Argo Group International Holdings, Ltd. (NASDAQ: AGII) today
announced financial results for the three and nine months ended
Sept. 30, 2016.
2016 Third Quarter Recap
Gross Written Net Investment
Net Income
After-tax Operating Book Value
of Premiums Income Per Diluted Share
Income Per Equity Per Share Diluted Share
$585.4M $32.7M $1.80 $1.12
$59.65 ↑ 10.2% ↑ 77.8% ↑ 59.3% ↑
57.7% ↑ 9.8% from 3Q 2015 from 3Q 2015
from 3Q 2015 from 3Q 2015 from Dec. 31, 2015
“Continued improvement in our underwriting results combined
with strong alternative investment returns contributed to growth in
book value per share, delivering real value to our shareholders,”
said CEO Mark E. Watson III. “By almost all measures, our business
continues to show year over year improvement.”
HIGHLIGHTS FOR THE THREE MONTHS
HIGHLIGHTS FOR THE NINE MONTHS ENDED SEPT. 30, 2016:
ENDED SEPT. 30, 2016:
- Gross written premiums were up 10.2% to $585.4 million
from $531.4 million in the 2015 third quarter.
- Gross written premiums were up 6.4% to $1.67 billion
from $1.57 billion in the first nine months of 2015.
- Net income was $55.2 million or $1.80 per diluted share,
compared to $35.3 million or $1.13 per diluted share for the 2015
third quarter.
- Net income was $113.8 million or $3.68 per diluted
share, compared to $122.0 million or $3.89 per diluted share for
the first nine months of 2015.
- After-tax operating income was $34.4 million or $1.12
per diluted share, compared to $22.2 million or $0.71 per diluted
share for the 2015 third quarter.
- After-tax operating income was $101.3 million or $3.28
per diluted share, compared to $83.6 million or $2.66 per diluted
share for the first nine months of 2015.
- Pre-tax underwriting income was $13.5 million compared
to $13.2 million for the 2015 third quarter.
- Pre-tax underwriting income was $49.5 million compared
to $50.4 million for the first nine months of 2015.
- Combined ratio was 96.2% compared to 96.2% for the 2015
third quarter. The loss and expense ratios for the quarter were
57.9% and 38.3%, respectively, compared to 57.8% and 38.4% for the
2015 third quarter.
- Combined ratio was 95.2% compared to 95.0% for the first
nine months of 2015. The loss and expense ratios were 56.8% and
38.4%, respectively compared to 55.9% and 39.1% in the first nine
months of 2015.
- Net Investment Income was $32.7 million, compared to
$18.4 million for the 2015 third quarter.
- Net Investment Income was $89.6 million, compared to
$68.5 million for the first nine months of 2015.
- Net favorable prior-year reserve development was $2.9
million (benefiting the combined ratio by 0.8 points), compared
with $6.6 million (benefiting the combined ratio by 1.9 points) for
the 2015 third quarter.
- Net favorable prior-year reserve development was $18.8
million (benefiting the combined ratio by 1.8 points), compared
with $15.3 million (benefiting the combined ratio by 1.5 points)
for the first nine months of 2015.
- Estimated pre-tax catastrophe losses were $12.9 million
or 3.6 points on the combined ratio, compared to $13.1 million or
3.9 points on the combined ratio for the 2015 third quarter.
- Estimated pre-tax catastrophe losses were $38.9 million
or 3.7 points on the combined ratio, compared to $18.5 million or
1.8 points on the combined ratio for the first nine months of
2015.
- Loss ratio excluding catastrophes and reserve
development was 55.1%, compared to 55.8% for the 2015 third
quarter.
- Loss ratio excluding catastrophes and reserve
development was 54.9%, compared to 55.6% in the first nine months
of 2015.
- During the third quarter, the Company repurchased $5.4
million or 96,601 shares of its common stock.
- During the first nine months of 2016, the Company
repurchased $45.3 million or 815,196 shares of its common
stock.
- Book value per share increased to $59.65, up 9.8% from
$54.31 at Dec. 31, 2015.
- Cash and investments at Sept. 30, 2016, totaled $4.4
billion with a net pre-tax unrealized gain of approximately $151.3
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 6% in the
third quarter and 4% in the first nine months of 2016 primarily
driven by casualty, environmental, and transportation lines.
- The loss ratio for the 2016 third
quarter, excluding catastrophe losses and reserve development, was
59.9% compared to 60.7% for the 2015 third quarter.
In the 2016 third quarter, the Excess and Surplus Lines segment
reported gross written premiums of $141.7 million compared to
$133.6 million in the 2015 third quarter. For the 2016 third
quarter, net written premiums were up 2.6% to $119.4 million, and
earned premiums were up 0.7% to $122.3 million, when compared to
the 2015 third quarter. Underwriting income was $11.5 million for
the 2016 third quarter, compared to $16.3 million for the 2015
third quarter. The 2016 third quarter combined ratio of 90.6%
compares to 86.6% for the prior-year quarter. Net favorable
prior-year reserve development was $5.7 million for the 2016 third
quarter, benefiting the combined ratio by 4.6 points, compared to
net favorable prior-year reserve development of $8.7 million or 7.2
points for the 2015 third quarter. Catastrophe losses for the 2016
third quarter were $3.8 million or 3.1 points on the combined
ratio, compared to $2.7 million or 2.2 points for the 2015 third
quarter. The loss ratio for the 2016 third quarter, excluding
catastrophe losses and reserve development, was 59.9% compared to
60.7% for the 2015 third quarter.
For the nine months ended Sept. 30, 2016, gross written premiums
were $456.0 million, up $16.0 million or 3.6%, compared to $440.0
million in the first nine months of 2015. Net written premiums were
up less than 1% to $379.4 million, and earned premiums were up 3.3%
to $363.4 million, when compared to the first nine months of 2015.
Underwriting income was $38.2 million compared to $43.8 million in
the first nine months of 2015. The first nine months of 2016
combined ratio of 89.5% compares to 87.6% in the first nine months
of 2015. Net favorable prior-year reserve development was $12.0
million or 3.3 points on the combined ratio in the first nine
months of 2016, compared to net favorable prior-year reserve
development of $18.4 million or 5.2 points in the first nine months
of 2015. Catastrophe losses in the first nine months of 2016 were
$9.4 million or 2.6 points on the combined ratio, compared to $4.7
million or 1.3 points in the first nine months of 2015. The loss
ratio for the first nine months of 2016, excluding catastrophe
losses and reserve development, was 58.9% compared to 59.8% in the
first nine months of 2015.
Commercial Specialty
- Gross written premium was up 24% in the
third quarter and 20% in the first nine months of 2016, driven by
program, surety, and professional lines businesses.
- The loss ratio for the 2016 third
quarter, excluding catastrophe losses and reserve development, was
56.8%, compared to 56.7% for the 2015 third quarter.
The Commercial Specialty segment reported gross written premiums
of $219.1 million, up $42.5 million or 24.1%, compared to $176.6
million in the 2015 third quarter. For the 2016 third quarter, net
written premiums were up 22.8% to $139.5 million, and earned
premiums were up 7.4% to $94.0 million, when compared to the 2015
third quarter. Underwriting income was $16.0 million for the 2016
third quarter, compared to underwriting income of $11.0 million for
the 2015 third quarter. The 2016 third quarter combined ratio of
83.0% compares to 87.4% for the prior-year quarter. For the 2016
third quarter, net favorable prior-year reserve development was
$8.0 million or 8.6 points on the combined ratio, compared to net
favorable prior-year reserve development of $2.6 million or 3.0
points for the 2015 third quarter. Catastrophe losses for the
quarter were $0.7 million or 0.8 points on the combined ratio,
compared to $0.4 million or 0.6 points for the 2015 third quarter.
The loss ratio for the 2016 third quarter, excluding catastrophe
losses and reserve development, was 56.8%, compared to 56.7% for
the 2015 third quarter.
For the nine months ended Sept. 30, 2016, gross written premiums
were $514.2 million, up $85.7 million or 20.0%, compared to $428.5
million in the first nine months of 2015. Net written premiums were
up 11.2% to $292.4 million, and earned premiums were up 4.1% to
$266.3 million, when compared to the first nine months of 2015.
Underwriting income was $40.7 million compared to $21.2 million in
the first nine months of 2015. The first nine months of 2016
combined ratio of 84.7% compares to 91.7% in the first nine months
of 2015. Net favorable prior-year reserve development was $13.6
million benefiting the combined ratio by 5.1 points, compared to
net unfavorable prior-year reserve development of $3.7 million or
1.5 points in the first nine months of 2015. Catastrophe losses in
the first nine months of 2016 were $2.1 million or 0.7 points on
the combined ratio, compared to $1.8 million or 0.7 points in the
first nine months of 2015. The loss ratio for the first nine months
of 2016, excluding catastrophe losses and reserve development, was
55.6%, compared to 57.0% in the first nine months of 2015.
Syndicate 1200
- Gross premiums written were up modestly
in the third quarter and first nine months of 2016 reflecting
continued challenging market conditions and a 5% reduction in our
participation on the syndicate for 2016.
- The loss ratio for the 2016 third
quarter, excluding catastrophe losses and reserve development, was
52.0%, compared to 51.2% in the 2015 third quarter.
The Syndicate 1200 segment reported gross written premiums of
$162.6 million in the 2016 third quarter, up $2.4 million or 1.5%
from $160.2 million for 2015 third quarter. Net written premiums
were $115.8 million versus $115.9 million in the 2015 third
quarter. Earned premiums were $102.4 million versus $100.3 million
for the 2015 third quarter. Underwriting income was $1.3 million
for the 2016 third quarter, compared to $4.2 million for the 2015
third quarter. The 2016 third quarter combined ratio of 98.7%
compares to 95.8% for the prior-year quarter. For the 2016 third
quarter, net unfavorable prior-year reserve development was $1.9
million or 1.8 points on the combined ratio, compared to net
favorable prior-year reserve development of $0.3 million benefiting
the combined by 0.2 points for the 2015 third quarter. Catastrophe
losses for the 2016 third quarter were $7.0 million or 6.8 points
on the combined ratio, compared to $4.0 million or 4.0 points for
the 2015 third quarter. The loss ratio for the 2016 third quarter,
excluding catastrophe losses and reserve development, was 52.0%,
compared to 51.2% in the 2015 third quarter.
For the nine months ended Sept. 30, 2016, gross written premiums
were $480.2 million, up $7.0 million or 1.5% from $473.2 million in
the first nine months of 2015. Net written premiums were $303.5
million versus $320.4 million in the first nine months of 2015.
Earned premiums were $301.1 million versus $308.9 million in the
first nine months of 2015. Underwriting income was $9.1 million
compared to $20.9 million in the first nine months of 2015. The
first nine months of 2016 combined ratio of 97.0% compares to 93.2%
in the first nine months of 2015. Net favorable prior-year reserve
development in the first nine months of 2016 was $2.5 million or
0.8 points on the combined ratio, compared to net favorable
prior-year reserve development of $2.8 million or 0.9 points in the
first nine months of 2015. Catastrophe losses in the first nine
months of 2016 were $14.0 million or 4.6 points on the combined
ratio, compared to $5.0 million or 1.5 points on the combined ratio
in the first nine months of 2015. The loss ratio for the first nine
months of 2016, excluding catastrophe losses and reserve
development, was 52.4%, compared to 51.8% in the first nine months
of 2015.
International Specialty
- Gross premiums written were up modestly
in the third quarter but down in the first nine months of 2016
reflecting more competitive market conditions that exist in nearly
all of the segment’s business lines.
- The loss ratio for the first nine
months of 2016, excluding catastrophe losses and reserve
development, was 47.0%, compared to 49.6% in the first nine months
of 2015.
The International Specialty segment includes our property
reinsurance business as well as our insurance business in Bermuda
and Brazil. In the 2016 third quarter, gross written premiums were
$61.9 million, up $1.2 million or 2.0% from $60.7 million for the
2015 third quarter. Net written premiums were $40.5 million versus
$40.0 million in the 2015 third quarter. Earned premiums were $39.9
million versus $36.4 million for the 2015 third quarter.
Underwriting income was $11.2 million for the 2016 third quarter,
compared to $1.3 million for the 2015 third quarter. The 2016 third
quarter combined ratio of 72.2% compares to 96.8% for the
prior-year quarter. Net favorable prior-year reserve development
was $2.5 million or 6.1 points on the combined ratio for the 2016
third quarter, compared to net favorable prior-year reserve
development of $2.1 million or 6.0 points for the 2015 third
quarter. Catastrophe losses for the 2016 third quarter were $1.4
million or 3.7 points on the combined ratio, compared to $6.0
million or 18.2 points for the 2015 third quarter. The loss ratio
for the 2016 third quarter, excluding catastrophe losses and
reserve development, was 44.8%, compared to 50.0% in the 2015 third
quarter.
For the nine months ended Sept. 30, 2016, gross written premiums
were $215.1 million, down $8.7 million or 3.9% from $223.8 million
in the first nine months of 2015. Net written premiums were $131.1
million versus $131.5 million in the first nine months of 2015.
Earned premiums were $117.4 million versus $109.8 million in the
first nine months of 2015. Underwriting income was $21.5 million
compared to $14.6 million in the first nine months of 2015. The
first nine months of 2016 combined ratio of 81.8% compares to 86.8%
in the first nine months of 2015. Net favorable prior-year reserve
development in the first nine months of 2016 was $8.3 million or
7.2 points on the combined ratio, compared to net favorable
prior-year reserve development of $5.8 million or 5.3 points in the
first nine months of 2015. Catastrophe losses in the first nine
months of 2016 were $13.4 million or 12.2 points on the combined
ratio compared to $7.0 million or 6.9 points in the first nine
months of 2015. The loss ratio for the first nine months of 2016,
excluding catastrophe losses and reserve development, was 47.0%,
compared to 49.6% in the first nine months of 2015.
CONFERENCE CALL
Argo Group management will conduct an investor conference call
starting at 11 a.m. EDT (Noon ADT) tomorrow, Wednesday, Nov. 2,
2016. A live webcast of the conference call can be accessed by
visiting (http://services.choruscall.com/links/agii161102.html).
Participants inside the U.S. can access the call by phone 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/agii161102.html). In
addition, a telephone replay of the call will be available through
Nov. 9, 2016, to callers from inside the U.S. by dialing (877)
344-7529 (conference #10095483). Callers dialing from outside the
U.S. can access the telephone replay by dialing (412) 317-0088
(conference #10095483).
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) September 30, December
31, 2016 2015 (unaudited) Assets Total investments $ 4,313.6 $
4,115.7 Cash 123.6 121.7 Accrued investment income 21.9 21.6
Receivables 1,786.5 1,525.6 Goodwill and intangible assets 221.1
225.5 Deferred acquisition costs, net 147.7 132.4 Ceded unearned
premiums 311.6 250.8 Other assets 255.1 232.3 Total
assets $ 7,181.1 $ 6,625.6 Liabilities and Shareholders'
Equity Reserves for losses and loss adjustment expenses $ 3,284.8 $
3,123.6 Unearned premiums 1,010.2 886.7 Ceded reinsurance payable,
net 452.8 312.4 Senior unsecured fixed rate notes 139.4 139.3 Other
indebtedness 57.3 55.2 Junior subordinated debentures 172.7 172.7
Other liabilities 275.5 267.6 Total liabilities
5,392.7 4,957.5 Total shareholders' equity 1,788.4
1,668.1 Total liabilities and shareholders' equity $ 7,181.1
$ 6,625.6 Book value per common share $ 59.65 $ 54.31
ARGO
GROUP INTERNATIONAL HOLDINGS, LTD. FINANCIAL HIGHLIGHTS ALL
SEGMENTS (in millions, except per share amounts) Three
Months Ended Nine Months Ended September 30, September 30, 2016
2015 2016 2015 (unaudited) (unaudited) Gross written
premiums $ 585.4 $ 531.4 $ 1,665.8 $ 1,565.9 Net written premiums
415.3 386.2 1,106.7 1,093.8 Earned premiums 358.7 346.0
1,048.5 1,026.6 Net investment income 32.7 18.4 89.6 68.5 Fee and
other income 7.6 9.2 20.2 17.9 Net realized investment and other
gains 17.7 6.6 12.8 20.4
Total revenue 416.7 380.2 1,171.1 1,133.4 Losses and
loss adjustment expenses 207.8 200.0 596.0 574.3 Underwriting,
acquisition and insurance expenses 137.4 132.8 403.0 401.9 Interest
expense 4.9 4.8 14.6 14.3 Fee and other expense, net 5.9 8.2 18.1
18.0 Foreign currency exchange (gain) loss (1.5 )
(1.8 ) 4.5 (8.4 ) Total expenses 354.5 344.0 1,036.2
1,000.1 Income before taxes 62.2 36.2 134.9 133.3 Income tax
provision 7.0 0.9 21.1
11.3 Net income $ 55.2 $ 35.3 $ 113.8 $ 122.0
Net income per common share (basic) $ 1.84
$ 1.15 $ 3.76 $ 3.96 Net income
per common share (diluted) $ 1.80 $ 1.13 $ 3.68 $
3.89 Weighted average common shares: Basic
30.0 30.7 30.2 30.8
Diluted 30.7 31.3 30.9
31.4
ARGO GROUP INTERNATIONAL HOLDINGS, LTD. SEGMENT DATA (in millions)
Three Months Ended Nine Months Ended September
30, September 30, 2016 2015 2016 2015 (unaudited) (unaudited)
Excess & Surplus
Lines
Gross written premiums $ 141.7 $ 133.6 $ 456.0 $ 440.0 Net written
premiums 119.4 116.4 379.4 378.6 Earned premiums 122.3 121.5 363.4
351.8 Underwriting income 11.5 16.3 38.2 43.8 Net investment income
12.7 7.2 35.1 24.6 Interest expense (1.4 ) (1.5 )
(4.3 ) (4.3 ) Net income before taxes $ 22.8 $
22.0 $ 69.0 $ 64.1 Loss ratio 58.4 55.7 58.2
55.9 Expense ratio 32.2 30.9
31.3 31.7 GAAP combined ratio 90.6 %
86.6 % 89.5 % 87.6 %
Commercial
Specialty
Gross written premiums $ 219.1 $ 176.6 $ 514.2 $ 428.5 Net written
premiums 139.5 113.6 292.4 262.9 Earned premiums 94.0 87.5 266.3
255.7 Underwriting income 16.0 11.0 40.7 21.2 Net investment income
7.6 4.4 20.7 15.1 Interest expense (0.8 ) (0.8 ) (2.5 ) (2.6 ) Fee
income (expense), net 0.3 0.5
(1.7 ) (2.0 ) Net income before taxes $ 23.1 $ 15.1
$ 57.2 $ 31.7 Loss ratio 49.0 54.3 51.2 59.2
Expense ratio 34.0 33.1 33.5
32.5 GAAP combined ratio 83.0 %
87.4 % 84.7 % 91.7 %
Syndicate
1200
Gross written premiums $ 162.6 $ 160.2 $ 480.2 $ 473.2 Net written
premiums 115.8 115.9 303.5 320.4 Earned premiums 102.4 100.3 301.1
308.9 Underwriting income 1.3 4.2 9.1 20.9 Net investment income
2.8 1.9 9.7 6.7 Interest expense (0.7 ) (0.7 ) (1.9 ) (2.0 ) Fee
income, net 1.5 1.1 3.8
2.4 Net income before taxes $ 4.9 $ 6.5
$ 20.7 $ 28.0 Loss ratio 60.6 55.0 56.2 52.4 %
Expense ratio 38.1 40.8 40.8
40.8 GAAP combined ratio 98.7 %
95.8 % 97.0 % 93.2 %
International
Specialty
Gross written premiums $ 61.9 $ 60.7 $ 215.1 $ 223.8 Net written
premiums 40.5 40.0 131.1 131.5 Earned premiums 39.9 36.4 117.4
109.8 Underwriting income 11.2 1.3 21.5 14.6 Net investment income
4.7 2.5 13.0 8.7 Interest expense (0.7 ) (0.7 )
(2.1 ) (2.2 ) Net income before taxes $ 15.2 $
3.1 $ 32.4 $ 21.1 Loss ratio 42.4 62.2 52.0
51.2 Expense ratio 29.8 34.6
29.8 35.6 GAAP combined ratio 72.2 %
96.8 % 81.8 % 86.8 % ARGO GROUP
INTERNATIONAL HOLDINGS LTD (in millions) (unaudited)
For
the Three Months Ended For the Nine Months Ended September 30,
September 30, Net Prior Year Development 2016 2015 2016 2015
(Favorable)/Unfavorable
E&S $ (5.7 ) $ (8.7 ) $ (12.0 ) $ (18.4 ) Commercial Specialty
(8.0 ) (2.6 ) (13.6 ) 3.7 Syndicate 1200 1.9 (0.3 ) (2.5 ) (2.8 )
International Specialty (2.5 ) (2.1 ) (8.3 ) (5.8 ) Run-off
11.4 7.1 17.6 8.0
Total $ (2.9 ) $ (6.6 ) $ (18.8 ) $ (15.3 )
ARGO GROUP
INTERNATIONAL HOLDINGS, LTD. RECONCILIATION OF UNDERWRITING INCOME
TO NET INCOME (in millions) Three Months Ended Nine Months
Ended September 30, September 30, 2016 2015 2016 2015 (unaudited)
(unaudited) Earned premiums
$
358.7 $ 346.0
$
1,048.5
$
1,026.6 Losses and loss adjustment expenses 207.8 200.0 596.0 574.3
Underwriting, acquisition and insurance expenses 137.4
132.8 403.0 401.9
Underwriting income 13.5 13.2 49.5 50.4 Net investment income 32.7
18.4 89.6 68.5 Net realized investment and other gains 17.7 6.6
12.8 20.4 Fee and other income 7.6 9.2 20.2 17.9 Interest expense
(4.9 ) (4.8 ) (14.6 ) (14.3 ) Fee and other expense (5.9 ) (8.2 )
(18.1 ) (18.0 ) Foreign currency exchange gains (losses) 1.5
1.8 (4.5 ) 8.4 Income
before taxes 62.2 36.2 134.9 133.3 Income tax provision 7.0
0.9 21.1 11.3 Net
Income $ 55.2 $ 35.3 $ 113.8 $ 122.0
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET INCOME (LOSS) (in
millions, except per share amounts)
Three Months Ended Nine
Months Ended September 30, September 30, 2016 2015 2016 2015
(unaudited) (unaudited) Net income, as reported $ 55.2 $
35.3 $ 113.8 $ 122.0 Provision for income taxes 7.0
0.9 21.1 11.3 Net income,
before taxes 62.2 36.2 134.9 133.3 Add (deduct): Net realized
investment and other gains (17.7 ) (6.6 ) (12.8 ) (20.4 ) Foreign
currency exchange (gains) losses (1.5 ) (1.8 )
4.5 (8.4 ) Operating income before taxes 43.0 27.8
126.6 104.5 Provision for income taxes, at assumed rate (a)
8.6 5.6 25.3 20.9
Operating income $ 34.4 $ 22.2 $ 101.3 $ 83.6
Operating income per common share (diluted) At
assumed tax rate: Income (a) $ 1.62 $ 0.92 $ 3.49 $ 3.40 Net
realized investment and other gains (a) (0.46 ) (0.17 ) (0.33 )
(0.52 ) Foreign currency exchange loss (gains) (a) (0.04 )
(0.04 ) 0.12 (0.22 ) Operating
income per common share (diluted) $ 1.12 $ 0.71 $
3.28 $ 2.66 (a) At assumed tax rate of 20%.
ARGO GROUP
INTERNATIONAL HOLDINGS, LTD. RECONCILIATION OF SEGMENT INCOME TO
NET INCOME (in millions)
For the Three Months Ended
For the Nine Months Ended
September 30, September 30, 2016 2015 2016 2015 Segment
income (loss) before income taxes Excess and Surplus Lines $ 22.8 $
22.0 $ 69.0 $ 64.1 Commercial Specialty 23.1 15.1 57.2 31.7
Syndicate 1200 4.9 6.5 20.7 28.0 International Specialty 15.2 3.1
32.4 21.1 Run-off Lines (10.0 ) (6.9 ) (14.6 ) (6.6 ) Corporate and
Other (13.0 ) (12.0 ) (38.1 ) (33.8 ) Realized investment and other
gains 17.7 6.6 12.8 20.4 Foreign currency exchange gains (losses)
1.5 1.8 (4.5 ) 8.4
Net income before income taxes 62.2 36.2 134.9 133.3 Provision for
taxes 7.0 0.9 21.1
11.3 Net income $ 55.2 $ 35.3 $ 113.8 $
122.0 ARGO
GROUP INTERNATIONAL HOLDINGS, LTD. RECONCILIATION OF LOSS RATIOS
Three Months Ended Nine Months
Ended September 30, September 30, 2016 2015 2016 2015 Excess
and Surplus lines Loss ratio 58.4 % 55.7 % 58.2 % 55.9 % Prior
accident year loss development 4.6 % 7.2 % 3.3 % 5.2 % Catastrophe
losses -3.1 % -2.2 % -2.6 % -1.3 % Current accident year ex-cats
loss ratio 59.9 % 60.7 % 58.9 % 59.8 % Commercial Specialty
Loss ratio 49.0 % 54.3 % 51.2 % 59.2 % Prior accident year loss
development 8.6 % 3.0 % 5.1 % -1.5 % Catastrophe losses -0.8 % -0.6
% -0.7 % -0.7 % Current accident year ex-cats loss ratio 56.8 %
56.7 % 55.6 % 57.0 % Syndicate 1200 Loss ratio 60.6 % 55.0 %
56.2 % 52.4 % Prior accident year loss development -1.8 % 0.2 % 0.8
% 0.9 % Catastrophe losses -6.8 % -4.0 % -4.6 % -1.5 % Current
accident year ex-cats loss ratio 52.0 % 51.2 % 52.4 % 51.8 %
International Specialty Loss ratio 42.4 % 62.2 % 52.0 % 51.2 %
Prior accident year loss development 6.1 % 6.0 % 7.2 % 5.3 %
Catastrophe losses -3.7 % -18.2 % -12.2 % -6.9 % Current accident
year ex-cats loss ratio 44.8 % 50.0 % 47.0 % 49.6 %
Consolidated Loss ratio 57.9 % 57.8 % 56.8 % 55.9 % Prior accident
year loss development 0.8 % 1.9 % 1.8 % 1.5 % Catastrophe losses
-3.6 % -3.9 % -3.7 % -1.8 % Current accident year ex-cats loss
ratio 55.1 % 55.8 % 54.9 % 55.6 %
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
COMPONENTS OF INVESTMENT INCOME ALL SEGMENTS (in millions)
Three Months Ended September 30
December 31 March 31 June 30 September 30 2015 2015 2016 2016 2016
Net Investment Income $ 21.3 $ 21.7 $ 22.7 $ 23.2 $ 22.9
Alternative Investments (2.9 ) (1.6 ) (1.5 )
12.5 9.8 Total $ 18.4 $ 20.1 $ 21.2
$ 35.7 $ 32.7
ARGO GROUP INTERNATIONAL HOLDINGS, LTD. SHAREHOLDER
RETURN ANALYSIS (in millions) Nine Months Ended
September 30 2016 2015 % Change Net income $ 113.8 $ 122.0
(6.7 %) Operating income (a) 101.3 83.6 21.1 % Shareholders'
Equity - Beginning of the period $ 1,668.1 $ 1,646.7 1.3 %
Shareholders' Equity - End of current period 1,788.4
1,641.5 8.9 % Average Shareholders' Equity $ 1,728.3
$ 1,644.1 5.1 %
Annualized return
on average shareholders' equity 8.8 % 9.9 % Annualized operating
return on average shareholders' equity
7.8 % 6.8 % (a) at
assumed 20% tax rate
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161101006722/en/
Argo Group International Holdings, Ltd.Susan Spivak Bernstein,
212-607-8835Senior Vice President, Investor Relations
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