Le Lézard
Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

Argo Group Reports 2020 Second Quarter Results


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

 

 

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

 
 

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

 

Balance Sheet:

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.

 

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 UNDERWRITING (LOSS) 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 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

 

 
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.


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