $1.00 Per Share
   ARGOPrA
  New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐



Item 2.02.     Results of Operations and Financial Condition.
 
On August 3, 2020, Argo Group International Holdings, Ltd. issued a press release announcing its financial results for the fiscal quarter ended June 30, 2020. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated herein by reference.
 
Item 9.01 Financial Statements and Exhibits.
 
(d) Exhibits:
 
No.
 
Exhibit
 
104
 
Cover Page Interactive Data File (embedded within the Inline XBRL document).



SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Dated:  August 3, 2020 ARGO GROUP INTERNATIONAL HOLDINGS, LTD.  
     
       

By:
  /s/ Jay S. Bullock____
 
    Name: Jay S. Bullock  
    Title:   Executive Vice President and  
   
Chief Financial Officer
 


Exhibit 99.1




Argo Group Reports 2020 Second Quarter Results
 
Ongoing Initiatives to Improve Underlying Profitability and Growth Showing Progress
 
Improved Underlying Results: GWP of $800 million, with 5.9% growth in the U.S. and 3.5% on a consolidated basis; combined ratio of 100.3% and CAY ex-CAT combined ratio of 93.0%; strongest U.S. underwriting income in Argo history.
Operational Enhancement Actions: Announced new executive leadership team responsibilities; U.S. expense management and International re-underwriting initiatives yielding positive results; continued pricing improvement in both U.S. and International Operations.
Capital Management Actions: Book value of $49.94 per share, a 6.1% increase including dividends from March 31, 2020; closed on the sale of Trident, recording a $32 million pre-tax gain; preferred share offering in July strengthens capital position and supports plans for strategic growth.

Hamilton, Bermuda - August 3, 2020 - Argo Group International Holdings, Ltd. (NYSE: ARGO) ("Argo" or the "Company") today announced financial results for the three and six months ended June 30, 2020.

“We are pleased to report the strongest quarterly underwriting income for the U.S. in Argo’s history,” said Argo Chief Executive Officer Kevin J. Rehnberg. “This demonstrates our shift to more positive underlying performance, particularly in our core U.S. specialty business that delivered an excellent quarter despite the broader economic challenges related to COVID-19. The company's operating results were, however, still negatively impacted by market volatility in our investment portfolio and the pandemic’s effects on premium growth and catastrophe losses, particularly in our International Operations.

“We continue to experience strong improvement in pricing across the business,” added Rehnberg. “We remain optimistic that current market conditions will provide opportunity for continued growth and margin improvement. In addition, our recent preferred stock offering provides Argo with additional capital, enhancing our financial strength, and enables us to more aggressively pursue our strategic growth objectives in this attractive underwriting environment."

2020 Second Quarter Operating Highlights
Consolidated:
 

$ in millions

Three Months Ended
June 30,
     Q/Q      
Six Months Ended
June 30,
 Y/Y
Consolidated
2020
   
2019
   
Change
     
2020
     
2019
   
Change
                                       
Gross written premiums
$
799.6
    $
772.9
   
3.5
%
  $
1,625.5
    $
1,533.7
   
6.0
%
Net written premiums
 
456.1
     
455.2
   
0.2
%
   
836.6
     
816.1
   
2.5
%
Earned premiums
 
433.4
     
431.7
   
0.4
%
   
868.4
     
852.2
   
1.9
%
                                           
Underwriting (loss) income
 
(1.2
)
   
(14.5
)
 
-91.7
%
   
(15.1
)
   
7.9
   
NM
 
Net investment income
 
1.5
     
42.8
   
-96.5
%
   
37.0
     
76.7
   
-51.8
%
                                           
Net (loss) income
$
(6.4
)
  $
28.8
   
NM
    $
(25.2
)
  $
120.0
   
NM
 
                                           
Operating (loss) income
$
(4.7
)
  $
16.8
   
NM
    $
7.9
    $
58.3
   
-86.4
%
                                           
Loss ratio
 
63.0
%
   
66.0
%
 
-3 pts
     
63.8
%
   
61.3
%
 
2.5 pts
 
Expense ratio
 
37.3
%
   
37.4
%
 
-0.1 pts
     
37.9
%
   
37.7
%
 
0.2 pts
 
Combined ratio
 
100.3
%
   
103.4
%
 
-3.1 pts
     
101.7
%
   
99.0
%
 
2.7 pts
 


On a consolidated basis, gross written premium grew 3.5% to $799.6 million driven by pricing increases, compared to $772.9 million for the 2019 second quarter. Premium growth in U.S. Operations was 5.9%, while premiums in International Operations were flat compared to the prior year quarter.
The combined ratio was 100.3% compared to 103.4% for the 2019 second quarter. The lower combined ratio was primarily driven by a better CAY ex-CAT loss ratio and a lower level of net unfavorable reserve development, which for the second consecutive quarter, was modest during the period at $1.8 million. Partially offsetting these improvements was a higher level of catastrophe losses of $27.9 million, including $17.4 million related to the COVID-19 pandemic, primarily resulting from contingency and property exposures in Argo’s International Operations. Additionally, net reserve development of $1.8 million added 0.4 points to the loss ratio in the second quarter of 2020, compared to $22.3 million or 5.2 points in the prior year quarter.
The CAY ex-CAT combined ratio was 93.0% compared to 96.7% in the prior year quarter. The improvement in the CAY ex-CAT combined ratio was due to a lower CAY ex-CAT loss ratio that was driven by stronger pricing and lower loss activity, while the expense ratio was stable.
Net investment income of $1.5 million decreased 96.5% compared to $48.2 million the 2019 second quarter. Net investment income excluding alternatives decreased 25.2% to $24.9 million, while alternative investments, which are reported on a lag, contributed a loss of $23.4 million in the second quarter of 2020. The decline in the portfolio excluding alternatives was primarily due to lower interest rates and portfolio de-risking actions that have been executed since the fourth quarter of 2019.
Net loss was $6.4 million or $(0.18) per diluted share, compared to net income of $28.8 million or $0.83 per diluted share for the 2019 second quarter. The 2020 second quarter result included lower investment income and foreign currency exchange losses compared to foreign currency exchange gains in the prior year period.
Operating loss was $4.7 million or $(0.14) per diluted share, compared to operating income of $16.8 million or $0.48 per diluted share for the 2019 second quarter. The primary driver of the decline in operating income was lower investment income in the second quarter of 2020, partially offset by improved underwriting results.

U.S. Operations:
 

$ in millions
Three Months Ended
June 30,
     
Q/Q
     
Six Months Ended
June 30,
   Y/Y  
U.S. Operations
2020
   
2019
   
Change
     
2020
     
2019
   
Change
 
                                           
Gross written premiums
$
480.2
    $
453.6
     
5.9
%
  $
956.7
    $
864.3
     
10.7
%
Net written premiums
 
303.6
     
295.3
     
2.8
%
   
573.0
     
543.7
     
5.4
%
Earned premiums
 
301.6
     
284.0
     
6.2
%
   
604.1
     
557.8
     
8.3
%
                                               
Losses and loss adjustment expenses
 
171.2
     
162.9
     
5.1
%
   
360.8
     
317.7
     
13.6
%
Underwriting expenses
 
95.6
     
91.7
     
4.3
%
   
191.7
     
185.9
     
3.1
%
Underwriting income
$
34.8
    $
29.4
     
18.4
%
  $
51.6
    $
54.2
     
-4.8
%
                                               
Loss ratio
 
56.8
%
   
57.4
%
 
-0.6 pts
     
59.8
%
   
57.0
%
 
2.8 pts
 
Expense ratio
 
31.7
%
   
32.3
%
 
-0.6 pts
     
31.7
%
   
33.3
%
 
-1.6 pts
 
Combined ratio
 
88.5
%
   
89.7
%
 
-1.2 pts
     
91.5
%
   
90.3
%
 
1.2 pts
 
 

In our U.S. Operations, gross written premiums increased 5.9% compared to the 2019 second quarter due to growth in Professional and Specialty lines, while premiums in Liability lines were down modestly. Growth in the period reflected stronger rate increases across most lines of business, partially offset by economic headwinds as a result of COVID-19.
Net earned premium growth in the second quarter of 2020 was driven by growth in gross written premium. Growth in earned premium compared to the 2019 second quarter was driven by Professional and Property lines of business.
The loss ratio for the second quarter of 2020 was 56.8%, a decrease of 0.6 points compared to the prior year quarter. The lower loss ratio was driven by a 2.9 point improvement in the CAY ex-CAT loss ratio, partially offset by higher catastrophe losses and a lower level of favorable reserve development. The improvement in the CAY ex-CAT loss ratio was primarily due to rate improvement achieved over the past several quarters as well as a significant reduction in claim activity during the second quarter. Catastrophe losses in the quarter included $1 million of COVID-19 related losses. Net favorable prior-year reserve development in the current quarter was modest at $0.6 million.
The expense ratio for the second quarter of 2020 was 31.7%, an improvement of 0.6 points compared to the 2019 second quarter. The improvement in the expense ratio was driven by growth in earned premium ahead of a modest increase in expenses and additional ceding commissions received.

International Operations:
 

$ in millions
Three Months Ended
June 30,
   

Q/Q
     
Six Months Ended
June 30,
  Y/Y
 
International Operations
2020
   
2019
   
Change
     
2020
     
2019
   
Change
 
                                           
Gross written premiums
$
319.3
    $
319.2
     
%
  $
668.5
    $
669.3
     
-0.1
%
Net written premiums
 
152.4
     
159.8
     
-4.6
%
   
263.3
     
272.3
     
-3.3
%
Earned premiums
 
131.8
     
147.6
     
-10.7
%
   
264.1
     
294.3
     
-10.3
%
                                               
Losses and loss adjustment expenses
 
101.1
     
120.9
     
-16.4
%
   
192.6
     
203.3
     
-5.3
%
Underwriting expenses
 
57.6
     
57.1
     
0.9
%
   
117.9
     
112.2
     
5.1
%
Underwriting loss
$
(26.9
)
  $
(30.4
)
   
-11.5
%
  $
(46.4
)
  $
(21.2
)
   
118.9
%
                                               
Loss ratio
 
76.7
%
   
81.9
%
 
-5.2 pts
     
72.9
%
   
69.1
%
 
3.8 pts
 
Expense ratio
 
43.7
%
   
38.7
%
 
5 pts
     
44.7
%
   
38.1
%
 
6.6 pts
 
Combined ratio
 
120.4
%
   
120.6
%
 
-0.2 pts
     
117.6
%
   
107.2
%
 
10.4 pts
 
 

In our International Operations, gross written premiums were approximately flat in the second quarter of 2020, as growth in Liability and Professional lines was offset by a decrease in Specialty and Property lines. Rates increased across all lines of business with particular strength in Property and Liability lines, and overall rate increases accelerated from the first quarter of 2020. Rate increases across International were partially offset by certain risk management actions, including reducing line sizes in some classes of business.
Net earned premium in the second quarter of 2020 decreased 10.7% from the prior year quarter. The decline was driven by higher ceded premium under certain reinsurance contracts, as well as additional reinstatement premiums incurred during the quarter.
The loss ratio for the second quarter of 2020 was 76.7%, an improvement of 5.2 points compared to the prior year quarter. The lower loss ratio was primarily due to a modest amount of unfavorable reserve development compared to 17.9 points in the prior year quarter, as well as an improved CAY ex-CAT loss ratio. Catastrophe losses totaled 17.2 points in the quarter, largely attributed to estimated losses related to COVID-19 in contingency and property exposures. The CAY ex-CAT loss ratio improvement was primarily due to achieved rate increases earnings through results and the impact of recent re-underwriting actions, partially offset by certain large losses.
The expense ratio for the second quarter of 2020 was 43.7%, an increase of 5.0 points from 38.7% for the 2019 second quarter due to lower earned premium and higher non-acquisition expenses. The slight increase in absolute expenses are primarily due to costs associated with increased participation in our Lloyd’s syndicates, which as a result leads to greater expenses being recognized ahead of a higher level of earned premium.



Balance Sheet:

Book value per share was $49.94 at June 30, 2020. Including dividends paid, this represents a 6.1% increase from March 31, 2020, primarily due to net realized and unrealized gains in the investment portfolio, as well as a $32.3 million pre-tax gain related to the sale of Trident Public Risk Solutions.
Following the close of the second quarter, the Company completed an offering of 7.0% resettable fixed rate perpetual non-cumulative preference shares with a total liquidation preference of $150 million. The Series A preference shares will be reflected on the Company's balance sheet for September 2020.



CONFERENCE CALL
Argo management will conduct an investor conference call starting at 10 a.m. EDT on Tuesday, August 4, 2020. Participants in the U.S. can access the call by dialing (877) 291-5203. Callers dialing from outside the U.S. can access the call by dialing (412) 902-6610. Please ask the operator for the Argo earnings call. A live webcast of the conference call can be accessed at https://services.choruscall.com/links/argo200804.html.

A webcast replay will be available shortly after the live conference call and can be accessed at https://services.choruscall.com/links/argo200804.html. A telephone replay of the conference call will be available through August 11, 2020, to callers in the U.S. by dialing (877) 344-7529 (conference #10145911). Callers dialing from outside the U.S. can access the replay by dialing (412) 317-0088 (conference #10145911).
 
ABOUT ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
Argo Group International Holdings, Ltd. (NYSE: ARGO) is an underwriter of specialty insurance and reinsurance 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’s insurance subsidiaries are rated ‛A-’ by A.M. Best and Argo’s U.S. insurance subsidiaries are rated ‛A-’ by Standard and Poor’s. More information on Argo and its subsidiaries is available at www.argolimited.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,” “outlook,” “trends,” “future,” “could,” “would,” “should,” “target,” “on track” and similar expressions of a future or forward-looking nature.

These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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, 2019, as supplemented in Part II, Item 1A, “Risk Factors” of Argo’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and in the Company’s Current Report on Form 8-K filed on July 7, 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. 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").

“Underwriting income” 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.

“Current accident year (CAY) ex-CAT combined ratio” and the “Current accident year (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 (impacts to both premium and losses), the impact of changes to prior year loss reserves and other one-time items that would impact expenses or net earned premium. 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" is an internal performance measure used in the management of the Company's operations and represents after-tax (at an assumed effective tax rate of 15%) operational results excluding, as applicable, net realized investment gains or losses, net foreign exchange gain or loss, and other similar non-recurring items. The Company excludes net realized investment gains or losses, net foreign exchange gain or loss, 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. Operating income should not be viewed as a substitute for U.S. GAAP net income.

"Annualized return on average shareholders’ equity" ("ROAE") is calculated using average shareholders' equity. In calculating ROAE, the net income available to shareholders for the period is multiplied by the number of periods in a calendar year to arrive at annualized net income available to shareholders. The Company presents ROAE as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information. "Annualized operating return on average shareholders' equity" is calculated using operating income (as defined above and annualized in the manner described for net income (loss) available to shareholders under ROAE above) and average shareholders' equity.

The “percentage change in book value per share” includes (by adding) the effects of cash dividends paid per share to the calculated book value per share for the current period. This adjusted amount is then compared to the prior period’s book value per share to determine the period over period change. The Company believes that including the dividends paid per share allows users of its financial statements to more easily identify the impact of the changes in book value per 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)

 
 
June 30,
   
December 31,
 
 
 
2020
   
2019
 
 
 
(unaudited)
       
Assets
           
Total investments
$
 
4,851.5
  $
 
5,099.4
 
Cash
   
187.7
     
137.8
 
Accrued investment income
   
23.4
     
25.7
 
Receivables
   
3,743.0
     
3,792.8
 
Goodwill and intangible assets
   
247.6
     
253.2
 
Deferred acquisition costs, net
   
153.5
     
160.2
 
Ceded unearned premiums
   
656.5
     
545.0
 
Other assets
   
533.5
     
500.4
 
Total assets
$
 
10,396.7
    $
10,514.5
 
                 
Liabilities and Shareholders' Equity
               
Reserves for losses and loss adjustment expenses
$
 
5,216.3
     $
5,157.6
 
Unearned premiums
   
1,481.2
     
1,410.9
 
Ceded reinsurance payable, net
   
1,042.7
     
1,203.1
 
Senior unsecured fixed rate notes
   
140.1
     
140.0
 
Other indebtedness
   
181.0
     
181.3
 
Junior subordinated debentures
   
257.6
     
257.4
 
Other liabilities
   
347.8
     
383.1
 
Total liabilities
   
8,666.7
     
8,733.4
 
                 
Total shareholders' equity
   
1,730.0
     
1,781.1
 
Total liabilities and shareholders' equity
   
10,396.7
     
10,514.5
 
                 
Book value per common share
   
49.94
     
51.80
 
 



ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
FINANCIAL HIGHLIGHTS
CONSOLIDATED
(in millions, except per share amounts)
(unaudited)

    Three Months Ended
    Six Months Ended
 
    June 30,   
    June 30,     
 
 
2020
   
2019
   
2020
   
2019
 
Gross written premiums
  $
799.6
    $
772.9
    $
1,625.5
    $
1,533.7
 
Net written premiums
   
456.1
     
455.2
     
836.6
     
816.1
 
                                 
Earned premiums
   
433.4
     
431.7
     
868.4
     
852.2
 
Net investment income
   
1.5
     
42.8
     
37.0
     
76.7
 
Fee and other income
   
2.0
     
2.1
     
4.1
     
4.4
 
Net realized investment gains (losses)
   
20.1
     
12.0
     
(16.0
)
   
64.5
 
Total revenue
   
457.0
     
488.6
     
893.5
     
997.8
 
                                 
Losses and loss adjustment expenses
   
273.2
     
284.8
     
554.1
     
522.7
 
Underwriting, acquisition and insurance expenses
   
161.4
     
161.4
     
329.4
     
321.6
 
Other corporate expenses
   
2.5
     
7.5
     
5.8
     
8.0
 
Interest expense
   
6.8
     
9.3
     
14.5
     
17.8
 
Fee and other expense
   
1.0
     
1.3
     
2.2
     
2.6
 
Foreign currency exchange losses (gains)
   
6.4
     
(5.3
)
   
3.4
     
(4.6
)
Total expenses
   
451.3
     
459.0
     
909.4
     
868.1
 
                                 
Income (loss) before income taxes
   
5.7
     
29.6
     
(15.9
)
   
129.7
 
Income tax provision
   
12.1
     
0.8
     
9.3
     
9.7
 
Net (loss) income
  $
(6.4
)
  $
28.8
    $
(25.2
)
  $
120.0
 
                                 
Net (loss) income per common share
(basic)
  $
(0.18
)
  $
0.84
    $
(0.73
)
  $
3.52
 
Net (loss) income per common share
(diluted)
  $
(0.18
)
  $
0.83
    $
(0.73
)
  $
3.45
 
                                 
Weighted average common shares:
                               
Basic
   
34.6
     
34.2
     
34.6
     
34.1
 
Diluted
   
34.6
     
34.8
     
34.6
     
34.8
 
                                 
Loss ratio
   
63.0
%
   
66.0
%
   
63.8
%
   
61.3
%
Expense ratio (1)
   
37.3
%
   
37.4
%
   
37.9
%
   
37.7
%
GAAP combined ratio
   
100.3
%
   
103.4
%
   
101.7
%
   
99.0
%
CAY ex-CAT combined ratio (2)
   
93.0
%
   
96.7
%
   
94.4
%
   
95.3
%
 

(1) The expense ratio is calculated as "Underwriting, acquisition and insurance expense" divided by "Earned premiums".
 
(2) For purposes of calculating these ratios, net earned premiums were adjusted to exclude outward reinstatement premium adjustments of $2.1 million for the three and six months ended June 30, 2020. There were no such adjustments for the three and six months ended June 30, 2019.



ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
SEGMENT DATA
(in millions)
(unaudited)

 
 
Three Months Ended
   
Six months ended
 
 
 
June 30,
   
June 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
U.S. Operations
                       
Gross written premiums
  $
480.2
    $
453.6
    $
956.7
    $
864.3
 
Net written premiums
   
303.6
     
295.3
     
573.0
     
543.7
 
Earned premiums
   
301.6
     
284.0
     
604.1
     
557.8
 
                                 
Underwriting income
   
34.8
     
29.4
     
51.6
     
54.2
 
Net investment income
   
0.8
     
29.6
     
26.0
     
52.7
 
Interest expense
   
(4.2
)
   
(5.7
)
   
(9.1
)
   
(10.9
)
Fee (expense) income, net
   
(0.2
)
   
(0.1
)
   
(0.4
)
   
0.1
 
Net income before taxes
  $
31.2
    $
53.2
    $
68.1
    $
96.1
 
                                 
Loss ratio
   
56.8
%
   
57.4
%
   
59.8
%
   
57.0
%
Expense ratio (1)
   
31.7
%
   
32.3
%
   
31.7
%
   
33.3
%
GAAP combined ratio
   
88.5
%
   
89.7
%
   
91.5
%
   
90.3
%
CAY ex-CAT combined ratio
   
86.5
%
   
90.0
%
   
88.4
%
   
90.4
%
                                 
International Operations
                               
Gross written premiums
  $
319.3
    $
319.2
    $
668.5
    $
669.3
 
Net written premiums
   
152.4
     
159.8
     
263.3
     
272.3
 
Earned premiums
   
131.8
     
147.6
     
264.1
     
294.3
 
                                 
Underwriting loss
   
(26.9
)
   
(30.4
)
   
(46.4
)
   
(21.2
)
Net investment income
   
0.5
     
11.5
     
9.1
     
20.6
 
Interest expense
   
(2.0
)
   
(3.1
)
   
(4.3
)
   
(5.9
)
Fee income, net
   
0.9
     
1.0
     
1.8
     
1.7
 
Net loss before taxes
  $
(27.5
)
  $
(21.0
)
  $
(39.8
)
  $
(4.8
)
                                 
Loss ratio
   
76.7
%
   
81.9
%
   
72.9
%
   
69.1
%
Expense ratio (1)
   
43.7
%
   
38.7
%
   
44.7
%
   
38.1
%
GAAP combined ratio
   
120.4
%
   
120.6
%
   
117.6
%
   
107.2
%
CAY ex-CAT combined ratio (2)
   
101.4
%
   
101.1
%
   
100.8
%
   
96.7
%
 
 
(1) The expense ratio is calculated as "Underwriting, acquisition and insurance expense" divided by "Earned premiums".
 
(2) For purposes of calculating these ratios, net earned premiums were adjusted to exclude outward reinstatement premium adjustments of $2.1 million for the three and six months ended June 30, 2020. There were no such adjustments for the three and six months ended June 30, 2019.



ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
RECONCILIATION OF LOSS RATIOS
(unaudited)

 
 
Three Months Ended
   
Six Months Ended
 
 
 
June 30,
   
June 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
U.S. Operations
                       
Loss ratio
   
56.8
%
   
57.4
%
   
59.8
%
   
57.0
%
Prior accident year loss reserve development
   
0.2
%
   
1.8
%
   
(0.4
)%
   
1.6
%
Catastrophe losses
   
(2.2
)%
   
(1.5
)%
   
(2.7
)%
   
(1.5
)%
CAY ex-CAT loss ratio
   
54.8
%
   
57.7
%
   
56.7
%
   
57.1
%
                                 
International Operations
                               
Loss ratio
   
76.7
%
   
81.9
%
   
72.9
%
   
69.1
%
Prior accident year loss reserve development
   
(1.1
)%
   
(17.9
)%
   
(0.4
)%
   
(9.2
)%
Catastrophe losses
   
(17.2
)%
   
(1.6
)%
   
(16.0
)%
   
(1.3
)%
CAY ex-CAT loss ratio (1)
   
58.4
%
   
62.4
%
   
56.5
%
   
58.6
%
                                 
Consolidated
                               
Loss ratio
   
63.0
%
   
66.0
%
   
63.8
%
   
61.3
%
Prior accident year loss reserve development
   
(0.4
)%
   
(5.2
)%
   
(0.5
)%
   
(2.3
)%
Catastrophe losses
   
(6.7
)%
   
(1.5
)%
   
(6.7
)%
   
(1.4
)%
CAY ex-CAT loss ratio (1)
   
55.9
%
   
59.3
%
   
56.6
%
   
57.6
%
 
 
(1) For purposes of calculating these ratios, net earned premiums were adjusted to exclude outward reinstatement premium adjustments of $2.1 million for the three and six months ended June 30, 2020. There were no such adjustments for the three and six months ended June 30, 2019.
 




ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
NET PRIOR-YEAR RESERVE DEVELOPMENT & CATASTROPHE LOSSES BY SEGMENT
(in millions)
(unaudited)

 
 
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
   
2020
   
2019
   
2020
   
2019
 
Net Prior-Year Reserve Development
                       
(Favorable)/Unfavorable
                       
U.S. Operations
  $
(0.6
)
  $
(5.1
)
  $
2.7
    $
(9.1
)
International Operations
   
1.5
     
26.4
     
1.1
     
27.2
 
Run-off Lines
   
0.9
     
1.0
     
0.7
     
1.7
 
Total net prior-year reserve development
  $
1.8
    $
22.3
    $
4.5
    $
19.8
 
 
 

 
 
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
   
2020
   
2019
   
2020
   
2019
 
Catastrophe & COVID-19 Losses
                       
Catastrophe losses
                       
U.S. Operations
  $
5.5
    $
4.2
    $
7.5
    $
8.2
 
International Operations
   
5.0
     
2.3
     
5.9
     
3.8
 
Total catastrophe losses
   
10.5
     
6.5
     
13.4
     
12.0
 
                                 
COVID-19 losses
                               
U.S. Operations
   
1.0
     
     
8.5
     
 
International Operations
   
16.4
     
     
35.1
     
 
Total COVID-19 losses
   
17.4
     
     
43.6
     
 
                                 
Catastrophe & COVID-19 losses
                               
U.S. Operations
   
6.5
     
4.2
     
16.0
     
8.2
 
International Operations
   
21.4
     
2.3
     
41.0
     
3.8
 
Total catastrophe & COVID-19 losses
  $
27.9
    $
6.5
    $
57.0
    $
12.0
 
 




ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
RECONCILIATION OF OPERATING INCOME TO NET (LOSS) INCOME
CONSOLIDATED
(in millions)
(unaudited)

 
 
Three Months Ended
   
Six Months Ended
 
 
 
June 30,
   
June 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Net (loss) income
  $
(6.4
)
  $
28.8
    $
(25.2
)
  $
120.0
 
Add (deduct):
                               
Income tax provision
   
12.1
     
0.8
     
9.3
     
9.7
 
Net investment income
   
(1.5
)
   
(42.8
)
   
(37.0
)
   
(76.7
)
Net realized investment (gains) losses
   
(20.1
)
   
(12.0
)
   
16.0
     
(64.5
)
Fee and other income
   
(2.0
)
   
(2.1
)
   
(4.1
)
   
(4.4
)
Interest expense
   
6.8
     
9.3
     
14.5
     
17.8
 
Fee and other expense
   
1.0
     
1.3
     
2.2
     
2.6
 
Foreign currency exchange losses (gains)
   
6.4
     
(5.3
)
   
3.4
     
(4.6
)
Other corporate expenses
   
2.5
     
7.5
     
5.8
     
8.0
 
Underwriting (loss) income
  $
(1.2
)
  $
(14.5
)
  $
(15.1
)
  $
7.9
 
 




ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
RECONCILIATION OF ADJUSTED OPERATING INCOME TO NET (LOSS) INCOME
CONSOLIDATED
(in millions, except per share amounts)
(unaudited)

 
 
Three Months Ended
   
Six Months Ended
 
 
 
June 30,
   
June 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Net (loss) income, as reported
  $
(6.4
)
  $
28.8
    $
(25.2
)
  $
120.0
 
Income tax provision
   
12.1
     
0.8
     
9.3
     
9.7
 
Net income (loss), before taxes
   
5.7
     
29.6
     
(15.9
)
   
129.7
 
Add (deduct):
                               
Net realized investment (gains) losses
   
(20.1
)
   
(12.0
)
   
16.0
     
(64.5
)
Foreign currency exchange losses (gains)
   
6.4
     
(5.3
)
   
3.4
     
(4.6
)
Other corporate expenses
   
2.5
     
7.5
     
5.8
     
8.0
 
Operating (loss) income before taxes
   
(5.5
)
   
19.8
     
9.3
     
68.6
 
Income tax (benefit) provision, at assumed rate (1)
   
(0.8
)
   
3.0
     
1.4
     
10.3
 
Operating (loss) income
  $
(4.7
)
  $
16.8
    $
7.9
    $
58.3
 
                                 
Operating (loss) income per common share (diluted)
  $
(0.14
)
  $
0.48
    $
0.23
    $
1.68
 
                                 
Weighted average common shares, diluted
   
34.6
     
34.8
     
34.6
     
34.8
 
 
 
(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 SEGMENT INCOME TO NET (LOSS) INCOME
(in millions)
(unaudited)

 
 
Three Months Ended
   
Six Months Ended
 
 
 
June 30,
   
June 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Segment income (loss) before income taxes:
                       
U.S. Operations
  $
31.2
    $
53.2
    $
68.1
    $
96.1
 
International Operations
   
(27.5
)
   
(21.0
)
   
(39.8
)
   
(4.8
)
Run-off Lines
   
(1.3
)
   
(1.1
)
   
(0.8
)
   
(0.5
)
Corporate and Other
   
(7.9
)
   
(11.3
)
   
(18.2
)
   
(22.2
)
Net realized investment gains (losses)
   
20.1
     
12.0
     
(16.0
)
   
64.5
 
Foreign currency exchange (loss) gains
   
(6.4
)
   
5.3
     
(3.4
)
   
4.6
 
Other corporate expenses
   
(2.5
)
   
(7.5
)
   
(5.8
)
   
(8.0
)
Income (loss) before income taxes
   
5.7
     
29.6
     
(15.9
)
   
129.7
 
Income tax provision
   
12.1
     
0.8
     
9.3
     
9.7
 
Net (loss) income
  $
(6.4
)
  $
28.8
    $
(25.2
)
  $
120.0
 
 

 


ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
PREMIUMS BY SEGMENT AND LINE OF BUSINESS
(in millions)
(unaudited)

U.S. Operations
 
Three months ended June 30, 2020
   
Three months ended June 30, 2019
 
   
Gross Written
   
Net
Written
   
Net
Earned
   
Gross Written
   
Net
Written
   
Net
Earned
 
Property
  $
81.5
    $
47.1
    $
41.3
    $
78.0
    $
44.1
    $
33.3
 
Liability
   
242.9
     
159.4
     
169.9
     
256.4
     
173.7
     
175.4
 
Professional
   
103.8
     
63.3
     
58.6
     
75.9
     
46.1
     
43.6
 
Specialty
   
52.0
     
33.8
     
31.8
     
43.3
     
31.4
     
31.7
 
Total
  $
480.2
    $
303.6
    $
301.6
    $
453.6
    $
295.3
    $
284.0
 
 

   
Six months ended June 30, 2020
   
Six months ended June 30, 2019
 
   
Gross Written
   
Net
Written
   
Net
Earned
   
Gross Written
   
Net
Written
   
Net
Earned
 
Property
  $
146.7
    $
62.2
    $
80.7
    $
142.2
   $  
51.5
    $
64.8
 
Liability
   
512.8
     
322.1
     
342.2
     
499.0
     
345.9
     
353.9
 
Professional
   
201.0
     
121.9
     
114.1
     
136.7
     
81.3
     
75.4
 
Specialty
   
96.2
     
66.8
     
67.1
     
86.4
     
65.0
     
63.7
 
Total
  $
956.7
    $
573.0
    $
604.1
    $
864.3
    $
543.7
    $
557.8
 
 
  
International Operations
 
Three months ended June 30, 2020
   
Three months ended June 30, 2019
 
   
Gross Written
   
Net
Written
   
Net
Earned
   
Gross Written
   
Net
Written
   
Net
Earned
 
Property
  $
132.3
    $
50.0
    $
35.6
    $
139.0
    $
57.1
    $
41.0
 
Liability
   
56.4
     
31.7
     
26.3
     
46.4
     
17.8
     
26.4
 
Professional
   
51.3
     
25.8
     
29.4
     
42.1
     
26.2
     
24.6
 
Specialty
   
79.3
     
44.9
     
40.5
     
91.7
     
58.7
     
55.6
 
Total
  $
319.3
    $
152.4
    $
131.8
    $
319.2
    $
159.8
    $
147.6
 
 
 
   
Six months ended June 30, 2020
   
Six months ended June 30, 2019
 
   
Gross Written
   
Net
Written
   
Net
Earned
   
Gross Written
   
Net
Written
   
Net
Earned
 
Property
  $
255.5
    $
62.7
    $
71.3
    $
294.0
    $
65.5
    $
76.6
 
Liability
   
112.4
     
49.1
     
46.3
     
93.4
     
45.4
     
55.8
 
Professional
   
107.0
     
50.3
     
58.1
     
98.0
     
53.7
     
53.8
 
Specialty
   
193.6
     
101.2
     
88.4
     
183.9
     
107.7
     
108.1
 
Total
  $
668.5
    $
263.3
    $
264.1
    $
669.3
    $
272.3
    $
294.3
 
 

Consolidated
 
Three months ended June 30, 2020
   
Three months ended June 30, 2019
 
   
Gross Written
   
Net
Written
   
Net
Earned
   
Gross Written
   
Net
Written
   
Net
Earned
 
Property
  $
213.8
    $
97.1
    $
76.9
    $
217.0
    $
101.2
    $
74.3
 
Liability
   
299.4
     
191.2
     
196.2
     
302.9
     
191.6
     
201.9
 
Professional
   
155.1
     
89.1
     
88.0
     
118.0
     
72.3
     
68.2
 
Specialty
   
131.3
     
78.7
     
72.3
     
135.0
     
90.1
     
87.3
 
Total
  $
799.6
    $
456.1
    $
433.4
    $
772.9
    $
455.2
    $
431.7
 
 

   
Six months ended June 30, 2020
   
Six months ended June 30, 2019
 
   
Gross Written
   
Net
Written
   
Net
Earned
   
Gross Written
   
Net
Written
   
Net
Earned
 
Property
  $
402.2
    $
124.9
    $
152.0
    $
436.2
    $
117.0
    $
141.4
 
Liability
   
625.5
     
371.5
     
388.7
     
592.5
     
391.4
     
409.8
 
Professional
   
308.0
     
172.2
     
172.2
     
234.7
     
135.0
     
129.2
 
Specialty
   
289.8
     
168.0
     
155.5
     
270.3
     
172.7
     
171.8
 
Total
  $
1,625.5
    $
836.6
    $
868.4
    $
1,533.7
    $
816.1
    $
852.2
 



 

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
COMPONENTS OF NET INVESTMENT INCOME & NET REALIZED INVESTMENT GAINS (LOSSES)
CONSOLIDATED
(in millions)
(unaudited)

 
 
Three Months Ended
   
Six Months Ended
 
 
 
June 30,
   
June 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Net Investment Income
                       
Net investment income, excluding alternative investments
  $
24.9
    $
33.3
    $
57.9
    $
65.3
 
Alternative investments
   
(23.4
)
   
9.5
     
(20.9
)
   
11.4
 
Total net investment income
  $
1.5
    $
42.8
    $
37.0
    $
76.7
 
 


 
 
Three Months Ended
   
Six Months Ended
 
 
 
June 30,
   
June 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Net Realized Investment Gains (Losses)
                       
Net realized investment gains (losses)
  $
(21.2
)
  $
(0.6
)
  $
6.7
    $
(2.3
)
Change in fair value of equity securities
   
16.8
     
12.6
     
(22.5
)
   
66.8
 
Credit losses on fixed maturity securities
   
(7.8
)
   
     
(32.5
)
   
 
Gain on sale of Trident assets
   
32.3
     
     
32.3
     
 
Total net realized investments (losses) gains
  $
20.1
    $
12.0
    $
(16.0
)
  $
64.5
 
 
 



ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
COMPONENTS OF INVESTMENT PORTFOLIO
CONSOLIDATED
(in millions)
(unaudited)

 
 
June 30,
   
December 31,
 
 
 
2020
   
2019
 
U.S. Governments and government agencies
  $
342.6
    $
354.6
 
States and political subdivisions
   
171.3
     
152.6
 
Foreign governments
   
258.2
     
248.7
 
Corporate – Financial
   
835.8
     
783.8
 
Corporate – Industrial
   
725.8
     
789.5
 
Corporate – Utilities
   
170.5
     
207.1
 
Asset-backed securities
   
152.9
     
165.5
 
Collateralized loan obligations
   
266.9
     
225.8
 
Mortgage-backed securities – Agency
   
423.2
     
373.8
 
Mortgage-backed securities – Commercial
   
253.2
     
217.0
 
Mortgage-backed securities – Residential
   
107.0
     
115.1
 
Total fixed maturities
   
3,707.4
     
3,633.5
 
Common stocks
   
141.6
     
116.5
 
Preferred stocks
   
5.9
     
7.9
 
Total equity securities available for sale
   
147.5
     
124.4
 
Private equity
   
190.5
     
268.1
 
Hedge fund
   
98.0
     
109.5
 
Overseas deposits
   
91.7
     
114.6
 
Other
   
4.3
     
4.3
 
Total other investments
   
384.5
     
496.5
 
Short term investments and cash equivalents
   
612.1
     
845.0
 
Cash
   
187.7
     
137.8
 
Total cash and invested assets
  $
5,039.2
    $
5,237.2
 
 


 
 
June 30,
   
December 31,
 
 
 
2020
   
2019
 
U.S. Governments and government agencies
  $
342.6
    $
354.7
 
AAA
   
1,267.8
     
1,171.3
 
AA
   
351.7
     
347.0
 
A
   
814.9
     
750.9
 
BBB
   
570.9
     
585.3
 
BB
   
169.8
     
159.9
 
B
   
79.2
     
131.7
 
Lower than B
   
49.5
     
61.7
 
Not rated
   
61.0
     
71.0
 
Total fixed maturities
  $
3,707.4
    $
3,633.5
 
 



ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
SHAREHOLDER RETURN ANALYSIS
(in millions, except per share data)
(unaudited)

 
 
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Net (loss) income
  $
(6.4
)
  $
28.8
    $
(25.2
)
  $
120.0
 
Operating (loss) income (1)
   
(4.7
)
   
16.8
     
7.9
     
58.3
 
                                 
Shareholders' Equity - Beginning of period
  $
1,636.8
    $
1,880.6
    $
1,781.1
    $
1,746.7
 
Shareholders' Equity - End of period
   
1,730.0
     
1,929.0
     
1,730.0
     
1,929.0
 
Average Shareholders' Equity
  $
1,683.4
    $
1,904.8
    $
1,755.6
    $
1,837.9
 
                                 
Shares outstanding - End of period
   
34.645
     
34.278
     
34.645
     
34.278
 
                                 
Book value per share
  $
49.94
    $
56.28
    $
49.94
    $
56.28
 
Cash dividends paid per share during 2020
   
0.31
             
0.62
         
Book value per share, June 30, 2020 - including cash dividends paid
  $
50.25
     
      $
50.56
         
                                 
Book value per share, prior period (2)
  $
47.37
            $
51.80
         
Change in book value per share during 2020
   
5.4
%
           
(3.6
)%
       
Change in book value per share including cash dividends paid, during 2020 (2)
   
6.1
%
           
(2.4
)%
       
                                 
Annualized return on average shareholders' equity
   
(1.5
)%
   
6.0
%
   
(2.9
)%
   
13.1
%
Annualized operating return on average shareholders' equity
   
(1.1
)%
   
3.5
%
   
0.9
%
   
6.3
%
 
(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 share is calculated by including cash dividends of $0.31 per share and $0.62 per share paid to shareholders during the three and six months ended June 30, 2020, respectively. This adjusted amount (Book value per share, including dividends) is then compared to the book value per share as of March 31, 2020 and December 31, 2019, respectively, to determine the change for the three and six months ended June 30, 2020.

 Contact:
 
 
 
Brett Shirreffs
David Snowden
 
 
Head of Investor Relations Senior Vice President, Communications
 
 
212.607.8830 210.321.2104
 
 
brett.shirreffs@argogroupus.com
david.snowden@argogroupus.com

v3.20.2
Document and Entity Information
Aug. 03, 2020
Entity Listings [Line Items]  
Document Type 8-K
Amendment Flag false
Document Period End Date Aug. 03, 2020
Entity Registrant Name Argo Group International Holdings, Ltd.
Entity Incorporation, State or Country Code D0
Entity File Number 001-15259
Entity Tax Identification Number 98-0214719
Entity Address, Address Line One 110 Pitts Bay Road
Entity Address, City or Town Pembroke
Entity Address, Country BM
Entity Address, Postal Zip Code HM 08
City Area Code 441
Local Phone Number 296-5858
Entity Information, Former Legal or Registered Name Not Applicable
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Entity Emerging Growth Company false
Entity Central Index Key 0001091748
Common Stock, par value of $1.00 per share [Member]  
Entity Listings [Line Items]  
Title of 12(b) Security Common Stock, par value of $1.00 per share
Trading Symbol ARGO
Security Exchange Name NYSE
Guarantee of Argo Group U.S., Inc. 6.500% Senior Notes due 2042 [Member]  
Entity Listings [Line Items]  
Title of 12(b) Security Guarantee of Argo Group U.S., Inc. 6.500%
Trading Symbol ARGD
Security Exchange Name NYSE