Bermuda
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1-15259
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98-0214719
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(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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(Address, Including Zip Code,
of Principal Executive Offices)
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(Mailing Address)
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ITEM 2.02.
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RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
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ITEM 9.01.
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FINANCIAL STATEMENTS AND EXHIBITS.
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99.1
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Press Release issued by Argo Group International Holdings, Ltd. dated August 4, 2015.
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ARGO GROUP INTERNATIONAL HOLDINGS, LTD. | ||||
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By:
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/s/ Jay S. Bullock | ||
Dated: August 4, 2015 | Name: | Jay S. Bullock | ||
Title: | Executive Vice President and Chief Financial Officer | |||
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·
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Gross written premiums were up 7.2% to $557.8 million from $520.1 million in the second quarter of 2014.
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·
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After-tax operating income was $25.9 million or $0.91 per diluted share, compared to $23.7 million or $0.81 per diluted share for the second quarter of 2014.
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·
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Net income was $27.9 million or $0.98 per diluted share, compared to $38.6 million or $1.32 per diluted share for the second quarter of 2014.
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·
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Pre-tax underwriting income increased 12.0% to $15.9 million in the second quarter of 2015 from $14.2 million in 2014.
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·
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The combined ratio was 95.4% compared to 95.8% for the second quarter of 2014. The loss and expense ratios for the quarter were 55.1% and 40.3%, respectively compared to 55.1% and 40.7% for the second quarter of 2014.
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·
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Included in underwriting expenses was a non-cash, equity-based compensation charge of $10.4 million (representing 3.0 combined ratio points), compared to $6.8 million (representing 2.0 combined ratio points) in the second quarter of 2014, resulting from the increase in the Company’s stock price during the quarter of each year.
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·
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Net favorable prior-year reserve development was $5.0 million (benefiting the combined ratio by 1.4 points), compared with $14.4 million (benefiting the combined ratio by 4.3 points) for the second quarter of 2014.
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·
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Estimated pre-tax catastrophe losses were $2.3 million or 0.6 points on the combined ratio, compared to $4.2 million or 1.3 points on the combined ratio for the second quarter of 2014.
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·
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The loss ratio excluding catastrophes and reserve development was 55.9% for the second quarter of 2015, compared to 58.1% for the second quarter of 2014.
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Argo House
110 Pitts Bay Road
Pembroke, Bermuda HM08
www.argolimited.com
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T
441 296 5858
F
441 296 6162
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·
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During the quarter, the Company repurchased $6.8 million or 136,042 shares of its common stock at an average price of $49.80 per share.
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·
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Gross written premiums were up 5.2% to $1.035 billion from $983.2 million in the first half of 2014.
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·
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After-tax operating income was $55.4 million or $1.94 per diluted share, compared to $48.7 million or $1.65 per diluted share for the first half of 2014.
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·
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Net income was $86.7 million or $3.03 per diluted share, compared to $78.8 million or $2.67 per diluted share for the first half of 2014.
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·
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Pre-tax underwriting income increased 29.6% to $37.2 million in the first half of 2015 from $28.7 million in 2014.
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·
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The combined ratio was 94.5% compared to 95.7% for the first half of 2014. The loss and expense ratios for the first half of 2015 were 55.0% and 39.5%, respectively compared to 55.6% and 40.1% for the first half of 2014.
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·
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Included in underwriting expenses was a non-cash, equity-based compensation charge of $15.3 million, (representing 2.2 combined ratio points), compared to $11.1 million (representing 1.6 combined ratio points), in the first half of 2014, resulting from the increase in the Company’s stock price during the first six months of each year.
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·
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Net favorable prior-year reserve development was $8.7 million (benefiting the combined ratio by 1.3 points), compared with $23.3 million (benefiting the combined ratio by 3.5 points) for the first half of 2014.
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·
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Estimated pre-tax catastrophe losses were $5.3 million or 0.8 points on the combined ratio, compared to $8.4 million or 1.3 points on the combined ratio for the first half of 2014.
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·
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The current accident year loss ratio excluding catastrophes was 55.5% for the first half of 2015, compared to 57.8% for the first half of 2014.
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·
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In the first half of 2015, the Company repurchased $24.9 million or 489,096 shares of its common stock at an average share price of $50.93, which represents 1.7% of net shares outstanding at December 31, 2014.
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·
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Book value per share increased to $59.76, up 2.6% from $58.22 at Dec. 31, 2014.
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·
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At June 30, 2015, cash and investments totaled $4.2 billion with a net pre-tax unrealized gain of approximately $166.5 million.
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ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
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CONSOLIDATED BALANCE SHEETS
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(in millions, except per share amounts)
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June 30,
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December 31,
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|||||||
2015
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2014
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|||||||
(unaudited)
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Assets
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Total investments
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$ | 4,082.2 | $ | 4,097.9 | ||||
Cash
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106.5 | 81.0 | ||||||
Accrued investment income
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20.6 | 22.1 | ||||||
Receivables
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1,468.1 | 1,350.8 | ||||||
Goodwill and intangible assets
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228.7 | 230.8 | ||||||
Deferred acquisition costs, net
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139.3 | 124.6 | ||||||
Ceded unearned premiums
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261.9 | 207.6 | ||||||
Other assets
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236.7 | 241.5 | ||||||
Total assets
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$ | 6,544.0 | $ | 6,356.3 | ||||
Liabilities and Shareholders' Equity
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Reserves for losses and loss adjustment expenses
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$ | 3,078.2 | $ | 3,042.4 | ||||
Unearned premiums
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896.4 | 817.2 | ||||||
Ceded reinsurance payable, net
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261.5 | 178.8 | ||||||
Senior unsecured fixed rate notes
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143.8 | 143.8 | ||||||
Other indebtedness
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56.7 | 62.0 | ||||||
Junior subordinated debentures
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172.7 | 172.7 | ||||||
Other liabilities
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265.8 | 292.7 | ||||||
Total liabilities
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4,875.1 | 4,709.6 | ||||||
Total shareholders' equity
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1,668.9 | 1,646.7 | ||||||
Total liabilities and shareholders' equity
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$ | 6,544.0 | $ | 6,356.3 | ||||
Book value per common share
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$ | 59.76 | $ | 58.22 |
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
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FINANCIAL HIGHLIGHTS
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ALL SEGMENTS
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(in millions, except per share amounts)
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Three Months Ended
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Six Months Ended
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June 30,
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June 30,
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|||||||||||||||
2015
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2014
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2015
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2014
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(unaudited) | (unaudited) | |||||||||||||||
Gross Written Premiums
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$ | 557.8 | $ | 520.1 | $ | 1,034.5 | $ | 983.2 | ||||||||
Net Written Premiums
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411.6 | 398.3 | 707.6 | 675.1 | ||||||||||||
Earned Premiums
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346.0 | 336.1 | 680.6 | 661.8 | ||||||||||||
Net Investment Income
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21.8 | 20.6 | 42.6 | 43.9 | ||||||||||||
Net Realized Investment and Other Gains
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5.3 | 18.5 | 21.3 | 29.6 | ||||||||||||
Total Revenue
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373.1 | 375.2 | 744.5 | 735.3 | ||||||||||||
Losses and Loss Adjustment Expenses
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190.6 | 185.1 | 374.3 | 367.6 | ||||||||||||
Underwriting, Acquisition and Insurance Expenses
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139.5 | 136.8 | 269.1 | 265.5 | ||||||||||||
Interest Expense
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4.6 | 5.1 | 9.5 | 10.1 | ||||||||||||
Fee Expense, net
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0.7 | 0.1 | 1.1 | 1.5 | ||||||||||||
Foreign Currency Exchange Loss (Gain)
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3.0 | 3.4 | (6.6 | ) | 3.2 | |||||||||||
Total Expenses
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338.4 | 330.5 | 647.4 | 647.9 | ||||||||||||
Income Before Taxes
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34.7 | 44.7 | 97.1 | 87.4 | ||||||||||||
Income Tax Provision
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6.8 | 6.1 | 10.4 | 8.6 | ||||||||||||
Net Income
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$ | 27.9 | $ | 38.6 | $ | 86.7 | $ | 78.8 | ||||||||
Net Income per Common Share (Basic)
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$ | 1.00 | $ | 1.34 | $ | 3.09 | $ | 2.72 | ||||||||
Net Income per Common Share (Diluted)
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$ | 0.98 | $ | 1.32 | $ | 3.03 | $ | 2.67 | ||||||||
Weighted Average Common Shares:
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Basic
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27.9 | 28.8 | 28.0 | 29.0 | ||||||||||||
Diluted
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28.5 | 29.2 | 28.6 | 29.5 |
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
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SEGMENT DATA
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(in millions)
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Three Months Ended
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Six Months Ended
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June 30
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June 30
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2015
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2014
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2015
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2014
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(unaudited) | (unaudited) | |||||||||||||||||||
Excess and Surplus Lines
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Gross Written Premiums
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$ | 196.2 | $ | 175.8 | $ | 358.8 | $ | 315.8 | ||||||||||||
Net Written Premiums
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166.1 | 147.4 | 292.2 | 245.6 | ||||||||||||||||
Earned Premiums
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131.1 | 125.3 | 254.2 | 242.7 | ||||||||||||||||
Underwriting Income
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$ | 16.7 | $ | 20.8 | $ | 34.4 | $ | 33.2 | ||||||||||||
Net Investment Income
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9.0 | 9.0 | 17.5 | 18.3 | ||||||||||||||||
Interest Expense
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(1.5 | ) | (1.6 | ) | (3.0 | ) | (3.2 | ) | ||||||||||||
Operating Income Before Taxes
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$ | 24.2 | $ | 28.2 | $ | 48.9 | $ | 48.3 | ||||||||||||
Loss Ratio
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54.8 | 51.3 | 54.0 | 53.2 | ||||||||||||||||
Expense Ratio
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32.5 | 32.1 | 32.5 | 33.1 | ||||||||||||||||
GAAP Combined Ratio
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87.3 | % | 83.4 | % | 86.5 | % | 86.3 | % | ||||||||||||
Commercial Specialty
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Gross Written Premiums
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$ | 92.5 | $ | 83.6 | $ | 199.5 | $ | 189.5 | ||||||||||||
Net Written Premiums
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55.5 | 55.7 | 119.3 | 123.7 | ||||||||||||||||
Earned Premiums
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71.7 | 71.1 | 144.3 | 142.8 | ||||||||||||||||
Underwriting Income (Loss)
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$ | 2.4 | $ | (2.4 | ) | $ | 3.3 | $ | (3.5 | ) | ||||||||||
Net Investment Income
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4.7 | 4.6 | 9.2 | 9.3 | ||||||||||||||||
Interest Expense
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(0.8 | ) | (0.8 | ) | (1.6 | ) | (1.6 | ) | ||||||||||||
Fee Expense, net
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(1.7 | ) | (1.9 | ) | (2.5 | ) | (3.0 | ) | ||||||||||||
Operating Income (Loss) Before Taxes
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$ | 4.6 | $ | (0.5 | ) | $ | 8.4 | $ | 1.2 | |||||||||||
Loss Ratio
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65.2 | 67.0 | 66.2 | 66.8 | ||||||||||||||||
Expense Ratio
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31.5 | 36.4 | 31.5 | 35.7 | ||||||||||||||||
GAAP Combined Ratio
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96.7 |
%
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103.4 |
%
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97.7 |
%
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102.5 | % | ||||||||||||
Syndicate 1200
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Gross Written Premiums
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$ | 168.2 | $ | 163.5 | $ | 305.8 | $ | 297.1 | ||||||||||||
Net Written Premiums
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122.8 | 131.3 | 201.6 | 208.0 | ||||||||||||||||
Earned Premiums
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104.5 | 102.2 | 206.4 | 201.5 | ||||||||||||||||
Underwriting Income
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$ | 7.4 | $ | 7.0 | $ | 16.5 | $ | 20.2 | ||||||||||||
Net Investment Income
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2.4 | 2.1 | 4.6 | 5.8 | ||||||||||||||||
Interest Expense
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(0.6 | ) | (0.8 | ) | (1.3 | ) | (1.6 | ) | ||||||||||||
Fee Income, net
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0.9 | 1.8 | 1.3 | 1.5 | ||||||||||||||||
Operating Income Before Taxes
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$ | 10.1 | $ | 10.1 | $ | 21.1 | $ | 25.9 | ||||||||||||
Loss Ratio
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51.3 | 51.1 | 51.4 | 48.5 | ||||||||||||||||
Expense Ratio
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41.7 | 42.1 | 40.6 | 41.5 | ||||||||||||||||
GAAP Combined Ratio
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93.0 |
%
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93.2 |
%
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92.0 |
%
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90.0 | % | ||||||||||||
International Specialty
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Gross Written Premiums
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$ | 100.5 | $ | 97.4 | $ | 170.3 | $ | 180.6 | ||||||||||||
Net Written Premiums
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66.8 | 64.1 | 94.4 | 97.6 | ||||||||||||||||
Earned Premiums
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38.3 | 37.6 | 75.6 | 74.6 | ||||||||||||||||
Underwriting Income
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$ | 6.5 | $ | 4.3 | $ | 13.5 | $ | 10.1 | ||||||||||||
Net Investment Income
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3.0 | 2.0 | 5.9 | 3.8 | ||||||||||||||||
Interest Expense
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(0.7 | ) | (0.7 | ) | (1.5 | ) | (1.5 | ) | ||||||||||||
Operating Income Before Taxes
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$ | 8.8 | $ | 5.6 | $ | 17.9 | $ | 12.4 | ||||||||||||
Loss Ratio
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46.0 | 48.4 | 45.6 | 49.6 | ||||||||||||||||
Expense Ratio
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36.5 | 40.5 | 36.4 | 36.9 | ||||||||||||||||
GAAP Combined Ratio
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82.5 |
%
|
88.9 |
%
|
82.0 |
%
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86.5 | % |
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
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(in millions)
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(unaudited)
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For the Three Months
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For the Six Months
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Ended June 30,
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Ended June 30,
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Net Prior Year Development
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2015
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2014
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2015
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2014
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(Favorable)/Unfavorable
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Excess and Surplus Lines
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$ | (6.8 | ) | $ | (13.7 | ) | $ | (15.0 | ) | $ | (21.7 | ) | ||||
Commercial Specialty
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4.4 | 2.9 | 11.6 | 4.9 | ||||||||||||
Syndicate 1200
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(2.2 | ) | (6.4 | ) | (2.5 | ) | (15.2 | ) | ||||||||
International Specialty
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(1.2 | ) | - | (3.7 | ) | 0.4 | ||||||||||
Run-off
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0.8 | 2.8 | 0.9 | 8.3 | ||||||||||||
Total
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$ | (5.0 | ) | $ | (14.4 | ) | $ | (8.7 | ) | $ | (23.3 | ) |
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
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RECONCILIATION OF OPERATING INCOME (LOSS) TO NET INCOME (LOSS)
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(in millions, except per share amounts)
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Three Months Ended
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Six Months Ended
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June 30,
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June 30,
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2015
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2014
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2015
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2014
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(unaudited) | (unaudited) | |||||||||||||||
Income Before Taxes:
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From Operations
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$ | 32.4 | $ | 29.6 | $ | 69.2 | $ | 61.0 | ||||||||
Foreign Currency Exchange (Loss) Gain
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(3.0 | ) | (3.4 | ) | 6.6 | (3.2 | ) | |||||||||
Net Realized Investment Gains
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5.3 | 18.5 | 21.3 | 29.6 | ||||||||||||
Income Before Taxes
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34.7 | 44.7 | 97.1 | 87.4 | ||||||||||||
Income Tax Provision
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6.8 | 6.1 | 10.4 | 8.6 | ||||||||||||
Net Income
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$ | 27.9 | $ | 38.6 | $ | 86.7 | $ | 78.8 | ||||||||
Net Income per Common Share (Diluted)
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$ | 0.98 | $ | 1.32 | $ | 3.03 | $ | 2.67 | ||||||||
Operating Income per Common Share (Diluted)
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At Assumed Tax Rate:
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Income (a)
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0.98 | 1.22 | 2.72 | 2.37 | ||||||||||||
Foreign Currency Exchange Loss (Gains) (a)
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0.08 | 0.09 | (0.18 | ) | 0.09 | |||||||||||
Net Realized Investment Gains (a)
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(0.15 | ) | (0.50 | ) | (0.60 | ) | (0.81 | ) | ||||||||
Operating Income per Common Share
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0.91 | 0.81 | 1.94 | 1.65 | ||||||||||||
(a) Per diluted share at assumed tax rate of 20%.
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