Bermuda
|
1-15259
|
98-0214719
|
(State or other jurisdiction
of incorporation) |
(Commission
File Number) |
(I.R.S. Employer
Identification No.) |
110 Pitts Bay Road
Pembroke HM 08 Bermuda |
P.O. Box HM 1282
Hamilton HM FX Bermuda |
|
(Address, Including Zip Code,
of Principal Executive Offices) |
(Mailing Address)
|
|
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
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|
|
|
|
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|
By:
|
/s/ Jay S. Bullock | |
Dated: November 2, 2017 |
|
Name: | Jay S. Bullock |
|
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Title: |
Executive Vice President and Chief Financial Officer
|
Gross Written
Premiums
$805.1M
↑ 37.5%
from 3Q 2016
|
Net Loss
Per Diluted Share
$2.04
↓
213.3%
from 3Q 2016
|
Net Investment
Income
$30.9M
↓
5.5%
from 3Q 2016
|
Total YTD Return on
Average Investments
(1)
4.4%
↑
100 basis points
YTD 3Q 2016
|
Book Value
Per Common Share
$60.96
↑ 2.1%
from Dec. 31, 2016
|
“In a quarter dominated by natural catastrophe losses, Argo Group’s risk and capital management framework was effective, together with our underwriting expertise and global platforms, gives us the ability to react to the most attractive market opportunities as market pricing changes in reaction to these events,” said Argo Group CEO Mark E. Watson III. “In addition, we continue seeing growth in many of our business lines as we leverage the ongoing investments in technology and talent.”
|
HIGHLIGHTS FOR THE THREE MONTHS
ENDED SEPT. 30, 2017:
·
Gross written premiums
were up 37.5% to $805.1 million compared to $585.4 million for the 2016 third quarter.
·
Net loss
of $61.3 million or $2.04 per diluted share, compared to net income of $55.2 million or $1.80 per diluted share for the 2016 third quarter.
·
Adjusted operating loss
(1)(2)
was $57.4 million or $1.91 per diluted share, compared to adjusted operating income of $34.4 million or $1.12 per diluted share for the 2016 third quarter.
·
The reported combined ratio
was 126.5% compared to 96.2% for the 2016 third quarter. The loss and expense ratios for the quarter were 83.8% and 42.7%, respectively, compared to 57.9% and 38.3% for the 2016 third quarter.
|
HIGHLIGHTS FOR THE NINE MONTHS
ENDED SEPT. 30, 2017:
·
Gross written premiums
were up 25.5% to $2.091 billion compared to $1.666 billion in the first nine months of 2016.
·
Net income
was $21.4 million or $0.69 per diluted share, compared to $113.8 million or $3.68 per diluted share in the first nine months of 2016.
·
Adjusted operating
income
(1)(2)
was $5.2 million or $0.17 per diluted share, compared to $101.3 million or $3.28 per diluted share in the first nine months of 2016.
·
The reported combined ratio
was 107.3% compared to 95.2% in the first nine months of 2016. The loss and expense ratios were 66.7% and 40.6%, respectively, compared to 56.8% and 38.4% in the first nine months of 2016.
|
·
Estimated pre-tax catastrophe losses
were $104.5 million inclusive of $14.5 million of catastrophe related premium charges. This compared to $13.0 million in the 2016 third quarter.
·
The current accident year ex-CAT combined ratio, as adjusted
(1)
for
certain other discreet catastrophe and risk management reinsurance purchases in the quarter and a one-time expense item was 97.2% The related loss and expense ratios for the quarter were 57.7% and 39.5%, respectively. This loss ratio includes a 3.7 point impact relating to the previously announced $15 million of current accident year losses recorded primarily in Syndicate 1200. There were no similar reinsurance purchases or one-time expenses in the comparable 2016 period. As such, the comparable 2016 third quarter current accident year ex-CAT combined ratio, as adjusted was 93.4% with underlying loss and expense ratios of 55.1% and 38.3%, respectively.
·
Net Investment Income
was $30.9 million, compared to $32.7 million for the 2016 third quarter. The result for the 2017 quarter reflects lower income from alternative investments of $5.7 million compared to $9.8 million in the 2016 third quarter.
·
Total return on average investments
for the 2017 third quarter was 1.3%, flat with same period in 2016.
·
Net favorable prior-year reserve development
was $1.3 million (benefiting the combined ratio by 0.3 points), compared with $2.9 million (benefiting the combined ratio by 0.8 points) for the 2016 third quarter.
·
During the third quarter of 2017, the Company repurchased
$33.8 million or 565,534 shares of its common stock.
|
·
Estimated pre-tax catastrophe losses
were $110.9 million inclusive of $14.5 million of catastrophe related premium charges. This compared to $38.9 million in the first nine months of 2016.
·
The current accident year ex-CAT combined ratio,
as adjusted
(1)
for certain discreet catastrophe and risk management reinsurance purchases in the third quarter of 2017 and one-time expenses was 96.0%. The related loss and expense ratios for the nine months ended September 30, 2017 were 57.0% and 39.0%. This loss ratio includes a 1.3 point impact relating to the previously announced $15 million of current accident year losses recorded primarily in Syndicate 1200. There were no similar reinsurance purchases or one-time expenses in the comparable 2016 period. As such, the comparable 2016 third quarter current accident year ex-CAT combined ratio, as adjusted was 93.4% in the first nine months of 2016 with underlying loss and expense ratios of 54.9% and 38.4%, respectively.
·
Net Investment Income
was $105.0 million, compared to $89.6 million in the first nine months of 2016. In the nine-month period alternative investments contributed $34.6 million to net investment income in 2017 and $20.8 million in 2016.
·
Total return on average investments
for the first nine months of 2017 was 4.4% compared to 4.3% in the first nine months of 2016.
·
Net unfavorable prior-year reserve development
was $4.4 million (adversely affecting the combined ratio by 0.4 points). Also included in the nine months of 2017 was an impact of approximately $10.0 million in the first quarter of 2017 from the Ogden rate change and claims from Hurricane Matthew. This compares to net favorable development of $18.8 million (benefiting the combined ratio by 1.8 points) in the first nine months of 2016.
·
During the first nine months of 2017, the Company repurchased
$36.6 million or 612,034 shares of its common stock.
·
Book value per share
increased to $60.96, up 2.1% from $59.73 at Dec. 31, 2016.
·
Cash and investments
at Sept. 30, 2017, totaled $5.0 billion with a net pre-tax unrealized gain of approximately $181.1 million.
|
Notes
·
All references to catastrophe losses are pre-tax, net of reinsurance and estimated reinstatement premiums and inclusive of catastrophe related premium adjustments.
·
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 and other catastrophe related premium adjustments.
|
(1)
|
Refer to Non-GAAP Financial Measures below.
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(2)
|
At assumed tax rate of 20%.
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·
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Third quarter 2017 gross written premiums growth of 18.9% was driven by executing on strategic growth initiatives across Liability, Professional, and Specialty lines and planned reductions within Property lines due to continued pricing competition.
|
·
|
Gross written premiums for the first nine months of 2017 were up 16.4% from the same 2016 period and reflect growth in all four business lines.
|
·
|
The loss ratio for the 2017 third quarter was 61.2% compared to 54.3% for the 2016 third quarter. For the nine-month period in 2017 the loss ratio was 56.8% compared to 55.3% in the same 2016 period.
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·
|
Current accident year ex-CAT loss ratio, as adjusted for the 2017 third quarter was 57.3%, compared to 58.5% for the 2016 third quarter, and 57.4% compared to 57.5%, respectively, for the nine-month periods in 2017 and 2016.
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·
|
The expense ratio for the 2017 third quarter was 36.5% compared to 33.0% for the 2016 third quarter. For the first nine-months of 2017 the expense ratio was 35.1% compared to 32.2% in the first nine months of 2016.
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·
|
The third quarter 2017 expense ratio excluding catastrophe related premium adjustments, other third quarter 2017 catastrophe and risk management purchases and a one-time expense of $3.5 million relating to the final resolution of a premium tax dispute was 34.3%.
|
·
|
For the 2017 third quarter, U.S. Operations reported underwriting income of $5.6 million, compared to underwriting income of $27.5 million for the 2016 third quarter. For the first nine months of 2017, underwriting income was $55.7 million compared to $78.9 million in the first nine months of 2016.
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·
|
For the 2017 third quarter, net favorable prior-year reserve development was $10.7 million, compared to net favorable prior-year reserve development of $13.7 million for the 2016 third quarter. For the nine-month period in 2017 net favorable prior-year reserve development was $28.7 million compared to net favorable prior-year reserve development of $25.6 million for the same period in 2016.
|
·
|
Catastrophe losses for the 2017 third quarter were $21.
0
million (and include $3.8 million of catastrophe related premium charges) compared to catastrophe losses of $4.5 million for the 2016 third quarter. Catastrophe losses for the first nine months of 2017 were $25.9 million (including $3.8 million of catastrophe related premium adjustments) compared to catastrophe losses of $11.5 million for the first nine months of 2016.
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·
|
During the third quarter of 2017, the Company received a fee of $8.5 million in connection with the transfer of certain fee based operations.
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·
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Gross written premiums were up 67.6% in the third quarter and 38.4% for the nine-month period of 2017 versus the same periods in 2016. Growth was driven by acquisition of Ariel Re reinsurance business at Syndicate 1910, and by business in Bermuda and Brazil.
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·
|
The third quarter 2017 reported loss ratio was 113.0% compared to 55.4% in the 2016 third quarter. For the nine months of 2017 the loss ratio was 77.7% compared to 55.0% for the same period of 2016. The increase in the third quarter 2017 loss ratio relates to Syndicate 1200 due to approximately $15 million in higher current accident year property losses as was pre-announced in mid-October.
|
·
|
Current accident year ex-CAT loss ratio, as adjusted
for the third quarter of 2017, was 58
.
3%, compared to 49.9% for the 2016 third quarter. For the nine month 2017 period the current accident year ex-CAT loss ratio, as adjusted was 56.4% compared to 50.9% in the first nine months of 2016
.
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·
|
The expense ratio for the 2017 third quarter was 43.3% compared to 35.8% for the 2016 third quarter. For the first nine-months of 2017 the expense ratio was 38.7% compared to 37.7% in the same 2016 period.
|
·
|
The third quarter 2017 expense ratio excluding catastrophe related premium adjustments, other third quarter 2017 catastrophe and risk management purchases was 38.7% compared to 35.8% in the same 2016 period. The nine-month adjusted expense ratio was 37.3% compared to 37.7% in the same 2016 period.
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·
|
For the 2017 third quarter, International Operations reported an underwriting loss of $82.7 million compared to underwriting income of $12.5 million for the 2016 third quarter. In the first nine months of 2017 the underwriting loss was $78.1 million, compared to underwriting income of $30.6 million in the first nine months of 2016.
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·
|
For the 2017 third quarter, net favorable prior-year reserve development was $2.6 million compared to net favorable prior year reserve development of $0.6 million for the 2016 third quarter.
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·
|
Catastrophe losses for the 2017 third quarter were $83.5 million (and include $10.7 million of catastrophe related premium charges) compared to catastrophe losses of $8.5 million for the 2016 third quarter. Catastrophe losses for the first nine months of 2017 were $85.0 million compared to catastrophe losses of $27.4 million for the first nine months of 2016.
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ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||
CONSOLIDATED BALANCE SHEETS
|
||||||||
(in millions, except per share amounts)
|
||||||||
September 30,
|
December 31,
|
|||||||
2017
|
2016
|
|||||||
(unaudited)
|
||||||||
Assets
|
||||||||
Total investments
|
$
|
4,807.5
|
$
|
4,324.3
|
||||
Cash
|
235.8
|
86.0
|
||||||
Accrued investment income
|
23.6
|
20.7
|
||||||
Receivables
|
2,780.7
|
1,849.4
|
||||||
Goodwill and intangible assets
|
260.5
|
219.9
|
||||||
Deferred acquisition costs, net
|
168.8
|
139.1
|
||||||
Ceded unearned premiums
|
461.4
|
302.8
|
||||||
Other assets
|
319.7
|
262.8
|
||||||
Total assets
|
$
|
9,058.0
|
$
|
7,205.0
|
||||
Liabilities and Shareholders' Equity
|
||||||||
Reserves for losses and loss adjustment expenses
|
$
|
4,305.9
|
$
|
3,350.8
|
||||
Unearned premiums
|
1,286.0
|
970.0
|
||||||
Ceded reinsurance payable, net
|
822.6
|
466.6
|
||||||
Senior unsecured fixed rate notes
|
139.6
|
139.5
|
||||||
Other indebtedness
|
184.7
|
55.4
|
||||||
Junior subordinated debentures
|
256.5
|
172.7
|
||||||
Other liabilities
|
254.7
|
257.3
|
||||||
Total liabilities
|
7,250.0
|
5,412.3
|
||||||
Total shareholders' equity
|
1,808.0
|
1,792.7
|
||||||
Total liabilities and shareholders' equity
|
$
|
9,058.0
|
$
|
7,205.0
|
||||
Book value per common share
|
$
|
60.96
|
$
|
59.73
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||||||||||
FINANCIAL HIGHLIGHTS
|
||||||||||||||||
ALL SEGMENTS
|
||||||||||||||||
(in millions, except per share amounts) | ||||||||||||||||
(unaudited)
|
||||||||||||||||
|
||||||||||||||||
Three Months Ended
|
Nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Gross written premiums
|
$
|
805.1
|
$
|
585.4
|
$
|
2,090.9
|
$
|
1,665.8
|
||||||||
Net written premiums
|
473.2
|
415.3
|
1,263.7
|
1,106.7
|
||||||||||||
Earned premiums
|
389.3
|
358.7
|
1,167.8
|
1,048.5
|
||||||||||||
Net investment income
|
30.9
|
32.7
|
105.0
|
89.6
|
||||||||||||
Fee and other income
|
13.0
|
7.6
|
20.4
|
20.2
|
||||||||||||
Net realized investment and other gains
|
6.0
|
17.7
|
25.1
|
12.8
|
||||||||||||
Total revenue
|
439.2
|
416.7
|
1,318.3
|
1,171.1
|
||||||||||||
Losses and loss adjustment expenses
|
326.4
|
207.8
|
779.5
|
596.0
|
||||||||||||
Underwriting, acquisition and insurance expenses
|
166.1
|
137.4
|
474.4
|
403.0
|
||||||||||||
Interest expense
|
7.5
|
4.9
|
20.4
|
14.6
|
||||||||||||
Fee and other expense, net
|
5.0
|
5.9
|
12.4
|
18.1
|
||||||||||||
Foreign currency exchange losses (gains)
|
0.1
|
(1.5
|
)
|
4.0
|
4.5
|
|||||||||||
Total expenses
|
505.1
|
354.5
|
1,290.7
|
1,036.2
|
||||||||||||
(Loss) income before taxes
|
(65.9
|
)
|
62.2
|
27.6
|
134.9
|
|||||||||||
Income tax (benefit) provision
|
(4.6
|
)
|
7.0
|
6.2
|
21.1
|
|||||||||||
Net (loss) income
|
$
|
(61.3
|
)
|
$
|
55.2
|
$
|
21.4
|
$
|
113.8
|
|||||||
Net (loss) income per common share (basic)
|
$
|
(2.04
|
)
|
$
|
1.84
|
$
|
0.71
|
$
|
3.76
|
|||||||
Net (loss) income per common share (diluted)
|
$
|
(2.04
|
)
|
$
|
1.80
|
$
|
0.69
|
$
|
3.68
|
|||||||
Weighted average common shares:
|
||||||||||||||||
Basic
|
30.0
|
30.0
|
30.1
|
30.2
|
||||||||||||
Diluted
|
30.0
|
30.7
|
30.9
|
30.9
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||||||||||
SEGMENT DATA
|
||||||||||||||||
(in millions)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
September 30,
|
September 30,
|
|||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
U.S. OPERATIONS
|
||||||||||||||||
Gross written premiums
|
$
|
428.9
|
$
|
360.8
|
$
|
1,128.9
|
$
|
970.2
|
||||||||
Net written premiums
|
302.6
|
258.9
|
781.1
|
671.8
|
||||||||||||
Earned premiums
|
242.6
|
216.3
|
692.9
|
629.7
|
||||||||||||
Underwriting income
|
5.6
|
27.5
|
55.6
|
78.9
|
||||||||||||
Net investment income
|
18.8
|
20.3
|
66.0
|
55.8
|
||||||||||||
Interest expense
|
(3.8
|
)
|
(2.2
|
)
|
(10.3
|
)
|
(6.8
|
)
|
||||||||
Fee income (expense), net
|
8.1
|
0.3
|
7.5
|
(1.7
|
)
|
|||||||||||
Net income before taxes
|
$
|
28.7
|
$
|
45.9
|
$
|
118.8
|
$
|
126.2
|
||||||||
Loss ratio
|
61.2
|
%
|
54.3
|
%
|
56.8
|
%
|
55.3
|
%
|
||||||||
Expense ratio
|
36.5
|
%
|
33.0
|
%
|
35.1
|
%
|
32.2
|
%
|
||||||||
GAAP combined ratio
|
97.7
|
%
|
87.3
|
%
|
91.9
|
%
|
87.5
|
%
|
||||||||
INTERNATIONAL OPERATIONS
|
||||||||||||||||
Gross written premiums
|
$
|
376.3
|
$
|
224.5
|
$
|
962.0
|
$
|
695.3
|
||||||||
Net written premiums
|
170.7
|
156.3
|
482.6
|
434.6
|
||||||||||||
Earned premiums
|
146.8
|
142.3
|
474.9
|
418.5
|
||||||||||||
Underwriting (loss) income
|
(82.7
|
)
|
12.5
|
(78.1
|
)
|
30.6
|
||||||||||
Net investment income
|
7.7
|
7.5
|
24.4
|
22.7
|
||||||||||||
Interest expense
|
(2.8
|
)
|
(1.4
|
)
|
(7.1
|
)
|
(4.0
|
)
|
||||||||
Fee income, net
|
0.3
|
1.5
|
0.7
|
3.8
|
||||||||||||
Net (loss) income before taxes
|
$
|
(77.5
|
)
|
$
|
20.1
|
$
|
(60.1
|
)
|
$
|
53.1
|
||||||
Loss ratio
|
113.0
|
%
|
55.4
|
%
|
77.7
|
%
|
55.0
|
%
|
||||||||
Expense ratio
|
43.3
|
%
|
35.8
|
%
|
38.7
|
%
|
37.7
|
%
|
||||||||
GAAP combined ratio
|
156.3
|
%
|
91.2
|
%
|
116.4
|
%
|
92.7
|
%
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||||||||||
(in millions)
|
||||||||||||||||
(unaudited) | ||||||||||||||||
Three months ended
|
Nine months ended
|
|||||||||||||||
Net Prior Year Development
|
September 30,
|
September 30,
|
||||||||||||||
(Favorable)/Unfavorable
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
US Operations
|
$
|
(10.7
|
)
|
$
|
(13.7
|
)
|
$
|
(28.7
|
)
|
$
|
(25.6
|
)
|
||||
International Operations
|
(2.6
|
)
|
(0.6
|
)
|
17.0
|
(10.8
|
)
|
|||||||||
Run-off Lines
|
12.0
|
11.4
|
16.1
|
17.6
|
||||||||||||
Total
|
$
|
(1.3
|
)
|
$
|
(2.9
|
)
|
$
|
4.4
|
$
|
(18.8
|
)
|
|||||
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Catastrophe losses
|
||||||||||||||||
US Operations
|
$
|
17.2
|
$
|
4.5
|
$
|
22.1
|
$
|
11.5
|
||||||||
International Operations
|
72.8
|
8.5
|
74.3
|
27.4
|
||||||||||||
Total catastrophe losses
|
90.0
|
13.0
|
96.4
|
38.9
|
||||||||||||
CAT related premium adjustments
|
||||||||||||||||
US Operations
|
3.8
|
-
|
3.8
|
-
|
||||||||||||
International Operations
|
10.7
|
-
|
10.7
|
-
|
||||||||||||
Total CAT related premium adjustments
|
14.5
|
-
|
14.5
|
-
|
||||||||||||
Catastrophe losses, inclusive of CAT related premium adjustments
|
$
|
104.5
|
$
|
13.0
|
$
|
110.9
|
$
|
38.9
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||||||||||
RECONCILIATION OF RATIOS
|
||||||||||||||||
(in millions)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
US Operations
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
Earned premiums, as reported
|
$
|
242.6
|
$
|
216.3
|
$
|
692.9
|
$
|
629.7
|
||||||||
CAT related premiums adjustments
|
3.8
|
-
|
3.8
|
-
|
||||||||||||
Net earned premiums, net of catastrophe adjustments
|
246.4
|
216.3
|
696.7
|
629.7
|
||||||||||||
Other CAT and risk management purchases in Q3 2017
|
1.4
|
-
|
1.4
|
-
|
||||||||||||
Net earned premiums, as adjusted
|
$
|
247.8
|
$
|
216.3
|
$
|
698.1
|
$
|
629.7
|
||||||||
Losses and loss adjustment expenses, as reported
|
$
|
148.4
|
$
|
117.5
|
$
|
394.2
|
$
|
348.1
|
||||||||
Catastrophe losses
|
(17.2
|
)
|
(4.5
|
)
|
(22.1
|
)
|
(11.5
|
)
|
||||||||
Prior accident year reserve development
|
10.7
|
13.7
|
28.7
|
25.6
|
||||||||||||
Current accident year losses excluding CATs, as adjusted
|
$
|
141.9
|
$
|
126.7
|
$
|
400.8
|
$
|
362.2
|
||||||||
Underwriting, acquisition and insurance expenses, as reported
|
$
|
88.6
|
$
|
71.3
|
$
|
243.0
|
$
|
202.7
|
||||||||
Final resolution of premium tax dispute
|
(3.5
|
)
|
-
|
(3.5
|
)
|
-
|
||||||||||
Underwriting, acquisition and insurance expenses, as adjusted
|
$
|
85.1
|
$
|
71.3
|
$
|
239.5
|
$
|
202.7
|
||||||||
Loss ratio, as reported
|
61.2
|
%
|
54.3
|
%
|
56.8
|
%
|
55.3
|
%
|
||||||||
Catastrophe losses
(a)
|
-8.0
|
%
|
-2.1
|
%
|
-3.4
|
%
|
-1.8
|
%
|
||||||||
Prior accident year loss development
|
4.3
|
%
|
6.3
|
%
|
4.1
|
%
|
4.0
|
%
|
||||||||
Other CAT and risk management purchases in Q3 2017
|
-0.2
|
%
|
0.0
|
%
|
-0.1
|
%
|
0.0
|
%
|
||||||||
Current accident year ex-CATs loss ratio, as adjusted
|
57.3
|
%
|
58.5
|
%
|
57.4
|
%
|
57.5
|
%
|
||||||||
Expense ratio, as reported
|
36.5
|
%
|
33.0
|
%
|
35.1
|
%
|
32.2
|
%
|
||||||||
Final resolution of premium tax dispute
|
-1.5
|
%
|
0.0
|
%
|
-0.5
|
%
|
0.0
|
%
|
||||||||
Other CAT and risk management purchases in Q3 2017
|
-0.7
|
%
|
0.0
|
%
|
-0.3
|
%
|
0.0
|
%
|
||||||||
Expense ratio, as adjusted
|
34.3
|
%
|
33.0
|
%
|
34.3
|
%
|
32.2
|
%
|
||||||||
Combined ratio, as reported
|
97.7
|
%
|
87.3
|
%
|
91.9
|
%
|
87.5
|
%
|
||||||||
|
||||||||||||||||
CAY ex-CAT combined ratio, as adjusted
|
91.6
|
%
|
91.5
|
%
|
91.7
|
%
|
89.7
|
%
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||||||||||
RECONCILIATION OF RATIOS
|
||||||||||||||||
(in millions)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
International Operations
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
Earned premiums, as reported
|
$
|
146.8
|
$
|
142.3
|
$
|
474.9
|
$
|
418.5
|
||||||||
CAT related premiums adjustments
|
10.7
|
-
|
10.7
|
-
|
||||||||||||
Net earned premiums, net of catastrophe adjustments
|
157.5
|
142.3
|
485.6
|
418.5
|
||||||||||||
Other CAT and risk management purchases in Q3 2017
|
6.7
|
-
|
6.7
|
-
|
||||||||||||
Net earned premiums, as adjusted
|
$
|
164.2
|
$
|
142.3
|
$
|
492.3
|
$
|
418.5
|
||||||||
Losses and loss adjustment expenses, as reported
|
$
|
166.0
|
$
|
78.9
|
$
|
369.2
|
$
|
230.3
|
||||||||
Catastrophe losses
|
(72.8
|
)
|
(8.5
|
)
|
(74.3
|
)
|
(27.4
|
)
|
||||||||
Prior accident year reserve development
|
2.6
|
0.6
|
(17.0
|
)
|
10.8
|
|||||||||||
Current accident year losses excluding CATs, as adjusted
|
$
|
95.8
|
$
|
71.0
|
$
|
277.9
|
$
|
213.7
|
||||||||
Underwriting, acquisition and insurance expenses, as reported
|
$
|
63.5
|
$
|
50.9
|
$
|
183.8
|
$
|
157.6
|
||||||||
Underwriting, acquisition and insurance expenses, as adjusted
|
$
|
63.5
|
$
|
50.9
|
$
|
183.8
|
$
|
157.6
|
||||||||
Loss ratio, as reported
|
113.0
|
%
|
55.4
|
%
|
77.7
|
%
|
55.0
|
%
|
||||||||
Catastrophe losses
(a)
|
-53.8
|
%
|
-5.9
|
%
|
-17.0
|
%
|
-6.7
|
%
|
||||||||
Prior accident year loss development
|
1.7
|
%
|
0.4
|
%
|
-3.5
|
%
|
2.6
|
%
|
||||||||
Other CAT and risk management purchases in Q3 2017
|
-2.6
|
%
|
0.0
|
%
|
-0.8
|
%
|
0.0
|
%
|
||||||||
Current accident year ex-CATs loss ratio, as adjusted
|
58.3
|
%
|
49.9
|
%
|
56.4
|
%
|
50.9
|
%
|
||||||||
Expense ratio, as reported
|
43.3
|
%
|
35.8
|
%
|
38.7
|
%
|
37.7
|
%
|
||||||||
Other CAT and risk management purchases in Q3 2017
|
-4.6
|
%
|
0.0
|
%
|
-1.4
|
%
|
0.0
|
%
|
||||||||
Expense ratio, as adjusted
|
38.7
|
%
|
35.8
|
%
|
37.3
|
%
|
37.7
|
%
|
||||||||
Combined ratio, as reported
|
156.3
|
%
|
91.2
|
%
|
116.4
|
%
|
92.7
|
%
|
||||||||
CAY ex-CAT combined ratio, as adjusted
|
97.0
|
%
|
85.7
|
%
|
93.8
|
%
|
88.6
|
%
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||||||||||
RECONCILIATION OF RATIOS
|
||||||||||||||||
(in millions)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
Consolidated
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
Earned premiums, as reported
|
$
|
389.3
|
$
|
358.7
|
$
|
1,167.8
|
$
|
1,048.5
|
||||||||
CAT related premiums adjustments
|
14.5
|
-
|
14.5
|
-
|
||||||||||||
Net earned premiums, net of catastrophe adjustments
|
403.8
|
358.7
|
1,182.3
|
1,048.5
|
||||||||||||
Other CAT and risk management purchases in Q3 2017
|
8.1
|
-
|
8.1
|
-
|
||||||||||||
Net earned premiums, as adjusted
|
$
|
411.9
|
$
|
358.7
|
$
|
1,190.4
|
$
|
1,048.5
|
||||||||
Losses and loss adjustment expenses, as reported
|
$
|
326.4
|
$
|
207.8
|
$
|
779.5
|
$
|
596.0
|
||||||||
Catastrophe losses
|
(90.0
|
)
|
(13.0
|
)
|
(96.4
|
)
|
(38.9
|
)
|
||||||||
Prior accident year reserve development
|
1.3
|
2.9
|
(4.4
|
)
|
18.8
|
|||||||||||
Current accident year losses excluding CATs, as adjusted
|
$
|
237.7
|
$
|
197.7
|
$
|
678.7
|
$
|
575.9
|
||||||||
Underwriting, acquisition and insurance expenses, as reported
|
$
|
166.1
|
$
|
137.4
|
$
|
474.4
|
$
|
403.0
|
||||||||
Final resolution of premium tax dispute
|
(3.5
|
)
|
-
|
(3.5
|
)
|
-
|
||||||||||
IT outsourcing costs - Q1
|
-
|
-
|
(4.0
|
)
|
-
|
|||||||||||
Ariel Re transaction costs - Q1
|
-
|
-
|
(2.5
|
)
|
-
|
|||||||||||
Underwriting, acquisition and insurance expenses, as adjusted
|
$
|
162.6
|
$
|
137.4
|
$
|
464.4
|
$
|
403.0
|
||||||||
Loss ratio, as reported
|
83.8
|
%
|
57.9
|
%
|
66.7
|
%
|
56.8
|
%
|
||||||||
Catastrophe losses
(a)
|
-25.2
|
%
|
-3.6
|
%
|
-8.9
|
%
|
-3.7
|
%
|
||||||||
Prior accident year loss development
|
0.3
|
%
|
0.8
|
%
|
-0.4
|
%
|
1.8
|
%
|
||||||||
Other CAT and risk management purchases in Q3 2017
|
-1.2
|
%
|
0.0
|
%
|
-0.4
|
%
|
0.0
|
%
|
||||||||
Current accident year ex-CATs loss ratio, as adjusted
|
57.7
|
%
|
55.1
|
%
|
57.0
|
%
|
54.9
|
%
|
||||||||
Expense ratio, as reported
|
42.7
|
%
|
38.3
|
%
|
40.6
|
%
|
38.4
|
%
|
||||||||
Final resolution of premium tax dispute
|
-0.8
|
%
|
0.0
|
%
|
-0.3
|
%
|
0.0
|
%
|
||||||||
IT outsourcing costs - Q1
|
0.0
|
%
|
0.0
|
%
|
-0.4
|
%
|
0.0
|
%
|
||||||||
Ariel Re transaction costs - Q1
|
0.0
|
%
|
0.0
|
%
|
-0.2
|
%
|
0.0
|
%
|
||||||||
Other CAT and risk management purchases in Q3 2017
|
-2.4
|
%
|
0.0
|
%
|
-0.7
|
%
|
0.0
|
%
|
||||||||
Expense ratio, as adjusted
|
39.5
|
%
|
38.3
|
%
|
39.0
|
%
|
38.4
|
%
|
||||||||
Combined ratio, as reported
|
126.5
|
%
|
96.2
|
%
|
107.3
|
%
|
95.2
|
%
|
||||||||
CAY ex-CAT combined ratio, as adjusted
|
97.2
|
%
|
93.4
|
%
|
96.0
|
%
|
93.3
|
%
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||||||||||
RECONCILIATION OF UNDERWRITING (LOSS) INCOME TO NET INCOME
|
||||||||||||||||
(in millions)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
|
||||||||||||||||
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Net (loss) Income
|
$
|
(61.3
|
)
|
$
|
55.2
|
$
|
21.4
|
$
|
113.8
|
|||||||
Add (deduct):
|
||||||||||||||||
Income tax provision
|
(4.6
|
)
|
7.0
|
6.2
|
21.1
|
|||||||||||
Net investment income
|
(30.9
|
)
|
(32.7
|
)
|
(105.0
|
)
|
(89.6
|
)
|
||||||||
Net realized investment and other gains
|
(6.0
|
)
|
(17.7
|
)
|
(25.1
|
)
|
(12.8
|
)
|
||||||||
Fee and other income
|
(13.0
|
)
|
(7.6
|
)
|
(20.4
|
)
|
(20.2
|
)
|
||||||||
Interest expense
|
7.5
|
4.9
|
20.4
|
14.6
|
||||||||||||
Fee and other expense
|
5.0
|
5.9
|
12.4
|
18.1
|
||||||||||||
Foreign currency exchange (gains) losses
|
0.1
|
(1.5
|
)
|
4.0
|
4.5
|
|||||||||||
Underwriting (loss) income
|
$
|
(103.2
|
)
|
$
|
13.5
|
$
|
(86.1
|
)
|
$
|
49.5
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||||||||||
RECONCILIATION OF ADJUSTED OPERATING INCOME TO NET INCOME
|
||||||||||||||||
(in millions, except per share amounts)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Net (loss) income, as reported
|
$
|
(61.3
|
)
|
$
|
55.2
|
$
|
21.4
|
$
|
113.8
|
|||||||
(Benefit) provision for income taxes
|
(4.6
|
)
|
7.0
|
6.2
|
21.1
|
|||||||||||
Net (loss) income, before taxes
|
(65.9
|
)
|
62.2
|
27.6
|
134.9
|
|||||||||||
Add (deduct):
|
||||||||||||||||
Net realized investment and other (gains) losses
|
(6.0
|
)
|
(17.7
|
)
|
(25.1
|
)
|
(12.8
|
)
|
||||||||
Foreign currency exchange losses (gains)
|
0.1
|
(1.5
|
)
|
4.0
|
4.5
|
|||||||||||
Adjusted operating (loss) income before taxes
|
(71.8
|
)
|
43.0
|
6.5
|
126.6
|
|||||||||||
(Benefit) provision for income taxes, at assumed rate
(1)
|
(14.4
|
)
|
8.6
|
1.3
|
25.3
|
|||||||||||
Adjusted operating (loss) income
|
$
|
(57.4
|
)
|
$
|
34.4
|
$
|
5.2
|
$
|
101.3
|
|||||||
Adjusted operating (loss) income per common share (diluted)
|
$
|
(1.91
|
)
|
$
|
1.12
|
$
|
0.17
|
$
|
3.28
|
|||||||
Weighted average common shares, diluted
|
30.0
|
30.7
|
30.9
|
30.9
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||||||||||
RECONCILIATION OF SEGMENT (LOSS) INCOME TO NET (LOSS) INCOME
|
||||||||||||||||
(in millions)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Segment income (loss) before income taxes
|
||||||||||||||||
U.S. Operations
|
28.7
|
45.9
|
118.9
|
126.2
|
||||||||||||
International Operations
|
(77.5
|
)
|
20.1
|
(60.1
|
)
|
53.1
|
||||||||||
Run-off Lines
|
(12.7
|
)
|
(10.0
|
)
|
(16.4
|
)
|
(14.6
|
)
|
||||||||
Corporate and Other
|
(10.3
|
)
|
(13.0
|
)
|
(35.9
|
)
|
(38.1
|
)
|
||||||||
Realized investment and other gains
|
6.0
|
17.7
|
25.1
|
12.8
|
||||||||||||
Foreign currency exchange (losses) gains
|
(0.1
|
)
|
1.5
|
(4.0
|
)
|
(4.5
|
)
|
|||||||||
Net (loss) income before income taxes
|
(65.9
|
)
|
62.2
|
27.6
|
134.9
|
|||||||||||
(Benefit) provision for taxes
|
(4.6
|
)
|
7.0
|
6.2
|
21.1
|
|||||||||||
Net (loss) income
|
$
|
(61.3
|
)
|
$
|
55.2
|
$
|
21.4
|
$
|
113.8
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||||||||||||||||||
GROSS WRITTEN PREMIUMS BY SEGMENT AND LINE OF BUSINESS
|
||||||||||||||||||||||||
(in millions)
|
||||||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||||||
U.S. Operations
|
Three months ended
|
Three months ended
|
||||||||||||||||||||||
September 30, 2017
|
September 30, 2016
|
|||||||||||||||||||||||
Gross Written
|
Net Written
|
Net Earned
|
Gross Written
|
Net Written
|
Net Earned
|
|||||||||||||||||||
Property
|
$
|
68.1
|
$
|
45.5
|
$
|
26.8
|
$
|
69.2
|
$
|
42.8
|
$
|
28.6
|
||||||||||||
Liability
|
277.2
|
196.9
|
160.2
|
226.7
|
164.2
|
146.3
|
||||||||||||||||||
Professional
|
46.2
|
32.1
|
30.8
|
35.3
|
28.6
|
21.3
|
||||||||||||||||||
Specialty
|
37.4
|
28.1
|
24.8
|
29.6
|
23.3
|
20.1
|
||||||||||||||||||
Total
|
$
|
428.9
|
$
|
302.6
|
$
|
242.6
|
$
|
360.8
|
$
|
258.9
|
$
|
216.3
|
||||||||||||
International Operations
|
Three months ended
|
Three months ended
|
||||||||||||||||||||||
September 30, 2017
|
September 30, 2016
|
|||||||||||||||||||||||
Gross Written
|
Net Written
|
Net Earned
|
Gross Written
|
Net Written
|
Net Earned
|
|||||||||||||||||||
Property
|
$
|
177.1
|
$
|
64.1
|
$
|
48.8
|
$
|
76.6
|
$
|
58.3
|
$
|
53.2
|
||||||||||||
Liability
|
56.3
|
25.1
|
22.6
|
40.5
|
23.0
|
24.3
|
||||||||||||||||||
Professional
|
42.8
|
27.9
|
22.7
|
39.7
|
25.9
|
22.3
|
||||||||||||||||||
Specialty
|
100.1
|
53.6
|
52.7
|
67.7
|
49.1
|
42.5
|
||||||||||||||||||
Total
|
$
|
376.3
|
$
|
170.7
|
$
|
146.8
|
$
|
224.5
|
$
|
156.3
|
$
|
142.3
|
||||||||||||
Consolidated
|
Three months ended
|
Three months ended
|
||||||||||||||||||||||
September 30, 2017
|
September 30, 2016
|
|||||||||||||||||||||||
Gross Written
|
Net Written
|
Net Earned
|
Gross Written
|
Net Written
|
Net Earned
|
|||||||||||||||||||
Property
|
$
|
245.1
|
$
|
109.5
|
$
|
75.5
|
$
|
145.8
|
$
|
101.1
|
$
|
81.8
|
||||||||||||
Liability
|
333.5
|
222.0
|
182.8
|
267.3
|
187.3
|
170.7
|
||||||||||||||||||
Professional
|
89.0
|
60.0
|
53.5
|
75.0
|
54.5
|
43.6
|
||||||||||||||||||
Specialty
|
137.5
|
81.7
|
77.5
|
97.3
|
72.4
|
62.6
|
||||||||||||||||||
Total
|
$
|
805.1
|
$
|
473.2
|
$
|
389.3
|
$
|
585.4
|
$
|
415.3
|
$
|
358.7
|
||||||||||||
U.S. Operations
|
Nine months ended
|
Nine months ended
|
||||||||||||||||||||||
September 30, 2017
|
September 30, 2016
|
|||||||||||||||||||||||
Gross Written
|
Net Written
|
Net Earned
|
Gross Written
|
Net Written
|
Net Earned
|
|||||||||||||||||||
Property
|
$
|
193.4
|
$
|
104.9
|
$
|
85.8
|
$
|
188.6
|
$
|
102.4
|
$
|
93.7
|
||||||||||||
Liability
|
715.4
|
511.3
|
454.8
|
613.2
|
440.8
|
429.1
|
||||||||||||||||||
Professional
|
119.9
|
89.3
|
85.5
|
98.9
|
71.7
|
56.8
|
||||||||||||||||||
Specialty
|
100.2
|
75.6
|
66.8
|
69.5
|
56.9
|
50.1
|
||||||||||||||||||
Total
|
$
|
1,128.9
|
$
|
781.1
|
$
|
692.9
|
$
|
970.2
|
$
|
671.8
|
$
|
629.7
|
||||||||||||
International Operations
|
Nine months ended
|
Nine months ended
|
||||||||||||||||||||||
September 30, 2017
|
September 30, 2016
|
|||||||||||||||||||||||
Gross Written
|
Net Written
|
Net Earned
|
Gross Written
|
Net Written
|
Net Earned
|
|||||||||||||||||||
Property
|
$
|
390.3
|
$
|
161.9
|
$
|
168.9
|
$
|
273.1
|
$
|
170.4
|
$
|
153.8
|
||||||||||||
Liability
|
126.6
|
61.3
|
60.1
|
109.9
|
62.1
|
65.8
|
||||||||||||||||||
Professional
|
120.4
|
72.3
|
70.4
|
111.2
|
70.7
|
71.8
|
||||||||||||||||||
Specialty
|
324.7
|
187.1
|
175.5
|
201.1
|
131.4
|
127.1
|
||||||||||||||||||
Total
|
$
|
962.0
|
$
|
482.6
|
$
|
474.9
|
$
|
695.3
|
$
|
434.6
|
$
|
418.5
|
||||||||||||
Consolidated
|
Nine months ended
|
Nine months ended
|
||||||||||||||||||||||
September 30, 2017
|
September 30, 2016
|
|||||||||||||||||||||||
Gross Written
|
Net Written
|
Net Earned
|
Gross Written
|
Net Written
|
Net Earned
|
|||||||||||||||||||
Property
|
$
|
583.7
|
$
|
266.8
|
$
|
254.7
|
$
|
461.7
|
$
|
272.8
|
$
|
247.5
|
||||||||||||
Liability
|
842.0
|
572.6
|
514.9
|
723.4
|
503.2
|
495.2
|
||||||||||||||||||
Professional
|
240.3
|
161.6
|
155.9
|
210.1
|
142.4
|
128.6
|
||||||||||||||||||
Specialty
|
424.9
|
262.7
|
242.3
|
270.6
|
188.3
|
177.2
|
||||||||||||||||||
Total
|
$
|
2,090.9
|
$
|
1,263.7
|
$
|
1,167.8
|
$
|
1,665.8
|
$
|
1,106.7
|
$
|
1,048.5
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||||||||||||||
COMPONENTS OF NET INVESTMENT INCOME
|
||||||||||||||||||||
ALL SEGMENTS
|
||||||||||||||||||||
(in millions)
|
||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||
Three months ended
|
||||||||||||||||||||
September 30
|
June 30
|
March 31
|
December 31
|
September 30
|
||||||||||||||||
2017
|
2017
|
2017
|
2016
|
2016
|
||||||||||||||||
Net investment income, excluding alternatives
|
$
|
25.2
|
$
|
23.0
|
$
|
22.2
|
$
|
22.4
|
$
|
22.9
|
||||||||||
Alternative investments
|
5.7
|
20.6
|
8.3
|
3.1
|
9.8
|
|||||||||||||||
Total net investment income
|
$
|
30.9
|
$
|
43.6
|
$
|
30.5
|
$
|
25.5
|
$
|
32.7
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||||||||||
RECONCILIATION OF TOTAL RETURN TO NET INVESTMENT INCOME
|
||||||||||||||||
(in millions)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
Three months ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Net investment income
|
$
|
30.9
|
$
|
32.7
|
$
|
105.0
|
$
|
89.6
|
||||||||
Add (deduct):
|
||||||||||||||||
Net realized investment and other gains
|
6.0
|
17.7
|
25.1
|
12.8
|
||||||||||||
Net unrealized gains
|
21.1
|
2.8
|
63.8
|
72.6
|
||||||||||||
Total return
|
$
|
58.0
|
$
|
53.2
|
$
|
193.9
|
$
|
175.0
|
||||||||
Average investments
(1)
|
$
|
4,560.6
|
$
|
4,111.5
|
$
|
4,431.3
|
$
|
4,062.7
|
||||||||
Total return on average investments
|
1.3
|
%
|
1.3
|
%
|
4.4
|
%
|
4.3
|
%
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||||||
SHAREHOLDER RETURN ANALYSIS
|
||||||||||||
(in millions)
|
||||||||||||
(unaudited)
|
||||||||||||
For the nine months ended September 30,
|
||||||||||||
2017
|
2016
|
% Change
|
||||||||||
Net income
|
$
|
21.4
|
$
|
113.8
|
(81.2
|
%)
|
||||||
Adjusted operating income
(a)
|
5.2
|
101.3
|
(94.9
|
%)
|
||||||||
Shareholders' Equity - Beginning of the period
|
$
|
1,792.7
|
$
|
1,668.1
|
7.5
|
%
|
||||||
Shareholders' Equity - End of current period
|
1,808.0
|
1,788.4
|
1.1
|
%
|
||||||||
Average Shareholders' Equity
|
$
|
1,800.4
|
$
|
1,728.3
|
4.2
|
%
|
||||||
Annualized return on average shareholders' equity
|
1.6
|
%
|
8.8
|
%
|
||||||||
Annualized adjusted operating return on average shareholders' equity
|
0.4
|
%
|
7.8
|
%
|