Argo Group International Holdings, Ltd. (NASDAQ: AGII) today
announced financial results for the three months and year ended
Dec. 31, 2016.
2016 Annual Recap
Gross Written Net Investment
Net Income
Adjusted Operating Annualized
Return Premiums Income Per Diluted Share
Income Per Diluted on Average
Share (1)
Shareholders’ Equity (1)
$2.16B $115.1M $4.75 $3.92 8.5%
↑ 7.6% ↑ 29.9% ↓ 8.7% ↑ 14.0% ↓ 1.3
pts from 2015 from 2015 from 2015 from
2015 from 2015
“Argo Group ended the year with book value of $59.73 per
share, a 10% increase from December 31, 2015, even with an increase
in the incidence of global catastrophe losses relative to recent
years,” said Argo Group CEO Mark E. Watson III. “For the
past 15 years, Argo Group has grown book value per share in excess
of 10% on a compounded annual basis. As we have discussed in
the past, we consider the compounded annual growth in book value as
the measure that most clearly demonstrates value creation for our
shareholders. Also, our annualized return on equity has
averaged 9.8% over the last four years. These results
demonstrate the value of a well-balanced and diverse portfolio of
businesses as well as thoughtful asset allocation. The
recently completed acquisition of Ariel Re provides us with
additional presence and scale in both our Bermuda and London based
operations,” said Mr. Watson.
HIGHLIGHTS FOR THE THREE MONTHS ENDED
DEC. 31, 2016:
HIGHLIGHTS FOR THE YEAR ENDED DEC. 31,
2016:
- Gross written premiums were up 11.8% to $499.0 million
from $446.2 million in the 2015 fourth quarter.
- Gross written premiums were up 7.6% to $2.16 billion
from $2.01 billion in 2015.
- Net income was $32.9 million or $1.07 per diluted share,
compared to $41.2 million or $1.31 per diluted share for the 2015
fourth quarter.
- Net income was $146.7 million or $4.75 per diluted
share, compared to $163.2 million or $5.20 per diluted share for
2015.
- Adjusted operating income was $19.8 million or $0.65 per
diluted share, compared to $24.5 million or $0.78 per diluted share
for the 2015 fourth quarter.
- Adjusted operating income was $121.0 million or
$3.92 per diluted share, compared to $108.1 million or $3.44 per
diluted share for 2015.
- Pre-tax underwriting income (1) was $4.2 million
compared to $18.7 million for the 2015 fourth quarter.
- Pre-tax underwriting income (1) was $53.7 million
compared to $69.1 million for 2015.
- Combined ratio was 98.8% compared to 94.5% for the 2015
fourth quarter. The loss and expense ratios for the quarter were
59.1% and 39.7%, respectively, compared to 55.5% and 39.0% for the
2015 fourth quarter.
- Combined ratio was 96.2% compared to 95.0% for 2015. The
loss and expense ratios were 57.4% and 38.8%, respectively compared
to 55.8% and 39.2% in 2015.
- Net Investment Income was $25.5 million, compared to
$20.1 million for the 2015 fourth quarter.
- Net Investment Income was $115.1 million, compared to
$88.6 million for 2015.
- Net favorable prior-year reserve development was $14.5
million (benefiting the combined ratio by 4.0 points), compared
with $17.1 million (benefiting the combined ratio by 5.0 points)
for the 2015 fourth quarter.
- Net favorable prior-year reserve development was $33.3
million (benefiting the combined ratio by 2.4 points), compared
with $32.4 million (benefiting the combined ratio by 2.4 points)
for 2015.
- Estimated pre-tax catastrophe losses were $22.8 million
or 6.4 points on the combined ratio, compared to $5.2 million or
1.5 points on the combined ratio for the 2015 fourth quarter.
- Estimated pre-tax catastrophe losses were $61.7 million
or 4.4 points on the combined ratio, compared to $23.7 million or
1.8 points on the combined ratio for 2015.
- Loss ratio excluding catastrophes and reserve
development was 56.7%, compared to 59.0% for the 2015 fourth
quarter.
- Loss ratio excluding catastrophes and reserve
development was 55.4%, compared to 56.4% in 2015.
- During the fourth quarter, the Company repurchased $1.8
million or 31,915 shares of its common stock.
- During 2016, the Company repurchased $47.1 million or
847,111 shares of its common stock.
- Book value per share increased to $59.73, up 10.0% from
$54.31 at Dec. 31, 2015.
- Cash and investments at Dec. 31, 2016, totaled $4.4
billion with a net pre-tax unrealized gain of approximately $113.2
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:
(a) A 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.
(b) 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.
(1) Refer to Non-GAAP Financial Measures
below.
FINANCIAL HIGHLIGHTS BY SEGMENT
Excess and Surplus Lines
- Gross written premiums were up 6% in
the fourth quarter and 4% in 2016 primarily driven by casualty
lines and rate increases in certain specialty classes.
- For calendar 2016 the loss ratio
excluding catastrophe losses and reserve development was 1.8 points
better at 59.3% from 61.1% in 2015.
In the 2016 fourth quarter, the Excess and Surplus Lines segment
reported gross written premiums of $129.8 million compared to
$122.5 million in the 2015 fourth quarter. For the 2016 fourth
quarter, net written premiums were up 2.8% to $110.0 million, and
earned premiums were up 2.1% to $121.9 million, when compared to
the 2015 fourth quarter. Underwriting income was $10.8 million for
the 2016 fourth quarter, compared to $11.0 million for the 2015
fourth quarter. The 2016 fourth quarter combined ratio of 91.1%
compares to 90.7% for the prior-year quarter. Net favorable
prior-year reserve development was $1.2 million for the 2016 fourth
quarter, benefiting the combined ratio by 1.0 points, compared to
net favorable prior-year reserve development of $7.1 million or 5.9
points for the 2015 fourth quarter. Catastrophe losses for the 2016
fourth quarter were $2.2 million or 1.8 points on the combined
ratio, compared to $0.8 million or 0.6 points for the 2015 fourth
quarter. The loss ratio for the 2016 fourth quarter, excluding
catastrophe losses and reserve development, was 60.5% compared to
64.8% for the 2015 fourth quarter.
For 2016 gross written premiums were $585.8 million, up $23.3
million or 4.1%, compared to $562.5 million in 2015. Net written
premiums were up 1.0% to $489.4 million, and earned premiums were
up 3.0% to $485.3 million, when compared to 2015. Underwriting
income was $49.0 million compared to $54.8 million in 2015. The
2016 combined ratio of 89.9% compares to 88.4% in 2015. Net
favorable prior-year reserve development was $13.2 million or 2.7
points on the combined ratio in 2016, compared to net favorable
prior-year reserve development of $25.5 million or 5.4 points in
2015. Catastrophe losses in 2016 were $11.6 million or 2.4 points
on the combined ratio, compared to $5.5 million or 1.1 points in
2015. The loss ratio for 2016, excluding catastrophe losses and
reserve development, was 59.3% compared to 61.1% in 2015.
Commercial Specialty
- Gross written premiums were up 15.2% in
the fourth quarter and 18.7% in 2016, driven by program, surety,
and professional lines businesses.
- The loss ratio for 2016, excluding
catastrophe losses and reserve development, was 55.2%, compared to
56.8% in 2015.
In the 2016 fourth quarter, the Commercial Specialty segment
reported gross written premiums of $177.7 million, up $23.5 million
or 15.2%, compared to $154.2 million in the 2015 fourth quarter.
For the 2016 fourth quarter, net written premiums were up 13.0% to
$101.7 million, and earned premiums were up 10.6% to $97.9 million,
when compared to the 2015 fourth quarter. Underwriting income was
$21.8 million for the 2016 fourth quarter, compared to underwriting
income of $8.9 million for the 2015 fourth quarter. The 2016 fourth
quarter combined ratio of 77.8% compares to 90.0% for the
prior-year quarter. For the 2016 fourth quarter, net favorable
prior-year reserve development was $9.1 million or 9.2 points on
the combined ratio, compared to net favorable prior-year reserve
development of $1.2 million or 1.4 points for the 2015 fourth
quarter. Catastrophe losses for the quarter were $0.5 million or
0.5 points on the combined ratio, compared to $3.4 million or 3.9
points for the 2015 fourth quarter. The loss ratio for the 2016
fourth quarter, excluding catastrophe losses and reserve
development, was 54.3%, compared to 56.2% for the 2015 fourth
quarter.
For 2016, gross written premiums were $691.9 million, up $109.2
million or 18.7%, compared to $582.7 million in 2015. Net written
premiums were up 11.7% to $394.1 million, and earned premiums were
up 5.8% to $364.2 million, when compared to 2015. Underwriting
income was $62.5 million compared to $30.1 million in 2015. The
2016 combined ratio of 82.8% compares to 91.3% in 2015. Net
favorable prior-year reserve development was $22.7 million
benefiting the combined ratio by 6.2 points, compared to net
unfavorable prior-year reserve development of $2.5 million or 0.7
points in 2015. Catastrophe losses in 2016 were $2.6 million or 0.7
points on the combined ratio, compared to $5.2 million or 1.6
points in 2015. The loss ratio for 2016, excluding catastrophe
losses and reserve development, was 55.2%, compared to 56.8% in
2015.
Syndicate 1200
- Gross written premiums were up modestly
in the fourth quarter. 2016 results reflected competitive market
conditions and a reduced participation on the syndicate.
- The loss ratio for 2016, excluding
catastrophe losses and reserve development, was 53.1%, compared to
53.0% in 2015.
The Syndicate 1200 segment reported gross written premiums of
$145.3 million in the 2016 fourth quarter, up $18.4 million or
14.5% from $126.9 million for 2015 fourth quarter. Net written
premiums were $99.4 million versus $84.7 million in the 2015 fourth
quarter. Earned premiums were $105.3 million versus $100.8 million
for the 2015 fourth quarter. For the 2016 fourth quarter, Syndicate
1200 reported an underwriting loss of $7.5 million, compared to
underwriting income of $7.8 million for the 2015 fourth quarter.
The 2016 fourth quarter combined ratio of 107.2% compares to 92.3%
for the prior-year quarter. For the 2016 fourth quarter, net
favorable prior-year reserve development was $2.5 million or 2.3
points on the combined ratio, compared to net favorable prior-year
reserve development of $7.5 million benefiting the combined by 7.4
points for the 2015 fourth quarter. Catastrophe losses for the 2016
fourth quarter were $16.1 million or 15.2 points on the combined
ratio, compared to no catastrophe losses for the 2015 fourth
quarter. The loss ratio for the 2016 fourth quarter, excluding
catastrophe losses and reserve development, was 54.9%, compared to
56.8% in the 2015 fourth quarter.
For 2016, gross written premiums were $625.5 million, up $25.4
million or 4.2% from $600.1 million in 2015. Net written premiums
were $402.9 million versus $405.1 million in 2015. Earned premiums
were $406.4 million versus $409.7 million in 2015. Underwriting
income was $1.6 million compared to $28.7 million in 2015. The 2016
combined ratio of 99.6% compares to 93.0% in 2015. Net favorable
prior-year reserve development in 2016 was $5.0 million or 1.3
points on the combined ratio, compared to net favorable prior-year
reserve development of $10.3 million or 2.5 points in 2015.
Catastrophe losses in 2016 were $30.1 million or 7.4 points on the
combined ratio, compared to $5.0 million or 1.2 points on the
combined ratio in 2015. The loss ratio for 2016, excluding
catastrophe losses and reserve development, was 53.1%, compared to
53.0% in 2015.
International Specialty
- Gross written premiums were up modestly
in the fourth quarter but down for 2016. Growth in our Bermuda
insurance business was offset by declines in our reinsurance
business in a more competitive rating environment.
- The loss ratio for 2016, excluding
catastrophe losses and reserve development, was 49.1%, compared to
50.3% in 2015.
The International Specialty segment includes our property
reinsurance business as well as our insurance business in Bermuda
and Brazil. In the 2016 fourth quarter, gross written premiums were
$46.2 million, up $3.7 million or 8.7% from $42.5 million for the
2015 fourth quarter. Net written premiums were $22.4 million versus
$26.6 million in the 2015 fourth quarter. Earned premiums were
$37.1 million versus $36.6 million for the 2015 fourth quarter.
Underwriting income was $2.7 million for the 2016 fourth quarter,
compared to $6.0 million for the 2015 fourth quarter. The 2016
fourth quarter combined ratio of 92.3% compares to 83.6% for the
prior-year quarter. Net favorable prior-year reserve development
was $2.7 million or 7.4 points on the combined ratio for the 2016
fourth quarter, compared to net favorable prior-year reserve
development of $1.9 million or 5.2 points for the 2015 fourth
quarter. Catastrophe losses for the 2016 fourth quarter were $4.0
million or 11.7 points on the combined ratio, compared to $1.0
million or 2.9 points for the 2015 fourth quarter. The loss ratio
for the 2016 fourth quarter, excluding catastrophe losses and
reserve development, was 55.8%, compared to 52.3% in the 2015
fourth quarter.
For 2016, gross written premiums were $261.3 million, down $5.0
million or 1.9% from $266.3 million in 2015. Net written premiums
were $153.5 million versus $158.1 million in 2015. Earned premiums
were $154.5 million versus $146.4 million in 2015. Underwriting
income was $24.2 million compared to $20.6 million in 2015. The
2016 combined ratio of 84.4% compares to 85.9% in 2015. Net
favorable prior-year reserve development in 2016 was $11.0 million
or 7.2 points on the combined ratio, compared to net favorable
prior-year reserve development of $7.7 million or 5.3 points in
2015. Catastrophe losses in 2016 were $17.4 million or 12.1 points
on the combined ratio compared to $8.0 million or 5.9 points in
2015. The loss ratio for 2016, excluding catastrophe losses and
reserve development, was 49.1%, compared to 50.3% in 2015.
CONFERENCE CALL
Argo Group management will conduct an investor conference call
starting at 10 a.m. EST (11 a.m. AST) tomorrow, Tuesday, Feb. 14,
2017. A live webcast of the conference call can be accessed by
visiting http://services.choruscall.com/links/agii170214.html.
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 to be connected
to the Argo Group earnings call.
A webcast replay will be available shortly after the live
conference call and can be accessed at
http://services.choruscall.com/links/agii170214.html. A telephone
replay of the conference call will be available through Feb. 21,
2017, to callers in the U.S. by dialing (877) 344-7529 (conference
#10100764). Callers dialing from outside the U.S. can access the
telephone replay by dialing (412) 317-0088 (conference #
10100764).
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. 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.
"Adjusted 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 20%) 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 adjusted operating income because
these amounts are influenced by and fluctuate in part according to
the availability of market opportunities. In addition to presenting
net income determined in accordance with U.S. GAAP, the Company
believes that showing adjusted 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. Adjusted 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 adjusted operating return on average shareholders'
equity" is calculated using adjusted 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)
December 31, December 31, 2016
2015 (unaudited) Assets Total investments $ 4,324.3 $ 4,115.7 Cash
86.0 121.7 Accrued investment income 20.7 21.6 Receivables 1,849.4
1,525.6 Goodwill and intangible assets 219.9 225.5 Deferred
acquisition costs, net 139.1 132.4 Ceded unearned premiums 302.8
250.8 Other assets 262.8 232.3 Total assets $ 7,205.0
$ 6,625.6 Liabilities and Shareholders' Equity Reserves for
losses and loss adjustment expenses $ 3,350.8 $ 3,123.6 Unearned
premiums 970.0 886.7 Ceded reinsurance payable, net 466.6 312.4
Senior unsecured fixed rate notes 139.5 139.3 Other indebtedness
55.4 55.2 Junior subordinated debentures 172.7 172.7 Other
liabilities 257.3 267.6 Total liabilities 5,412.3
4,957.5 Total shareholders' equity 1,792.7
1,668.1 Total liabilities and shareholders' equity $ 7,205.0 $
6,625.6 Book value per common share $ 59.73 $ 54.31
ARGO GROUP INTERNATIONAL HOLDINGS, LTD. FINANCIAL HIGHLIGHTS
ALL SEGMENTS (in millions, except per share amounts)
Three Months Ended
Years Ended December 31, December 31, 2016 2015 2016 2015
(unaudited) (unaudited) Gross written premiums $ 499.0 $
446.2 $ 2,164.8 $ 2,012.1 Net written premiums 333.5 308.3 1,440.2
1,402.1 Earned premiums 362.3 345.3 1,410.8 1,371.9 Net
investment income 25.5 20.1 115.1 88.6 Fee and other income 4.3 4.3
24.5 22.2 Net realized investment and other gains 13.3
3.7 26.1 24.1
Total revenue 405.4 373.4 1,576.5 1,506.8 Losses and loss
adjustment expenses 214.1 191.8 810.1 766.1 Underwriting,
acquisition and insurance expenses 144.0 134.8 547.0 536.7 Interest
expense 5.0 4.7 19.6 19.0 Fee and other expense, net 4.3 7.8 22.4
25.8 Foreign currency exchange gain (9.0 ) (9.9 )
(4.5 ) (18.3 ) Total expenses 358.4 329.2 1,394.6
1,329.3 Income before taxes 47.0 44.2 181.9 177.5 Income tax
provision 14.1 3.0 35.2
14.3 Net income $ 32.9 $ 41.2 $ 146.7
$ 163.2 Net income per common share
(basic) $ 1.10 $ 1.34 $ 4.86 $ 5.31
Net income per common share (diluted) $ 1.07 $
1.31 $ 4.75 $ 5.20 Weighted average
common shares: Basic 30.0 30.7
30.2 30.8 Diluted 30.7
31.4 30.8 31.4
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD. SEGMENT DATA (in millions)
Three Months Ended Years Ended December 31, December 31, 2016 2015
2016 2015 (unaudited) (unaudited)
Excess & Surplus
Lines
Gross written premiums $ 129.8 $ 122.5 $ 585.8 $ 562.5 Net written
premiums 110.0 107.0 489.4 485.6 Earned premiums 121.9 119.4 485.3
471.2 Underwriting income 10.8 11.0 49.0 54.8 Net investment income
10.1 7.7 45.2 32.3 Interest expense (1.5 ) (1.4 )
(5.8 ) (5.7 ) Net income before taxes $ 19.4 $
17.3 $ 88.4 $ 81.4 Loss ratio 61.3 59.5 59.0
56.8 Expense ratio 29.8 31.2
30.9 31.6 GAAP combined ratio 91.1 %
90.7 % 89.9 % 88.4 %
Commercial
Specialty
Gross written premiums $ 177.7 $ 154.2 $ 691.9 $ 582.7 Net written
premiums 101.7 90.0 394.1 352.9 Earned premiums 97.9 88.5 364.2
344.2 Underwriting income 21.8 8.9 62.5 30.1 Net investment income
6.0 4.8 26.7 19.9 Interest expense (0.9 ) (0.9 ) (3.4 ) (3.5 ) Fee
income (expense), net 1.9 (1.5 ) 0.2
(3.5 ) Net income before taxes $ 28.8 $ 11.3
$ 86.0 $ 43.0 Loss ratio 45.6 58.7 49.7 59.1
Expense ratio 32.2 31.3 33.1
32.2 GAAP combined ratio 77.8 %
90.0 % 82.8 % 91.3 %
Syndicate
1200
Gross written premiums $ 145.3 $ 126.9 $ 625.5 $ 600.1 Net written
premiums 99.4 84.7 402.9 405.1 Earned premiums 105.3 100.8 406.4
409.7 Underwriting (loss) income (7.5 ) 7.8 1.6 28.7 Net investment
income 2.2 2.2 11.9 8.9 Interest expense (0.6 ) (0.6 ) (2.5 ) (2.6
) Fee (expense) income, net (1.4 ) (2.0 ) 2.4
0.4 Net income (loss) before taxes $ (7.3 ) $
7.4 $ 13.4 $ 35.4 Loss ratio 67.8 49.4 59.2
51.7 % Expense ratio 39.4 42.9
40.4 41.3 GAAP combined ratio 107.2 %
92.3 % 99.6 % 93.0 %
International
Specialty
Gross written premiums $ 46.2 $ 42.5 $ 261.3 $ 266.3 Net written
premiums 22.4 26.6 153.5 158.1 Earned premiums 37.1 36.6 154.5
146.4 Underwriting income 2.7 6.0 24.2 20.6 Net investment income
3.8 2.7 16.8 11.4 Interest expense (0.7 ) (0.8 )
(2.8 ) (3.0 ) Net income before taxes $ 5.8 $
7.9 $ 38.2 $ 29.0 Loss ratio 60.1 50.0 54.0
50.9 Expense ratio 32.2 33.6
30.4 35.0 GAAP combined ratio 92.3 %
83.6 % 84.4 % 85.9 %
ARGO GROUP INTERNATIONAL HOLDINGS,
LTD.
(in millions) Net Prior Year
Development For the Three Months Ended For the Years Ended
(Favorable)/Unfavorable
December 31, December 31, 2016 2015 2016 2015 (unaudited)
(unaudited) E&S $ (1.2 ) $ (7.1 ) $ (13.2 ) $ (25.5 )
Commercial Specialty (9.1 ) (1.2 ) (22.7 ) 2.5 Syndicate 1200 (2.5
) (7.5 ) (5.0 ) (10.3 ) International Specialty (2.7 ) (1.9 ) (11.0
) (7.7 ) Run-off 1.0 0.6 18.6
8.6 Total $ (14.5 ) $ (17.1 ) $ (33.3 ) $
(32.4 ) ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
RECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS) TO NET INCOME
(LOSS) (in millions, except per share amounts) (unaudited)
Three
Months Ended Years Ended December 31, December 31, 2016 2015 2016
2015 Net income, as reported $ 32.9 $ 41.2 $ 146.7 $
163.2 Provision for income taxes 14.1 3.0
35.2 14.3 Net income, before
taxes 47.0 44.2 181.9 177.5 Add (deduct): Net realized investment
and other gains (13.3 ) (3.7 ) (26.1 ) (24.1 ) Foreign currency
exchange gains (9.0 ) (9.9 ) (4.5 )
(18.3 ) Adjusted operating income before taxes 24.7 30.6 151.3
135.1 Provision for income taxes, at assumed rate (a) 4.9
6.1 30.3 27.0
Adjusted operating income $ 19.8 $ 24.5 $ 121.0
$ 108.1 Adjusted operating income per
common share (diluted) $ 0.65 $ 0.78 $ 3.92 $
3.44 Weighted average common shares, diluted
30.7 31.4 30.8 31.4
(a) At assumed tax rate of 20%.
ARGO GROUP INTERNATIONAL HOLDINGS, LTD. RECONCILIATION OF
UNDERWRITING INCOME TO NET INCOME (in millions) (unaudited)
Three Months Ended Years
Ended December 31, December 31, 2016 2015 2016 2015 Net
Income $ 32.9 $ 41.2 $ 146.7 $ 163.2 Add (deduct): Income tax
provision 14.1 3.0 35.2 14.3 Net investment income (25.5 ) (20.1 )
(115.1 ) (88.6 ) Net realized investment and other gains (13.3 )
(3.7 ) (26.1 ) (24.1 ) Fee and other income (4.3 ) (4.3 ) (24.5 )
(22.2 ) Interest expense 5.0 4.7 19.6 19.0 Fee and other expense
4.3 7.8 22.4 25.8 Foreign currency exchange gains (9.0 )
(9.9 ) (4.5 ) (18.3 ) Underwriting income $
4.2 $ 18.7 $ 53.7 $ 69.1
ARGO GROUP INTERNATIONAL
HOLDINGS, LTD. RECONCILIATION OF SEGMENT INCOME TO NET INCOME (in
millions) (unaudited) For the Three Months
Ended For the Years Ended December 31, December 31, 2016 2015 2016
2015 Segment income (loss) before income taxes Excess and
Surplus Lines $ 19.4 $ 17.3 $ 88.4 $ 81.4 Commercial Specialty 28.8
11.3 86.0 43.0 Syndicate 1200 (7.3 ) 7.4 13.4 35.4 International
Specialty 5.8 7.9 38.2 29.0 Run-off Lines (0.6 ) (0.8 ) (15.2 )
(7.4 ) Corporate and Other (21.4 ) (12.5 ) (59.5 ) (46.3 ) Realized
investment and other gains 13.3 3.7 26.1 24.1 Foreign currency
exchange gains 9.0 9.9 4.5
18.3 Net income before income taxes 47.0 44.2
181.9 177.5 Provision for taxes 14.1 3.0
35.2 14.3 Net income $ 32.9
$ 41.2 $ 146.7 $ 163.2
ARGO GROUP INTERNATIONAL HOLDINGS, LTD. RECONCILIATION OF LOSS
RATIOS (unaudited)
Three Months Ended Years Ended December 31,
December 31, 2016 2015 2016 2015 Excess and Surplus lines
Loss ratio 61.3 % 59.5 % 59.0 % 56.8 % Prior accident year loss
development 1.0 % 5.9 % 2.7 % 5.4 % Catastrophe losses -1.8 % -0.6
% -2.4 % -1.1 % Current accident year ex-cats loss ratio 60.5 %
64.8 % 59.3 % 61.1 % Commercial Specialty Loss ratio 45.6 %
58.7 % 49.7 % 59.1 % Prior accident year loss development 9.2 % 1.4
% 6.2 % -0.7 % Catastrophe losses -0.5 % -3.9 % -0.7 % -1.6 %
Current accident year ex-cats loss ratio 54.3 % 56.2 % 55.2 % 56.8
% Syndicate 1200 Loss ratio 67.8 % 49.4 % 59.2 % 51.7 %
Prior accident year loss development 2.3 % 7.4 % 1.3 % 2.5 %
Catastrophe losses -15.2 % 0.0 % -7.4 % -1.2 % Current accident
year ex-cats loss ratio 54.9 % 56.8 % 53.1 % 53.0 %
International Specialty Loss ratio 60.1 % 50.0 % 54.0 % 50.9 %
Prior accident year loss development 7.4 % 5.2 % 7.2 % 5.3 %
Catastrophe losses -11.7 % -2.9 % -12.1 % -5.9 % Current accident
year ex-cats loss ratio 55.8 % 52.3 % 49.1 % 50.3 %
Consolidated Loss ratio 59.1 % 55.5 % 57.4 % 55.8 % Prior accident
year loss development 4.0 % 5.0 % 2.4 % 2.4 % Catastrophe losses
-6.4 % -1.5 % -4.4 % -1.8 % Current accident year ex-cats loss
ratio 56.7 % 59.0 % 55.4 % 56.4 %
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
COMPONENTS OF INVESTMENT INCOME ALL SEGMENTS (in millions)
(unaudited) Three Months Ended
December 31 March 31 June 30 September 30 December 31 2015 2016
2016 2016 2016 Net Investment Income $ 21.7 $ 22.7 $ 23.2 $
22.9
$ 22.4
Alternative Investments (1.6) (1.5) 12.5 9.8
3.1
Total $ 20.1 $ 21.2 $ 35.7 $ 32.7 $ 25.5 ARGO GROUP
INTERNATIONAL HOLDINGS, LTD. SHAREHOLDER RETURN ANALYSIS (in
millions) (unaudited)
For the Years Ended December 31, 2016 2015 %
Change Net income $ 146.7 $ 163.2 (10.1 %) Adjusted
operating income (a) 121.0 108.1 12.0 % Shareholders' Equity
- Beginning of the period $ 1,668.1 $ 1,646.7 1.3 % Shareholders'
Equity - End of current period 1,792.7 1,668.1
7.5 % Average Shareholders' Equity $ 1,730.4 $ 1,657.4 4.4 %
Annualized return on
average shareholders' equity 8.5 % 9.8 % Annualized adjusted
operating return on average shareholders' equity
7.0 % 6.5 %
(a) at assumed 20% tax rate
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170213006132/en/
Argo Group International Holdings, Ltd.Susan Spivak Bernstein,
212-607-8835Senior Vice President, Investor Relations
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