Argo Group International Holdings, Ltd. (NASDAQ: AGII) today
announced financial results for the three and six months ended June
30, 2016.
2016 Second Quarter Recap
Gross Written Combined
Net Income After-tax
Operating
Book Value of
Premiums Ratio Per Diluted Share Income
Per
Equity Per Share
Diluted Share
$560.6M
95.6%
$1.00
$1.20
$57.93
↑ 0.5%
↑ 0.2%
↑ 12.3%
↑ 34.8%
↑ 6.7%
from 2Q 2015
from 2Q 2015
from 2Q 2015
from 2Q 2015
from Dec. 31, 2015
“The geographic and product diversity of our business
portfolio delivered real value again this quarter as we generated
underwriting profit in line with a year ago despite the number of
industry catastrophe related losses this quarter,” said CEO Mark E.
Watson III. “In addition, our alternative investment income
contributed strongly to the quarter’s results.”
HIGHLIGHTS FOR THE THREE MONTHS HIGHLIGHTS FOR THE SIX
MONTHS ENDED JUNE 30, 2016: ENDED JUNE 30, 2016:
- Gross written premiums were up 0.5% to $560.6 million
from $557.8 million in the 2015 second quarter.
- Gross written premiums were up 4.4% to $1.08 billion
from $1.03 billion in the 2015 first half.
- Net income was $30.9 million or $1.00 per diluted share,
compared to $27.9 million or $0.89 per diluted share for the 2015
second quarter.
- Net income was $58.6 million or $1.89 per diluted share,
compared to $86.7 million or $2.76 per diluted share for the 2015
first half.
- After-tax operating income was $37.0 million or $1.20
per diluted share, compared to $28.0 million or $0.89 per diluted
share for the 2015 second quarter.
- After-tax operating income was $66.9 million or $2.16
per diluted share, compared to $61.4 million or $1.95 per diluted
share for the 2015 first half.
- Pre-tax underwriting income was $15.3 million compared
to $15.9 million for the 2015 second quarter.
- Pre-tax underwriting income was $36.0 million compared
to $37.2 million for the 2015 first half.
- Combined ratio was 95.6% compared to 95.4% for the 2015
second quarter. The loss and expense ratios for the quarter were
57.0% and 38.6%, respectively, compared to 55.1% and 40.3% for the
2015 second quarter.
- Combined ratio was 94.8% compared to 94.5% for the 2015
first half. The loss and expense ratios for the first half were
56.3% and 38.5%, respectively compared to 55.0% and 39.5% in the
2015 first half.
- Net Investment Income was $35.7 million, compared to
$24.4 million for the 2015 second quarter.
- Net Investment Income was $56.9 million, compared to
$50.1 million for the 2015 first half.
- Net favorable prior-year reserve development was $12.7
million (benefiting the combined ratio by 3.7 points), compared
with $5.0 million (benefiting the combined ratio by 1.4 points) for
the 2015 second quarter.
- Net favorable prior-year reserve development was $15.9
million (benefiting the combined ratio by 2.3 points), compared
with $8.7 million (benefiting the combined ratio by 1.3 points) for
the 2015 first half.
- Estimated pre-tax catastrophe losses were $22.7 million
or 6.8 points on the combined ratio, compared to $2.3 million or
0.6 points on the combined ratio for the 2015 second quarter.
- Estimated pre-tax catastrophe losses were $26.0 million
or 3.9 points on the combined ratio, compared to $5.3 million or
0.8 points on the combined ratio for the 2015 first half.
- Loss ratio excluding catastrophes and reserve
development was 53.9%, compared to 55.9% for the 2015 second
quarter.
- Loss ratio excluding catastrophes and reserve
development was 54.7%, compared to 55.5% in the 2015 first
half.
- During the second quarter, the Company repurchased $21.0
million or 374,943 shares of its common stock.
- During the 2016 first half, the Company repurchased
$40.0 million or 718,595 shares of its common stock.
- Book value per share increased to $57.93, up 6.7% from
$54.31 at Dec. 31, 2015.
- Cash and investments at June 30, 2016, totaled $4.3
billion with a net pre-tax unrealized gain of approximately $144.4
million.
Notes
- All per share amounts, except for number of shares repurchased,
are adjusted for the 10% stock dividend that was paid on June 15,
2016, to stockholders of record on June 1, 2016.
- The following changes were made to the reporting structure
effective Jan. 1, 2016: (1) reclassification of Argo Pro results
and identifiable assets from Excess and Surplus lines to the
Commercial Specialty segment which more appropriately matches
segment distribution strategy; and (2) alternative investment
income was moved from realized gains and losses to net investment
income.
- All references to catastrophe losses are pre-tax and net of
reinsurance and estimated reinstatement premiums. Point impacts on
the combined ratio are calculated as the difference between the
reported combined ratio and the combined ratio excluding incurred
catastrophe losses and associated reinstatement premiums.
- After-tax operating income is defined as net income before
taxes excluding net realized investment gains/losses and foreign
currency exchange gains/losses at an assumed 20% effective tax
rate.
FINANCIAL HIGHLIGHTS BY SEGMENT
Excess and Surplus Lines
- Gross written premium was up modestly
in the second quarter and the first six months of 2016.
- Slower growth reflects increased
competition and the de-emphasizing of select business lines.
In the 2016 second quarter, the Excess and Surplus Lines segment
reported gross written premiums of $168.1 million compared to
$167.7 million in the 2015 second quarter. For the 2016 second
quarter, net written premiums were down 2.6% to $145.5 million, and
earned premiums were up 2.4% to $121.3 million, when compared to
the 2015 second quarter. Underwriting income was $12.8 million for
the 2016 second quarter, compared to $12.6 million for the 2015
second quarter. The 2016 second quarter combined ratio of 89.3%
compares to 89.4% for the prior-year quarter. Net favorable
prior-year reserve development was $3.4 million for the 2016 second
quarter, benefiting the combined ratio by 2.8 points, compared to
net favorable prior-year reserve development of $4.1 million or 3.5
points for the 2015 second quarter. Catastrophe losses for the 2016
second quarter were $3.4 million or 2.8 points on the combined
ratio, compared to $1.5 million or 1.3 points for the 2015 second
quarter. The 2016 second quarter loss ratio, excluding catastrophe
losses and reserve development, was 58.9% compared to 59.1% for the
2015 second quarter.
For the six months ended June 30, 2016, gross written premiums
were $314.3 million, up $7.9 million or 2.6%, compared to $306.4
million in the 2015 first half. Net written premiums were down 0.8%
to $260.0 million, and earned premiums were up 4.7% to $241.1
million, when compared to the 2015 first half. Underwriting income
was $26.7 million compared to $27.5 million in the 2015 first half.
The 2016 first half combined ratio of 88.9% compares to 88.0% in
the 2015 first half. Net favorable prior-year reserve development
was $6.3 million or 2.6 points on the combined ratio in the 2016
first half, compared to net favorable prior-year reserve
development of $9.8 million or 4.3 points in the 2015 first half.
Catastrophe losses in the 2016 first half were $5.6 million or 2.3
points on the combined ratio, compared to $2.0 million or 0.9
points in the 2015 first half. The 2016 first half loss ratio,
excluding catastrophe losses and reserve development, was 58.4%
compared to 59.4% in the 2015 first half.
Commercial Specialty
- Strong growth in the second quarter was
driven by program and surety businesses.
- Growth in the first six months of 2016
reflects program, surety, and professional lines businesses.
The Commercial Specialty segment reported gross written premiums
of $153.7 million, up $32.7 million or 27.0%, compared to $121.0
million in the 2015 second quarter. For the 2016 second quarter,
net written premiums were up 8.0% to $78.0 million, and earned
premiums were up 1.3% to $85.5 million, when compared to the 2015
second quarter. Underwriting income was $14.4 million for the 2016
second quarter, compared to underwriting income of $6.5 million for
the 2015 second quarter. The 2016 second quarter combined ratio of
83.4% compares to 92.4% for the prior-year quarter. For the 2016
second quarter, net favorable prior-year reserve development was
$5.6 million or 6.5 points on the combined ratio, compared to net
unfavorable prior-year reserve development of $1.7 million or 2.0
points for the 2015 second quarter. Catastrophe losses for the
quarter were $1.3 million or 1.5 points on the combined ratio,
compared to $0.8 million or 1.0 points for the 2015 second quarter.
The 2016 second quarter loss ratio, excluding catastrophe losses
and reserve development, was 56.1% compared to 57.6% for the 2015
second quarter.
For the six months ended June 30, 2016, gross written premiums
were $295.1 million, up $43.2 million or 17.1%, compared to $251.9
million in the 2015 first half. Net written premiums were up 2.4%
to $152.9 million, and earned premiums were up 2.4% to $172.3
million, when compared to the 2015 first half. Underwriting income
was $24.7 million compared to $10.2 million in the 2015 first half.
The 2016 first half combined ratio of 85.7% compares to 94.0% in
the 2015 first half. Net favorable prior-year reserve development
was $5.6 million or 3.3 points on the combined ratio, compared to
net unfavorable prior-year reserve development of $6.4 million or
3.8 points in the 2015 first half. Catastrophe losses in the 2016
first half were $1.4 million or 0.9 points on the combined ratio,
compared to $1.3 million or 0.8 points in the 2015 first half. The
2016 first half loss ratio, excluding catastrophe losses and
reserve development, was 54.9% compared to 57.1% in the 2015 first
half.
Syndicate 1200
- The decline in gross written premium in
the second quarter reflects continued challenging market conditions
particularly in marine and energy and property lines, and a
slightly reduced participation on the syndicate for 2016.
- For the first six months of 2016 gross
written premium were up modestly driven by the strong first quarter
production.
The Syndicate 1200 segment reported gross written premiums of
$155.6 million in the 2016 second quarter, down $15.5 million or
9.1% from $171.1 million for 2015 second quarter. Net written
premiums were $107.6 million versus $124.0 million in the 2015
second quarter. Earned premiums were $98.2 million versus $105.6
million for the 2015 second quarter. Underwriting income was $3.7
million for the 2016 second quarter, compared to $7.4 million for
the 2015 second quarter. The 2016 second quarter combined ratio of
96.3% compares to 92.9% for the prior-year quarter. For the 2016
second quarter, net favorable prior-year reserve development was
$3.6 million or 3.7 points on the combined ratio, compared to net
favorable prior-year reserve development of $2.2 million or 2.2
points for the 2015 second quarter. Catastrophe losses for the 2016
second quarter were $7.0 million or 7.2 points on the combined
ratio, compared to negligible catastrophe losses for the 2015
second quarter. The 2016 second quarter loss ratio, excluding
catastrophe losses and reserve development, was 49.4%, compared to
53.3% in the 2015 second quarter.
For the six months ended June 30, 2016, gross written premiums
were $317.6 million, up $4.6 million or 1.5% from $313.0 million in
the 2015 first half. Net written premiums were $187.7 million
versus $204.5 million in the 2015 first half. Earned premiums were
$198.7 million versus $208.6 million in the 2015 first half.
Underwriting income was $7.8 million compared to $16.7 million in
the 2015 first half. The 2016 first half combined ratio of 96.0%
compares to 92.0% in the 2015 first half. Net favorable prior-year
reserve development in the 2016 first half was $4.4 million or 2.3
points on the combined ratio, compared to net favorable prior-year
reserve development of $2.5 million or 1.2 points in the 2015 first
half. Catastrophe losses in the 2016 first half were $7.0 million
or 3.5 points on the combined ratio, compared to $1.0 million or
0.5 points on the combined ratio in the 2015 first half. The 2016
first half loss ratio, excluding catastrophe losses and reserve
development, was 52.7%, compared to 52.0% in the 2015 first
half.
International Specialty
- The decline in premium reflects more
competitive market conditions that exist in nearly all of the
segment’s business lines.
- In Brazil, business production was up
year over year in local currency but growth was partially offset by
devaluation of the local currency.
The International Specialty segment includes our property
reinsurance business as well as our insurance business in Bermuda
and Brazil. In the 2016 second quarter, gross written premiums were
$83.0 million, down $14.6 million or 15.0% from $97.6 million for
the 2015 second quarter. Net written premiums were $56.7 million
versus $65.6 million in the 2015 second quarter. Earned premiums
were $39.7 million versus $37.2 million for the 2015 second
quarter. Underwriting income was $2.6 million for the 2016 second
quarter, compared to $6.5 million for the 2015 second quarter. The
2016 second quarter combined ratio of 93.8% compares to 82.3% for
the prior-year quarter. Net favorable prior-year reserve
development was $4.9 million or 12.8 points on the combined ratio
for the 2016 second quarter, compared to net favorable prior-year
reserve development of $1.2 million or 3.3 points for the 2015
second quarter. Catastrophe losses for the 2016 second quarter were
$11.0 million or 30.3 points on the combined ratio, compared to
negligible catastrophe losses for the 2015 second quarter. The 2016
second quarter loss ratio, excluding catastrophe losses and reserve
development, was 44.9%, compared to 49.5% in the 2015 second
quarter.
For the six months ended June 30, 2016, gross written premiums
were $153.2 million, down $9.9 million or 6.1% from $163.1 million
in the 2015 first half. Net written premiums were $90.6 million
versus $91.5 million in the 2015 first half. Earned premiums were
$77.5 million versus $73.4 million in the 2015 first half.
Underwriting income was $10.3 million compared to $13.3 million in
the 2015 first half. The 2016 first half combined ratio of 86.9%
compares to 81.8% in the 2015 first half. Net favorable prior-year
reserve development in the 2016 first half was $5.8 million or 7.6
points on the combined ratio, compared to net favorable prior-year
reserve development of $3.7 million or 5.1 points in the 2015 first
half. Catastrophe losses in the 2016 first half were $12.0 million
or 16.6 points on the combined ratio compared to $1.0 million or
1.4 points in the 2015 first half. The 2016 first half loss ratio,
excluding catastrophe losses and reserve development, was 48.0%,
compared to 49.5% in the 2015 first half.
CONFERENCE CALL
Argo Group management will conduct an investor conference call
starting at 10 a.m. EDT (11 a.m. ADT) tomorrow, Wednesday, Aug. 3,
2016. A live webcast of the conference call can be accessed by
visiting http://services.choruscall.com/links/agii160803.
Additionally, participants inside 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
to be connected to the Argo Group earnings call.
A webcast replay will be available shortly after the conference
call and can be accessed at
http://services.choruscall.com/links/agii160803. Additionally, a
telephone replay of the call will be available through August 10,
2016, to callers from inside the U.S. by dialing (877) 344-7529
(conference #10090424). Callers dialing from outside the U.S. can
access the telephone replay by dialing (412) 317-0088 (conference
#10090424).
ABOUT ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
Argo Group International Holdings, Ltd. (NASDAQ: AGII) is an
international underwriter of specialty insurance and reinsurance
products in the property and casualty market. Argo Group offers a
full line of products and services designed to meet the unique
coverage and claims handling needs of businesses in four primary
segments: Excess & Surplus Lines, Commercial Specialty,
Syndicate 1200 and International Specialty. Argo Group's insurance
subsidiaries are A. M. Best-rated 'A' (Excellent) (highest rating
out of 16 rating classifications) with a stable outlook, and Argo's
U.S. insurance subsidiaries are Standard and Poor's-rated 'A-'
(Strong) with a stable outlook. More information on Argo Group and
its subsidiaries is available at www.argolimited.com.
FORWARD-LOOKING STATEMENTS
This press release may include forward-looking statements, both
with respect to Argo Group and its industry, that reflect our
current views with respect to future events and financial
performance. These statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
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,” “outlook,” “trends,” “future,” “could,” “would,”
“should,” “target,” “on track” and similar expressions of a future
or forward-looking nature. All forward-looking statements address
matters that involve risks and uncertainties, many of which are
beyond Argo Group's control. Accordingly, there are or will be
important factors that could cause actual results to differ
materially from those indicated in such statements and, therefore,
you should not place undue reliance on any such statements. We
believe that these factors include, but are not limited to, the
following: 1) unpredictability and severity of catastrophic events;
2) rating agency actions; 3) adequacy of our risk management and
loss limitation methods; 4) cyclicality of demand and pricing in
the insurance and reinsurance markets; 5) statutory or regulatory
developments including tax policy, reinsurance and other regulatory
matters; 6) our ability to implement our business strategy; 7)
adequacy of our loss reserves; 8) continued availability of capital
and financing; 9) retention of key personnel; 10) competition; 11)
potential loss of business from one or more major insurance or
reinsurance brokers; 12) our ability to implement, successfully and
on a timely basis, complex infrastructure, distribution
capabilities, systems, procedures and internal controls, and to
develop accurate actuarial data to support the business and
regulatory and reporting requirements; 13) general economic and
market conditions (including inflation, volatility in the credit
and capital markets, interest rates and foreign currency exchange
rates); 14) the integration of businesses we may acquire or new
business ventures we may start; 15) the effect on our investment
portfolios of changing financial market conditions including
inflation, interest rates, liquidity and other factors; 16) acts of
terrorism or outbreak of war; and 17) availability of reinsurance
and retrocessional coverage, as well as management's response to
any of the aforementioned factors.
In addition, any estimates relating to loss events involve the
exercise of considerable judgment and reflect a combination of
ground-up evaluations, information available to date from brokers
and cedants, market intelligence, initial tentative loss reports
and other sources. The actuarial range of reserves and management’s
best estimate is based on our then current state of knowledge
including explicit and implicit assumptions relating to the pattern
of claim development, the expected ultimate settlement amount,
inflation and dependencies between lines of business. Our internal
capital model is used to consider the distribution for
reserving risk around this best estimate and predict the potential
range of outcomes. However, due to the complexity of factors
contributing to the losses and the preliminary nature of the
information used to prepare these estimates, there can be no
assurance that Argo Group’s ultimate losses will remain within the
stated amount.
The foregoing review of important factors should not be
construed as exhaustive and should be read in conjunction with the
other cautionary statements that are included herein and elsewhere,
including the risk factors included in our most recent reports on
Form 10-K and Form 10-Q and other documents of Argo Group on file
with or furnished to the U.S. Securities and Exchange Commission
(“SEC”). Any forward-looking statements made in this press release
are qualified by these cautionary statements, and there can be no
assurance that the actual results or developments anticipated by
Argo Group will be realized or, even if substantially realized,
that they will have the expected consequences to, or effects on,
Argo Group or its business or operations. Except as required by
law, Argo Group undertakes no obligation to update publicly or
revise any forward-looking statement, whether as a result of new
information, future developments or otherwise.
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 U.S. Securities and
Exchange Commission. 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 premiums 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.
"Operating income" is an internal performance measure used in
the management of the Company's operations and represents after-tax
operational results excluding, as applicable, net realized
investment gains or losses, net foreign exchange gain or loss, and
other non-recurring items. The Company excludes net realized
investment gains or losses, net foreign exchange gain or loss, and
other non-recurring items from the calculation of operating income
because these amounts are influenced by and fluctuate in part
according to the availability of market opportunities and other
factors. 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 assumed tax rate is 20%.
Reconciliations of these financial measures to their most
directly comparable U.S. GAAP measures are included in the attached
tables.
ARGO GROUP
INTERNATIONAL HOLDINGS, LTD. CONSOLIDATED BALANCE SHEETS (in
millions, except per share amounts) June 30, December 31,
2016 2015 (unaudited) Assets Total investments $ 4,158.1 $ 4,115.7
Cash 120.6 121.7 Accrued investment income 20.7 21.6 Receivables
1,716.2 1,525.6 Goodwill and intangible assets 222.7 225.5 Deferred
acquisition costs, net 144.6 132.4 Ceded unearned premiums 312.2
250.8 Other assets 265.7 232.3 Total assets $ 6,960.8
$ 6,625.6 Liabilities and Shareholders' Equity Reserves for
losses and loss adjustment expenses $ 3,181.9 $ 3,123.6 Unearned
premiums 956.5 886.7 Ceded reinsurance payable, net 432.6 312.4
Senior unsecured fixed rate notes 139.4 139.3 Other indebtedness
57.1 55.2 Junior subordinated debentures 172.7 172.7 Other
liabilities 280.3 267.6 Total liabilities 5,220.5
4,957.5 Total shareholders' equity 1,740.3
1,668.1 Total liabilities and shareholders' equity $ 6,960.8 $
6,625.6 Book value per common share $ 57.93 $ 54.31
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD. FINANCIAL HIGHLIGHTS ALL SEGMENTS (in millions,
except per share amounts) Three Months
Ended Six Months Ended June 30 June 30 2016 2015 2016 2015
(unaudited) (unaudited) Gross written premiums $ 560.6 $
557.8 $ 1,080.4 $ 1,034.5 Net written premiums 388.0 411.6 691.4
707.6 Earned premiums 344.9 346.0 689.8 680.6 Net investment
income 35.7 24.4 56.9 50.1 Net realized investment and other
(losses) gains (2.1 ) 2.7 (4.9 ) 13.8 Fee and other income
5.8 4.1 12.6 8.7 Total
revenue 384.3 377.2 754.4 753.2 Losses and loss adjustment
expenses 196.6 190.6 388.2 374.3 Underwriting, acquisition and
insurance expenses 133.0 139.5 265.6 269.1 Interest expense 4.9 4.6
9.7 9.5 Fee and other expense, net 5.7 4.8 12.2 9.8 Foreign
currency exchange loss (gain) 4.5 3.0
6.0 (6.6 ) Total expenses 344.7 342.5 681.7 656.1
Income before taxes 39.6 34.7 72.7 97.1 Income tax provision
8.7 6.8 14.1 10.4
Net income $ 30.9 $ 27.9 $ 58.6 $ 86.7
Net income per common share (basic) $ 1.03 $ 0.91 $
1.93 $ 2.81 Net income per common share
(diluted) $ 1.00 $ 0.89 $ 1.89 $ 2.76
Weighted average common shares: Basic 30.2
30.7 30.3 30.8 Diluted 30.8
31.3 31.0 31.4
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD. SEGMENT DATA (in millions)
Three Months Ended Six Months Ended June 30, June 30, 2016
2015 2016 2015 (unaudited) (unaudited)
Excess & Surplus
Lines
Gross written premiums $ 168.1 $ 167.7 $ 314.3 $ 306.4 Net written
premiums 145.5 149.4 260.0 262.2 Earned premiums 121.3 118.4 241.1
230.3 Underwriting income $ 12.8 $ 12.6 $ 26.7 $ 27.5 Net
investment income 13.7 9.4 22.4 17.4 Interest expense (1.5 )
(1.3 ) (2.9 ) (2.8 ) Net income before taxes $
25.0 $ 20.7 $ 46.2 $ 42.1 Loss ratio
58.9
%
56.9
%
58.1
%
56.0
%
Expense ratio 30.4 32.5 30.8
32.0 GAAP combined ratio 89.3 %
89.4 % 88.9 % 88.0 %
Commercial
Specialty
Gross written premiums $ 153.7 $ 121.0 $ 295.1 $ 251.9 Net written
premiums 78.0 72.2 152.9 149.3 Earned premiums 85.5 84.4 172.3
168.2 Underwriting income $ 14.4 $ 6.5 $ 24.7 $ 10.2 Net investment
income 8.0 5.7 13.1 10.7 Interest expense (0.9 ) (1.0 ) (1.7 ) (1.8
) Fee expense, net (1.1 ) (1.7 ) (2.0 )
(2.5 ) Net income before taxes $ 20.4 $ 9.5 $ 34.1
$ 16.6 Loss ratio 51.1
%
60.6 % 52.5
%
61.7
%
Expense ratio 32.3 31.8 33.2
32.3 GAAP combined ratio 83.4 %
92.4 % 85.7 % 94.0 %
Syndicate
1200
Gross written premiums $ 155.6 $ 171.1 $ 317.6 $ 313.0 Net written
premiums 107.6 124.0 187.7 204.5 Earned premiums 98.2 105.6 198.7
208.6 Underwriting income $ 3.7 $ 7.4 $ 7.8 $ 16.7 Net investment
income 4.1 2.6 6.9 4.8 Interest expense (0.6 ) (0.6 ) (1.2 ) (1.3 )
Fee income, net 1.2 0.9 2.3
1.3 Net income before taxes $ 8.4 $
10.3 $ 15.8 $ 21.5 Loss ratio 52.9
%
51.1 % 53.9
%
51.3 % Expense ratio 43.4 41.8
42.1 40.7 GAAP combined ratio 96.3 %
92.9 % 96.0 % 92.0 %
International
Specialty
Gross written premiums $ 83.0 $ 97.6 $ 153.2 $ 163.1 Net written
premiums 56.7 65.6 90.6 91.5 Earned premiums 39.7 37.2 77.5 73.4
Underwriting income $ 2.6 $ 6.5 $ 10.3 $ 13.3 Net investment income
5.0 3.3 8.3 6.2 Interest expense (0.7 ) (0.7 )
(1.4 ) (1.5 ) Net income before taxes $ 6.9 $ 9.1
$ 17.2 $ 18.0 Loss ratio 62.4
%
46.2 % 57.0
%
45.8
%
Expense ratio 31.4 36.1 29.9
36.0 GAAP combined ratio 93.8 %
82.3 % 86.9 % 81.8 %
ARGO GROUP INTERNATIONAL HOLDINGS LTD (in millions)
(unaudited) For the Three Months
For the Six Months Ended June 30, Ended June 30, Net Prior Year
Development 2016 2015 2016 2015
(Favorable)/Unfavorable
E&S $ (3.4 ) $ (4.1 ) $ (6.3 ) $ (9.8 ) Commercial Specialty
(5.6 ) 1.7 (5.6 ) 6.4 Syndicate 1200 (3.6 ) (2.2 ) (4.4 ) (2.5 )
International Specialty (4.9 ) (1.2 ) (5.8 ) (3.7 ) Run-off
4.8 0.8 6.2 0.9
Total $ (12.7 ) $ (5.0 ) $ (15.9 ) $ (8.7 )
ARGO GROUP
INTERNATIONAL HOLDINGS, LTD. RECONCILIATION OF OPERATING INCOME
(LOSS) TO NET INCOME (LOSS) (in millions, except per share amounts)
Three Months Ended Six Months Ended June 30 June 30
2016 2015 2016 2015 (unaudited) (unaudited) Net income, as
reported $ 30.9 $ 27.9 $ 58.6 $ 86.7 Provision for income taxes
8.7 6.8 14.1 10.4 Net
income, before taxes 39.6 34.7 72.7 97.1 Add (deduct): Net realized
investment and other losses (gains) 2.1 (2.7 ) 4.9 (13.8 ) Net
foreign currency exchange loss (gains) 4.5 3.0
6.0 (6.6 ) Operating income before taxes 46.2 35.0
83.6 76.7 Provision for income taxes, at assumed rate (a)
9.2 7.0 16.7 15.3 Operating
income $ 37.0 $ 28.0 $ 66.9 $ 61.4
Operating income per common share (diluted) At assumed tax rate:
Income (a) $ 1.03
$
0.89
$
1.88
$
2.47 Net realized investment losses (gains) (a) 0.05 (0.07 ) 0.13
(0.35 ) Foreign currency exchange loss (gains) (a) 0.12
0.07 0.15 (0.17 ) Operating
income per common share (diluted) $ 1.20 $ 0.89 $ 2.16 $
1.95 (a) At assumed tax rate of 20%.
ARGO GROUP
INTERNATIONAL HOLDINGS, LTD. RECONCILIATION OF UNDERWRITING INCOME
TO NET INCOME (in millions) Three Months Ended Six Months
Ended June 30, June 30, 2016 2015 2016 2015 (unaudited) (unaudited)
Earned premiums $ 344.9 $ 346.0
$
689.8
$
680.6 Losses and loss adjustment expenses 196.6 190.6 388.2 374.3
Underwriting, acquisition and insurance
expenses
133.0 139.5 265.6
269.1 Underwriting income 15.3 15.9 36.0 37.2 Net investment
income 35.7 24.4 56.9 50.1 Net realized investment and other
(losses) gains (2.1 ) 2.7 (4.9 ) 13.8 Fee and other income 5.8 4.1
12.6 8.7 Interest expense (4.9 ) (4.6 ) (9.7 ) (9.5 ) Fee and other
expense (5.7 ) (4.8 ) (12.2 ) (9.8 ) Foreign currency exchange
(loss) gain (4.5 ) (3.0 ) (6.0 ) 6.6
Income before taxes 39.6 34.7 72.7 97.1 Income tax provision
8.7 6.8 14.1 10.4
Net Income $ 30.9 $ 27.9 $ 58.6 $ 86.7
ARGO GROUP
INTERNATIONAL HOLDINGS, LTD. RECONCILIATION OF SEGMENT INCOME TO
NET INCOME (in millions)
For the Three Months Ended
For the Six Months Ended June 30, June 30, 2016 2015 2016 2015
Segment income (loss) before income taxes Excess and Surplus
Lines $ 25.0 $ 20.7 $ 46.2 $ 42.1 Commercial Specialty 20.4 9.5
34.1 16.6 Syndicate 1200 8.4 10.3 15.8 21.5 International Specialty
6.9 9.1 17.2 18.0 Run-off Lines (3.2 ) (0.8 ) (4.6 ) 0.4 Corporate
and Other (11.3 ) (13.8 ) (25.1 ) (21.9 ) Realized investment and
other (losses) gains (2.1 ) 2.7 (4.9 ) 13.8 Foreign currency
exchange (losses) gains (4.5 ) (3.0 ) (6.0 )
6.6 Net income before income taxes 39.6 34.7 72.7
97.1 Provision for taxes 8.7 6.8
14.1 10.4 Net income $ 30.9 $ 27.9
$ 58.6 $ 86.7 ARGO GROUP
INTERNATIONAL HOLDINGS, LTD. RECONCILIATION OF LOSS RATIOS
Three
Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015
Excess and Surplus lines Loss ratio 58.9 % 56.9 % 58.1 %
56.0 % Prior accident loss development 2.8 % 3.5 % 2.6 % 4.3 %
Catastrophe losses -2.8 % -1.3 % -2.3 % -0.9 % Accident year
ex-cats loss ratio 58.9 % 59.1 % 58.4 % 59.4 % Commercial
Specialty Loss ratio 51.1 % 60.6 % 52.5 % 61.7 % Prior accident
loss development 6.5 % -2.0 % 3.3 % -3.8 % Catastrophe losses -1.5
% -1.0 % -0.9 % -0.8 % Accident year ex-cats loss ratio 56.1 % 57.6
% 54.9 % 57.1 % Syndicate 1200 Loss ratio 52.9 % 51.1 % 53.9
% 51.3 % Prior accident loss development 3.7 % 2.2 % 2.3 % 1.2 %
Catastrophe losses -7.2 % 0.0 % -3.5 % -0.5 % Accident year ex-cats
loss ratio 49.4 % 53.3 % 52.7 % 52.0 % International
Specialty Loss ratio 62.4 % 46.2 % 57.0 % 45.8 % Prior accident
loss development 12.8 % 3.3 % 7.6 % 5.1 % Catastrophe losses -30.3
% 0.0 % -16.6 % -1.4 % Accident year ex-cats loss ratio 44.9 % 49.5
% 48.0 % 49.5 % Consolidated Loss ratio 57.0 % 55.1 % 56.3 %
55.0 % Prior accident loss development 3.7 % 1.4 % 2.3 % 1.3 %
Catastrophe losses -6.8 % -0.6 % -3.9 % -0.8 % Accident year
ex-cats loss ratio 53.9 % 55.9 % 54.7 % 55.5 % ARGO
GROUP INTERNATIONAL HOLDINGS, LTD. SHAREHOLDER RETURN ANALYSIS (in
millions)
Six Months Ended June 30 2016 2015 % Change
Net income $ 58.6 $ 86.7 (32.4 %) Operating income (a) 66.9 61.4
9.0 % Shareholders' Equity - Beginning of the period $
1,668.1 $ 1,646.7 1.3 % Shareholders' Equity - End of current
period 1,740.3 1,668.9 4.3 % Average
Shareholders' Equity $ 1,704.2 $ 1,657.8 2.8 %
Annualized return on average shareholders' equity 6.9
% 10.5 % Annualized operating return on average shareholders'
equity 7.8 % 7.4 %
(a) at assumed 20% tax rate
ARGO GROUP INTERNATIONAL HOLDINGS, LTD. COMPONENTS OF
INVESTMENT INCOME ALL SEGMENTS (in millions)
Three
Months Ended June 30 September 30 December 31 March 31 June 30 2015
2015 2015 2016 2016 Net Investment Income $ 21.8 $ 21.3 $
21.7 $ 22.7 $ 23.2 Alternative Investments 2.6 (2.9 )
(1.6 ) (1.5 ) 12.5 Total $ 24.4 $ 18.4
$ 20.1 $ 21.2 $ 35.7
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160802006783/en/
Argo Group International Holdings, Ltd.Susan Spivak Bernstein,
212-607-8835Senior Vice President, Investor Relations
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