Current Report Filing (8-k)
August 13 2015 - 6:08AM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report
Pursuant
to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 12, 2015
Argo Group International Holdings, Ltd.
(Exact name of registrant as specified in its charter)
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| Bermuda |
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1-15259 |
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98-0214719 |
(State or other jurisdiction
of incorporation) |
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(Commission
File Number) |
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(I.R.S. Employer
Identification No.) |
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| 110 Pitts Bay Road
Pembroke HM 08
Bermuda |
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P.O. Box HM 1282
Hamilton HM FX
Bermuda |
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of Principal Executive Offices) |
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(Mailing Address) |
Registrant’s telephone number, including area code: (441) 296-5858
Not Applicable
(Former
name or former address, if changed since last report)
Check the appropriate box below
if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| ITEM 7.01. |
REGULATION FD DISCLOSURE. |
Argo Group International Holdings, Ltd. (“Argo Group”) may make
presentations to members of the investment community from time to time using the presentation materials attached hereto as Exhibit 99.1 to this Current Report on Form 8-K.
Note: The information in this report and Exhibit 99.1 attached hereto are furnished pursuant to Item 7.01 and shall not be deemed “filed”
for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section. This report will not be deemed an admission as to the materiality of any information in the report that is required to be
disclosed solely by Regulation FD.
FORWARD-LOOKING STATEMENTS
This press release contains certain statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are qualified by the inherent risks and uncertainties surrounding future expectations generally and also may materially differ from actual future
experience involving any one or more of such statements. For a more detailed discussion of such risks and uncertainties, see Argo Group’s filings with the SEC. The inclusion of a forward-looking statement herein should not be regarded as a
representation by Argo Group that Argo Group’s objectives will be achieved. Argo Group undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.
| ITEM 9.01. |
FINANCIAL STATEMENTS AND EXHIBITS. |
(d) Exhibits:
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| 99.1 |
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Argo Group International Holdings, Ltd. Presentation |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
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ARGO GROUP INTERNATIONAL HOLDINGS, LTD. |
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By: |
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/s/ Jay S. Bullock |
| Dated: August 12, 2015 |
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Name: |
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Jay S. Bullock |
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Title: |
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Executive Vice President and Chief Financial Officer |
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| 2Q 2015
Investor Presentation August 2015
Exhibit 99.1 |
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Forward-Looking Statements
This presentation contains “forward-looking statements” which are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The forward-looking statements are based on the
Company's current expectations and beliefs concerning future developments
and their potential effects on the Company. There can be no assurance that actual developments will be those anticipated by the Company. Actual results may differ materially from
those projected as a result of significant risks and uncertainties, including
non-receipt of the expected payments, changes in interest rates, effect
of the performance of financial markets on investment income and fair
values of investments, development of claims and the effect on loss
reserves, accuracy in projecting loss reserves, the impact of competition and pricing
environments, changes in the demand for the Company's products, the effect
of general economic conditions, adverse state and federal legislation,
regulations and regulatory investigations into industry practices,
developments relating to existing agreements, heightened competition,
changes in pricing environments, and changes in asset valuations. The Company
undertakes no obligation to publicly update any forward-looking
statements as a result of events or developments subsequent to the
presentation. 2. |
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3. Argo Group at a Glance Exchange / Ticker: NASDAQ / “AGII” Share Price: $57.15 Market Capitalization: $1.6 billion Annual Dividend / Yield: $0.80 per share / 1.4% Gross Written Premium: $2.0 billion Capital: $2.0 billion Analyst Coverage: Raymond James (Strong Buy) – Greg Peters KBW (Outperform) – Meyer Shields Compass Point (Neutral) – Ken Billingsley Dowling & Partners (Neutral) – Aaron Woomer William Blair (Market Perform) – Adam Klauber Macquarie (Neutral) – Amit Kumar Note: Market information as of August 11, 2015 and annual performance figures as of TTM June 30, 2015. |
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4. Leading Specialty Franchise Global underwriter of specialty insurance & reinsurance Strategically located in major insurance centers • U.S., Bermuda and London Established presence in attractive markets • Leader in U.S. Excess & Surplus Lines • Top Quartile Lloyd’s Syndicate by stamp • Strong core Commercial Specialty franchise • Flexible reinsurance & excess casualty platform • Primary presence in Brazil Diversified by geography, product & distribution Broad and strong producer relationships • Retailers, wholesalers and brokers (Lloyd’s, Re) “A” (excellent) A.M. Best rating Primary Insurance Reinsurance Property Casualty GWP by Business Type GWP by Business Mix Argo Franchise Overview ~35% ~90% ~10% ~65% |
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5. Sustainable competitive advantage • Niche markets • Underwriting expertise • Superior customer service • Product innovation Profitable organic & strategic growth • Profitable through cycles • Key underwriters/teams • Deals that meet stringent criteria Deep, tenured management team Active capital management Strategy Aligned Toward Shareholder Value Maximize Shareholder Value through growth in Book Value per Share 5. |
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6. *Excludes GWP recorded in runoff and corporate & other. Note: BVPS (book value per common share) adjusted for June 2013 and March 2015 stock dividend.
Evolution of Growth and Diversification |
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7. Argo Group Business Mix ($2.0b in GWP) GWP by Segment Excess & Surplus Lines Commercial Specialty Syndicate 1200 International Specialty 29% 14% 33% GWP by Product GWP by Geography United States London Bermuda 23% 14% Excess & Surplus Lines 33% Other Commercial Specialty Property Public Entity 18% 6% 6% Marine & Aerospace Surety 3% Programs Mining 4% Emerging Mkts & Bermuda Long Tail 8% 6% Emerging Markets 4% 56% 10% 29% GWP by Business Type Primary Insurance Reinsurance *Data is based on TTM as of June 30, 2015. Excludes GWP recorded in runoff and corporate & other.
~10% ~90% |
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8. Multi-Channel Distribution Strategy Retail Broker / Agent General Agency Wholesale Broker Lloyd’s Market Reinsurance Broker Rockwood X Argo Insurance X Trident X Surety X X Commercial Programs X Alteris X Contract X Transportation X Casualty X E&O X X D&O X X Environmental X Allied Medical X X Specialty Property X Liability X Property X Aviation X Marine X Excess Casualty X X Professional Liability X X Emerging Markets X X Reinsurance X |
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Book value per common share: -
Adjusted for June 2013 and March 2015 stock dividend
- 2008-2011 restated to reflect adoption of ASU 2010-26 (related to accounting for costs associated with acquiring or renewing insurance
contracts); 2007 and prior not restated -
2006 and prior years adjusted for PXRE merger
- 2003-2006 includes impact of Series A Mandatory Convertible Preferred on an as-if converted basis. Preferred stock fully converted
into common shares as of Dec. 31, 2007 (2) Price / book calculated at
52-week high and most recent book value per share. Stock price adjusted for PXRE merger for 2006 and prior years. Maximizing Shareholder Value – BVPS Growth 2002 Reported Book Value 1 Cumulative Dividends Price/Book 2 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2Q ‘15 2014 $19.34 $22.50 $25.09 $27.69 $32.29 $37.32 $36.02 $42.73 $47.78 $45.95 $50.20 $53.60 $58.22 $59.76 $19.34 $22.50 $25.09 $27.69 $32.29 $38.68 $37.38 $44.09 $49.54 $48.11 $52.76 $56.69 $61.94 $63.88 1.1x 1.1x 1.2x 1.6x 1.7x 1.2x 0.9x 0.8x 0.7x 0.7x 0.6x 0.8x 0.9x 0.9x 9. |
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10. Substantial Growth and Financial Strength Scale ($m) 2002 2006 TTM 2Q '15 '02-2Q'15 Factor Gross Written Premiums $622.1 $1,155.6 $1,956.7 3.1x Net Written Premiums 484.0 847.0 1,400.4 2.9x Net Earned Premiums 378.4 813.0 1,356.9 3.6x Financial Strength ($m) 2002 2006 TTM 2Q '15 '02-2Q'15 Factor Total Assets $2,208.9 $3,721.5 $6,544.0 3.0x Total Investments 1,181.3 2,514.1 4,082.2 3.5x Shareholder's Equity 327.7 847.7 1,668.9 5.1x Total Capital $327.7 $992.0 $2,042.1 6.2x Debt+TRUPs / Total Capital 0.0% 14.5% 18.3% A.M. Best Rating A A A |
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11. 2Q YTD YoY Gross Written Premium & Combined Ratio Consolidated GWP up 5.2% and Combined Ratio improved 1.2% in Q2 YTD 2015 vs. Q2 YTD 2014
Excess & Surplus Lines
Commercial Specialty International Specialty Syndicate 1200 Combined Ratio 86.3% 0.2% 86.5% Combined Ratio 102.5% -4.8% 97.7% Combined Ratio 86.5% -4.5% 82.0% Combined Ratio 90.0% 2.0% 92.0% $315.8 $358.8 $100 $200 $300 $400 2Q 2014 YTD 2Q 2015 YTD $189.5 $199.5 $50 $90 $130 $170 $210 $250 2Q 2014 YTD 2Q 2015 YTD $180.6 $170.3 $25 $75 $125 $175 $225 2Q 2014 YTD 2Q 2015 YTD $297.1 $305.8 $100 $150 $200 $250 $300 $350 2Q 2014 YTD 2Q 2015 YTD |
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12. Excess & Surplus Lines Segment (33% of TTM GWP)
88.9% 89.3% 99.6% 97.4% 95.5% 91.9% 93.3% 84.4% 88.1% About Us • Leader in U.S. Excess & Surplus Lines • Strong relationships with national, local and regional wholesale brokers • Seasoned U/W expertise is a competitive advantage • Target all sizes of non-standard (hard-to-place) risks, with focus on small/medium accounts • Underwrites on both admitted & non-admitted basis and across all business enterprises via two brands: • Colony Specialty • Argo Pro GWP by Business Unit (TTM 6/30/15) PTOI PTOI (1) & Combined Ratio 2006 2014 2011 2010 2009 2008 2012 2007 2013 2Q’15 (2) All data in millions except for ratio calculations. (1) PTOI = Pre-Tax Operating Income. Excludes interest expense. (2) Data is based on year-to-date as of June 30, 2015. (3) Data is based on trailing twelve months as of June 30, 2015. 86.5% 2013 2011 2010 2009 2008 2006 2012 2007 2Q’15 (3) 2014 Gross Written Premium Management Liability 8% Errors & Omissions 7% Allied Medical 6% Environmental 6% Casualty 37% Transportation 5% Combined Ratio $753.2 $726.5 $684.3 $642.3 $522.6 $478.9 $513.5 $594.2 $607.2 $650.2 TTM = trailing twelve months. Contract 22%
Property 9% |
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13. New segment management team is formed Year of restructuring and strategy enhancement Year of execution on the newly restructured platform Continued execution and Combined Ratio improvement Restructuring initiatives and strategy enhancement has enabled Argo to become an industry-leading E&S underwriter E&S Operating Platform Enhancement TTM = trailing twelve months. |
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14. Commercial Specialty Segment (23% of TTM GWP)
About Us • Business primarily placed through retail distribution partners • Argo Insurance – designs customized commercial insurance programs for retail grocery stores • Trident – One of the largest specialty commercial insurance providers for small to middle market public-sector entities in the U.S. • Rockwood – 2 nd largest provider of workers compensation for the Pennsylvania coal mining industry • Programs – provides fronting options for carriers to write business on Argo paper GWP by Business Unit (TTM 6/30/15) U.S. Retail (Argo Insurance) 14% Restaurants 4% Grocery 5% Dry Cleaners 1% Other Industries 4% Public Entity (Trident) 25% Surety 13% Mining (Rockwood) 18% Other 1% Programs 28% Transportation 2% State Workers’ Comp Funds 23% Combined Ratio PTOI Gross Written Premium PTOI (1) & Combined Ratio All data in millions except for ratio calculations. TTM = trailing twelve months.
(1) PTOI = Pre-Tax Operating Income. Excludes interest expense. (2) Data is based on year-to-date as of June 30, 2015. (3) Data is based on trailing twelve months as of June 30, 2015. 2006 2014 2011 2010 2009 2008 2012 2007 2013 2Q’15 (2) 2013 2011 2010 2009 2008 2006 2012 2007 2Q’15 (3) 2014 89.4% 88.7% 95.6% 98.1% 108.3% 115.1% 96.5% 100.2% 97.8% 97.7% Other 3% |
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15. 131.7% 115.2% Syndicate 1200 Segment (29% of TTM GWP)
General Liability 10% Prof. Indemnity 13% Int’l Casualty Treaty 3% Directors & Officers 4% Other 3% About Us • Well-established multi-class platform at Lloyd’s of London • Ranks among the largest Syndicates at Lloyd’s by Stamp Capacity • Lloyd’s market ratings: • ‘A’ (Excellent) by A.M. Best • ‘A+’ (Strong) by S&P GWP by Business Unit (TTM 6/30/15) Property 42% Liability 34% Specialty 17% Asia 1% Property Fac 17% Personal Accident 10% N. Am. & Int’l Binders 8% Other 8% 95.8% 112.3% 96.2% 92.4% Offshore Energy 7% Onshore Energy 4% Cargo 4% Yachts & Hulls 3% 91.4% Combined Ratio PTOI Gross Written Premium PTOI (1) & Combined Ratio 2013 2011 2010 2009 2008 2012 2014 2Q’15 (2) 2013 2011 2010 2009 2008 2012 2014 2Q’15 (3) All data in millions except for ratio calculations. TTM = trailing twelve months.
(1) PTOI = Pre-Tax Operating Income. Excludes interest expense. (2) Data is based on year-to-date as of June 30, 2015. (3) Data is based on trailing twelve months as of June 30, 2015. 92.0% Aerospace 5% |
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16. International Specialty Segment (14% of TTMGWP)
About Us • Bermuda team underwrites: • Property cat, short tail per risk and proportional treaty reinsurance worldwide • Excess casualty and professional liability for Fortune 1000 accounts • Building diversity through international expansion: • Established primary operations in Brazil • Established operations in Eurozone • Established regional office in Dubai • Distributes through brokers GWP by Business Unit (TTM 6/30/15) Excess Casualty 24% Professional Liability 12% Brazil 22% Marine Cargo 9% Property & Engineering 3% Motor 4% Financial Lines 6% Reinsurance 42% Other Assumed Re 5% Property Risk XS 4% Property Pro Rata 5% Property Cat 28% Combined Ratio PTOI Gross Written Premium PTOI (1) & Combined Ratio All data in millions except for ratio calculations. TTM = trailing twelve months.
(1) PTOI = Pre-Tax Operating Income. Excludes interest expense. (2) Data is based on year-to-date as of June 30, 2015. (3) Data is based on trailing twelve months as of June 30, 2015. 2013 2011 2010 2009 2008 2012 2014 2Q’15 (2) 2013 2011 2010 2009 2008 2012 2014 2Q’15 (3) 177.5% 71.7% 52.3% 77.9% 96.2% 95.4% 89.2% 82.0% |
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17. 2Q 2015 2Q 2014 2Q 2015 YTD 2Q 2014 YTD Gross Written Premiums $557.8 $520.1 $1,034.5 $983.2 Net Written Premiums 411.6 398.3 707.6 675.1 Earned Premiums 346.0 336.1 680.6 661.8 Losses and Loss Adjustment Expenses 190.6 185.1 374.3 367.6 Underwriting, Acquisition and Insurance Expenses 139.5 136.8 269.1 265.5 Underwriting Income $15.9 $14.2 $37.2 $28.7 Net Investment Income 21.8 20.6 42.6 43.9 Fee expense, net 0.7 0.1 1.1 1.5 Interest Expense 4.6 5.1 9.5 10.1 Operating Income $32.4 $29.6 $69.2 $61.0 Net Realized Investment and Other Gains 5.3 18.5 21.3 29.6 Foreign Currency Exchange Gain (Loss) (3.0) (3.4) 6.6 (3.2) Income Before Taxes $34.7 $44.7 $97.1 $87.4 Income Tax Provision 6.8 6.1 10.4 8.6 Net Income $27.9 $38.6 $86.7 $78.8 Operating Income per Common Share (Diluted)¹
$0.91 $0.81 $1.94 $1.65 Net Income per Common Share (Diluted) $0.98 $1.32 $3.03 $2.67 Loss Ratio² 55.1% 55.1% 55.0% 55.6% Expense Ratio³ 40.3% 40.7% 39.5% 40.1% Combined Ratio 95.4% 95.8% 94.5% 95.7% All data in millions except for per share data and ratio calculations. (1) Calculated using an assumed tax rate of 20%. (2) Defined as Losses and Loss Adjustment Expenses / Earned Premiums. (3) Defined as Underwriting, Acquisition and Insurance Expenses / Earned Premiums. 2Q 2015 Operating Results |
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18. As of June 30, 2015 Conservative Investment Strategy 17% 18. 17% • Duration of 2.4 years • Average rating of ‘A1/A+’ • Book yield of 2.7%* • Very liquid • Conservatively managed Portfolio Characteristics *Book yield is pre-tax & includes all fixed maturities 18. Equity Investments by Sector 12% Health Care Energy 23%
8% Financials
6% Industrials
10% Technology
2% Funds
3% Materials
8% Discretionary
Consumer Staples 26%
Total: $0.5b Fixed Maturities by Type 13% Short Term & Cash
Corporate 40%. 14% Gov. 18% Structured State/Muni 15%. Total:
$3.2b* *$2.8 billion in fixed maturities, $0.4 billion in short term & cash 2% Utilities & Telecom Asset Allocation 12% Other Fixed 66%
Maturities.
8% Short Term
12% Equities
Total: $4.2b *Duration includes cash & equivalents 3% Cash |
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19. Q2 YTD 2010-Q2 '15 ($millions) 2010 2011 2012 2013 2014 2015 Total Total Shares Outstanding 31,206,796 31,285,469 31,384,271 34,066,889 34,318,224 37,021,341 Less: Treasury Shares 3,363,560 4,971,305 6,459,613 7,558,345 8,606,489 9,095,585 Net Shares 27,843,236 26,314,164 24,924,658 26,508,544 25,711,735 27,925,756 Shares Repurchased 3,217,561 1,607,745 1,488,308 1,098,732 1,048,144 489,096 8,949,586 As % of Beg. Net Shares 10% 6% 6% 4% 4% 2% 29% Avg. Repurchase Price per Share $33.05 $30.69 $29.89 $41.02 $48.45 $50.90 $35.86 Total Repurchased ($m) $106.3 $49.3 $44.5 $45.1 $50.8 $24.9 $320.9 Dividends per Share $0.48 $0.48 $0.48 $0.60 $0.69 $0.40 $3.13 Dividend Payments ($m) $15.3 $14.2 $13.4 $16.1 $17.9 $11.2 $88.1 Repurchases + Dividends ($m) $121.7 $63.6 $57.9 $61.1 $68.7 $36.1 $409.0 Note: Not adjusted for June 2013 or March 2015 stock dividend. Active Capital Management Through share repurchases and dividends, we have returned $409 million of capital
and repurchased 29% of shares outstanding from 2010 through 2Q 2015
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20. (10.0%) +0.0% +10.0% +20.0% +30.0% +40.0% +50.0% Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Argo Group Peer Group S&P 500 +23% +46% +33% Source: SNL Financial (as of 8/11/15). Note: Peer Group consists of: Allied World, American Financial, Arch Capital, Aspen, AXIS Capital, Endurance, Global Indemnity, Markel, Navigators, OneBeacon, RLI Corp, Selective Group, W.R. Berkley. Stock Price Performance – Last 2 Years |
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21. - 0.2x 0.4x 0.6x 0.8x 1.0x 1.2x 1.4x 1.6x 1.8x 2.0x Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Argo Peer Group Price/Book Jan-00 Aug-15 Argo 0.70x 0.96x Peer Avg. 1.17x 1.36x Difference 0.47x 0.40x Source: SNL Financial (as of 8/11/15). Note: Price to book is average price/book across all peer companies based on latest reported book value. Peer Group consists of:
Allied World, American Financial, Arch Capital, Aspen, AXIS Capital,
Endurance, Global Indemnity, Markel, Navigators, OneBeacon, RLI Corp, Selective Group, W.R. Berkley. Compelling Valuation vs. Peer Group 0.96x 1.36x 0.40x Difference |
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22. We believe that Argo Group has potential to generate substantial value for new and existing investors Well Positioned for Value Creation in 2016 and Beyond • Compelling investment case • Stock trading at a discount to book value and below peers • Upside potential as past and ongoing efforts continue • Moderate financial leverage • Strong balance sheet with adequate reserves and excellent asset quality • Significant changes to premium composition completed • Results of re-underwriting efforts emerging in financials • Continue to employ and attract some of the best talent in the industry • Incremental yield improvements can have a favorable impact on ROE |
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