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1. |
Basis of Presentation |
The accompanying consolidated financial statements of Argo Group International Holdings, Ltd. (“Argo Group,” “we” or the “Company”) and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. The preparation of interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The major estimates reflected in our consolidated financial statements include, but are not limited to, reserves for losses and loss adjustment expenses; reinsurance recoverables, including the reinsurance recoverables allowance for doubtful accounts; estimates of written and earned premiums; reinsurance premium receivable; fair value of investments and assessment of potential impairment; valuation of goodwill and intangibles and our deferred tax asset valuation allowance. Actual results could differ from those estimates. Certain financial information that normally is included in annual financial statements, including certain financial statement footnotes, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on February 27, 2015.
The interim financial information as of, and for the three and nine months ended, September 30, 2015 and 2014 is unaudited. However, in the opinion of management, the interim information includes all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results presented for the interim periods. The operating results for the interim periods are not necessarily indicative of the results to be expected for the full year. All significant intercompany amounts have been eliminated in consolidation. Certain amounts in prior years’ financial statements have been reclassified to conform to the current presentation.
10% Stock Dividend
On February 17, 2015, our Board of Directors declared a 10% stock dividend, payable on March 16, 2015, to shareholders of record at the close of business on March 2, 2015. As a result of the stock dividend, 2,554,506 additional shares were issued. Cash was paid in lieu of fractional shares of our common shares. All references to share and per share amounts in this document and related disclosures have been adjusted to reflect the stock dividend for all periods presented.
|
2. |
Recently Issued Accounting Pronouncements |
In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (Topic 606). The ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The ASU provides a five-step analysis of transactions to determine when and how revenue is recognized and requires additional disclosures sufficient to describe the nature, amount, timing and uncertainty of revenue and cash flows for these transactions. This ASU is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted as early as annual reporting periods beginning after December 15, 2016. We will adopt this ASU on January 1, 2018. Companies may use either a “full retrospective” adoption, meaning the update is applied to all periods presented, or a “modified retrospective” adoption, meaning the update is applied only to the most current period presented in the financial statements. While insurance contracts are excluded from this ASU, fee income related to our brokerage operations and management of the third-party capital for our underwriting Syndicate at Lloyd’s will be subject to this updated guidance. We continue to evaluate what impact this ASU will have on our financial results and disclosures and which adoption method to apply, but no not anticipate such impact being material based on the limited revenue streams subject to the ASU.
In February 2015, the FASB issued ASU 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis." ASU 2015-02 changes the analysis that a reporting entity must perform to determine whether entities should be consolidated if they are deemed variable interest entities. It is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. We are currently in the process of evaluating the impact of the adoption of ASU 2015-02 on our consolidated financial statements.
In May 2015, the FASB issued ASU 2015-09, “Insurance (Topic 944), Disclosures about Short-Duration Contracts.” ASU 2015-09 requires additional disclosures about short-duration contracts for products in effect for typically a year or less. The disclosures will focus on the liability for unpaid claims and claim adjustment expenses. ASU 2015-09 is effective for annual periods beginning after December 15, 2015 and interim periods within annual periods beginning after December 15, 2016. We are currently in the process of evaluating the impact of the adoption of ASU 2015-09 on our consolidated financial statements.
|
3. |
Investments |
Composition of Invested Assets
The amortized cost, gross unrealized gains, gross unrealized losses and fair value of investments were as follows:
September 30, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
||||
Fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Governments |
|
$ |
167.8 |
|
|
$ |
1.4 |
|
|
$ |
0.3 |
|
|
$ |
168.9 |
|
Non-U.S. Governments |
|
|
87.4 |
|
|
|
0.4 |
|
|
|
1.8 |
|
|
|
86.0 |
|
Obligations of states and political subdivisions |
|
|
473.6 |
|
|
|
19.4 |
|
|
|
0.5 |
|
|
|
492.5 |
|
Credit-Financial |
|
|
491.4 |
|
|
|
8.2 |
|
|
|
2.5 |
|
|
|
497.1 |
|
Credit-Industrial |
|
|
493.0 |
|
|
|
6.7 |
|
|
|
6.8 |
|
|
|
492.9 |
|
Credit-Utility |
|
|
148.8 |
|
|
|
2.1 |
|
|
|
7.4 |
|
|
|
143.5 |
|
Structured securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMO/MBS-agency (1) |
|
|
132.8 |
|
|
|
6.0 |
|
|
|
0.2 |
|
|
|
138.6 |
|
CMO/MBS-non agency |
|
|
11.7 |
|
|
|
0.7 |
|
|
|
— |
|
|
|
12.4 |
|
CMBS (2) |
|
|
165.5 |
|
|
|
0.9 |
|
|
|
0.7 |
|
|
|
165.7 |
|
ABS (3) |
|
|
127.8 |
|
|
|
0.5 |
|
|
|
0.3 |
|
|
|
128.0 |
|
CLO (4) |
|
|
136.0 |
|
|
|
0.4 |
|
|
|
0.8 |
|
|
|
135.6 |
|
Foreign denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Governments |
|
|
171.4 |
|
|
|
1.0 |
|
|
|
20.1 |
|
|
|
152.3 |
|
Credit |
|
|
126.0 |
|
|
|
1.3 |
|
|
|
18.3 |
|
|
|
109.0 |
|
ABS/CMBS |
|
|
24.9 |
|
|
|
0.1 |
|
|
|
2.9 |
|
|
|
22.1 |
|
CLO |
|
|
83.6 |
|
|
|
1.2 |
|
|
|
7.2 |
|
|
|
77.6 |
|
Total fixed maturities |
|
|
2,841.7 |
|
|
|
50.3 |
|
|
|
69.8 |
|
|
|
2,822.2 |
|
Equity securities |
|
|
358.5 |
|
|
|
129.7 |
|
|
|
22.2 |
|
|
|
466.0 |
|
Other investments |
|
|
488.1 |
|
|
|
12.6 |
|
|
|
0.7 |
|
|
|
500.0 |
|
Short-term investments |
|
|
345.0 |
|
|
|
— |
|
|
|
0.2 |
|
|
|
344.8 |
|
Total investments |
|
$ |
4,033.3 |
|
|
$ |
192.6 |
|
|
$ |
92.9 |
|
|
$ |
4,133.0 |
|
(1) |
Collateralized mortgage obligations/mortgage-backed securities (“CMO/MBS”). |
(2) |
Commercial mortgage-backed securities (“CMBS”). |
(3) |
Asset-backed securities (“ABS”). |
(4) |
Collateralized loan obligations (“CLO”). |
December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
||||
Fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Governments |
|
$ |
184.0 |
|
|
$ |
1.3 |
|
|
$ |
0.3 |
|
|
$ |
185.0 |
|
Non-U.S. Governments |
|
|
79.9 |
|
|
|
0.6 |
|
|
|
0.6 |
|
|
|
79.9 |
|
Obligations of states and political subdivisions |
|
|
468.1 |
|
|
|
22.9 |
|
|
|
0.3 |
|
|
|
490.7 |
|
Credit-Financial |
|
|
508.1 |
|
|
|
12.3 |
|
|
|
2.3 |
|
|
|
518.1 |
|
Credit-Industrial |
|
|
493.7 |
|
|
|
9.4 |
|
|
|
3.5 |
|
|
|
499.6 |
|
Credit-Utility |
|
|
142.7 |
|
|
|
3.2 |
|
|
|
3.9 |
|
|
|
142.0 |
|
Structured securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMO/MBS-agency (1) |
|
|
168.0 |
|
|
|
8.0 |
|
|
|
0.7 |
|
|
|
175.3 |
|
CMO/MBS-non agency |
|
|
13.2 |
|
|
|
0.8 |
|
|
|
— |
|
|
|
14.0 |
|
CMBS (2) |
|
|
178.6 |
|
|
|
1.6 |
|
|
|
0.2 |
|
|
|
180.0 |
|
ABS (3) |
|
|
142.7 |
|
|
|
0.4 |
|
|
|
0.5 |
|
|
|
142.6 |
|
CLO (4) |
|
|
78.7 |
|
|
|
0.2 |
|
|
|
0.5 |
|
|
|
78.4 |
|
Foreign denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Governments |
|
|
148.4 |
|
|
|
1.2 |
|
|
|
9.4 |
|
|
|
140.2 |
|
Credit |
|
|
136.7 |
|
|
|
1.8 |
|
|
|
12.5 |
|
|
|
126.0 |
|
ABS/CMBS |
|
|
29.5 |
|
|
|
0.2 |
|
|
|
2.5 |
|
|
|
27.2 |
|
CLO |
|
|
44.9 |
|
|
|
0.7 |
|
|
|
3.9 |
|
|
|
41.7 |
|
Total fixed maturities |
|
|
2,817.2 |
|
|
|
64.6 |
|
|
|
41.1 |
|
|
|
2,840.7 |
|
Equity securities |
|
|
307.3 |
|
|
|
184.1 |
|
|
|
5.1 |
|
|
|
486.3 |
|
Other investments |
|
|
488.9 |
|
|
|
7.5 |
|
|
|
1.3 |
|
|
|
495.1 |
|
Short-term investments |
|
|
275.8 |
|
|
|
— |
|
|
|
— |
|
|
|
275.8 |
|
Total investments |
|
$ |
3,889.2 |
|
|
$ |
256.2 |
|
|
$ |
47.5 |
|
|
$ |
4,097.9 |
|
(1) |
Collateralized mortgage obligations/mortgage-backed securities (“CMO/MBS”). |
(2) |
Commercial mortgage-backed securities (“CMBS”). |
(3) |
Asset-backed securities (“ABS”). |
(4) |
Collateralized loan obligations (“CLO”). |
Included in “Total investments” in our Consolidated Balance Sheets at September 30, 2015 and December 31, 2014 is $78.2 million and $75.2 million, respectively, of assets managed on behalf of the trade capital providers, who are third-party participants that provide underwriting capital to our Syndicate 1200 segment.
Contractual Maturity
The amortized cost and fair values of fixed maturity investments as of September 30, 2015, by contractual maturity, were as follows:
(in millions) |
|
Amortized Cost |
|
|
Fair Value |
|
||
Due in one year or less |
|
$ |
219.8 |
|
|
$ |
208.4 |
|
Due after one year through five years |
|
|
1,295.9 |
|
|
|
1,285.8 |
|
Due after five years through ten years |
|
|
480.4 |
|
|
|
481.0 |
|
Thereafter |
|
|
163.3 |
|
|
|
167.0 |
|
Structured securities |
|
|
682.3 |
|
|
|
680.0 |
|
Total |
|
$ |
2,841.7 |
|
|
$ |
2,822.2 |
|
The expected maturities may differ from the contractual maturities because debtors may have the right to call or prepay obligations.
Other Invested Assets
Details regarding the carrying value and unfunded investment commitments of the other invested assets portfolio as of September 30, 2015 and December 31, 2014 were as follows:
September 30, 2015 |
|
|
|
|
|
|
|
|
(in millions) |
|
Carrying Value |
|
|
Unfunded Commitments |
|
||
Investment Type |
|
|
|
|
|
|
|
|
Hedge funds |
|
$ |
141.3 |
|
|
$ |
— |
|
Private equity |
|
|
143.7 |
|
|
|
71.6 |
|
Long only funds |
|
|
195.1 |
|
|
|
— |
|
Other investments |
|
|
19.9 |
|
|
|
— |
|
Total other invested assets |
|
$ |
500.0 |
|
|
$ |
71.6 |
|
December 31, 2014 |
|
|
|
|
|
|
|
|
(in millions) |
|
Carrying Value |
|
|
Unfunded Commitments |
|
||
Investment Type |
|
|
|
|
|
|
|
|
Hedge funds |
|
$ |
153.2 |
|
|
$ |
— |
|
Private equity |
|
|
123.6 |
|
|
|
72.9 |
|
Long only funds |
|
|
200.7 |
|
|
|
— |
|
Other investments |
|
|
17.6 |
|
|
|
— |
|
Total other invested assets |
|
$ |
495.1 |
|
|
$ |
72.9 |
|
The following describes each investment type:
|
· |
Hedge funds: Hedge funds include funds that primarily buy and sell stocks including short sales, multi-strategy credit, relative value credit and distressed credit. |
|
· |
Private equity: Private equity includes buyout funds, real asset/infrastructure funds, credit special situations funds, mezzanine lending funds and direct investments and strategic non-controlling minority investments in private companies that are principally accounted for using the equity method of accounting. |
|
· |
Long only funds: These funds include a fund that primarily owns international stocks, a fund that owns high yield fixed income securities and a fund that primarily owns investment-grade corporate and sovereign fixed income securities. |
|
· |
Other investments: Other investments include our participation in pools, foreign exchange currency forward contracts to manage exposure on losses related to global catastrophic events, our Canadian dollar investment portfolio, certain Euro and other non-U.S. dollar denominated investments and to minimize negative impacts to our investment portfolio returns. |
Unrealized Losses and Other-Than-Temporary Impairments
An aging of unrealized losses on our investments in fixed maturities, equity securities, other investments and short-term investments is presented below:
September 30, 2015 |
|
Less Than One Year |
|
|
One Year or Greater |
|
|
Total |
|
|||||||||||||||
(in millions) |
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
||||||
Fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Governments (2) |
|
$ |
33.6 |
|
|
$ |
0.3 |
|
|
$ |
0.4 |
|
|
$ |
— |
|
|
$ |
34.0 |
|
|
$ |
0.3 |
|
Non-U.S. Governments |
|
|
32.9 |
|
|
|
1.5 |
|
|
|
3.1 |
|
|
|
0.3 |
|
|
|
36.0 |
|
|
|
1.8 |
|
Obligations of states and political subdivisions |
|
|
27.2 |
|
|
|
0.2 |
|
|
|
8.5 |
|
|
|
0.3 |
|
|
|
35.7 |
|
|
|
0.5 |
|
Credit-Financial |
|
|
197.9 |
|
|
|
2.2 |
|
|
|
19.1 |
|
|
|
0.3 |
|
|
|
217.0 |
|
|
|
2.5 |
|
Credit-Industrial |
|
|
218.4 |
|
|
|
5.2 |
|
|
|
30.6 |
|
|
|
1.6 |
|
|
|
249.0 |
|
|
|
6.8 |
|
Credit-Utility |
|
|
75.0 |
|
|
|
3.9 |
|
|
|
13.3 |
|
|
|
3.5 |
|
|
|
88.3 |
|
|
|
7.4 |
|
Structured securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMO/MBS-agency (1) |
|
|
7.9 |
|
|
|
— |
|
|
|
8.2 |
|
|
|
0.2 |
|
|
|
16.1 |
|
|
|
0.2 |
|
CMBS (2) |
|
|
54.9 |
|
|
|
0.7 |
|
|
|
4.5 |
|
|
|
— |
|
|
|
59.4 |
|
|
|
0.7 |
|
ABS (1) |
|
|
27.5 |
|
|
|
— |
|
|
|
12.1 |
|
|
|
0.3 |
|
|
|
39.6 |
|
|
|
0.3 |
|
CLO |
|
|
95.2 |
|
|
|
0.7 |
|
|
|
8.9 |
|
|
|
0.1 |
|
|
|
104.1 |
|
|
|
0.8 |
|
Foreign denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Governments (2) |
|
|
136.3 |
|
|
|
20.1 |
|
|
|
0.3 |
|
|
|
— |
|
|
|
136.6 |
|
|
|
20.1 |
|
Credit |
|
|
104.2 |
|
|
|
18.3 |
|
|
|
— |
|
|
|
— |
|
|
|
104.2 |
|
|
|
18.3 |
|
ABS/CMBS |
|
|
21.8 |
|
|
|
2.9 |
|
|
|
— |
|
|
|
— |
|
|
|
21.8 |
|
|
|
2.9 |
|
CLO |
|
|
75.6 |
|
|
|
7.2 |
|
|
|
— |
|
|
|
— |
|
|
|
75.6 |
|
|
|
7.2 |
|
Total fixed maturities |
|
|
1,108.4 |
|
|
|
63.2 |
|
|
|
109.0 |
|
|
|
6.6 |
|
|
|
1,217.4 |
|
|
|
69.8 |
|
Equity securities |
|
|
136.0 |
|
|
|
22.2 |
|
|
|
— |
|
|
|
— |
|
|
|
136.0 |
|
|
|
22.2 |
|
Other investments |
|
|
(0.4 |
) |
|
|
0.7 |
|
|
|
— |
|
|
|
— |
|
|
|
(0.4 |
) |
|
|
0.7 |
|
Short-term investments |
|
|
20.5 |
|
|
|
0.2 |
|
|
|
— |
|
|
|
— |
|
|
|
20.5 |
|
|
|
0.2 |
|
Total |
|
$ |
1,264.5 |
|
|
$ |
86.3 |
|
|
$ |
109.0 |
|
|
$ |
6.6 |
|
|
$ |
1,373.5 |
|
|
$ |
92.9 |
|
(1) |
Unrealized losses less than one year are less than $0.1 million. |
(2) |
Unrealized losses one year or greater are less than $0.1 million. |
December 31, 2014 |
|
Less Than One Year |
|
|
One Year or Greater |
|
|
Total |
|
|||||||||||||||
(in millions) |
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
||||||
Fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Governments |
|
$ |
55.0 |
|
|
$ |
0.2 |
|
|
$ |
15.7 |
|
|
$ |
0.1 |
|
|
$ |
70.7 |
|
|
$ |
0.3 |
|
Non-U.S. Governments |
|
|
36.5 |
|
|
|
0.4 |
|
|
|
5.2 |
|
|
|
0.2 |
|
|
|
41.7 |
|
|
|
0.6 |
|
Obligations of states and political subdivisions |
|
|
10.4 |
|
|
|
0.1 |
|
|
|
16.6 |
|
|
|
0.2 |
|
|
|
27.0 |
|
|
|
0.3 |
|
Credit-Financial |
|
|
195.7 |
|
|
|
2.2 |
|
|
|
11.1 |
|
|
|
0.1 |
|
|
|
206.8 |
|
|
|
2.3 |
|
Credit-Industrial |
|
|
240.8 |
|
|
|
3.3 |
|
|
|
12.2 |
|
|
|
0.2 |
|
|
|
253.0 |
|
|
|
3.5 |
|
Credit-Utility |
|
|
63.1 |
|
|
|
3.8 |
|
|
|
1.9 |
|
|
|
0.1 |
|
|
|
65.0 |
|
|
|
3.9 |
|
Structured securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMO/MBS-agency |
|
|
10.1 |
|
|
|
0.1 |
|
|
|
19.2 |
|
|
|
0.6 |
|
|
|
29.3 |
|
|
|
0.7 |
|
CMBS |
|
|
49.3 |
|
|
|
0.1 |
|
|
|
6.0 |
|
|
|
0.1 |
|
|
|
55.3 |
|
|
|
0.2 |
|
ABS |
|
|
68.8 |
|
|
|
0.2 |
|
|
|
8.1 |
|
|
|
0.3 |
|
|
|
76.9 |
|
|
|
0.5 |
|
CLO |
|
|
60.4 |
|
|
|
0.5 |
|
|
|
— |
|
|
|
— |
|
|
|
60.4 |
|
|
|
0.5 |
|
Foreign denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Governments |
|
|
123.7 |
|
|
|
9.3 |
|
|
|
11.2 |
|
|
|
0.1 |
|
|
|
134.9 |
|
|
|
9.4 |
|
Credit |
|
|
122.3 |
|
|
|
12.3 |
|
|
|
0.9 |
|
|
|
0.2 |
|
|
|
123.2 |
|
|
|
12.5 |
|
ABS/CMBS |
|
|
26.8 |
|
|
|
2.5 |
|
|
|
— |
|
|
|
— |
|
|
|
26.8 |
|
|
|
2.5 |
|
CLO |
|
|
41.7 |
|
|
|
3.9 |
|
|
|
— |
|
|
|
— |
|
|
|
41.7 |
|
|
|
3.9 |
|
Total fixed maturities |
|
|
1,104.6 |
|
|
|
38.9 |
|
|
|
108.1 |
|
|
|
2.2 |
|
|
|
1,212.7 |
|
|
|
41.1 |
|
Equity securities |
|
|
53.6 |
|
|
|
5.1 |
|
|
|
— |
|
|
|
— |
|
|
|
53.6 |
|
|
|
5.1 |
|
Other investments |
|
|
(0.9 |
) |
|
|
1.3 |
|
|
|
— |
|
|
|
— |
|
|
|
(0.9 |
) |
|
|
1.3 |
|
Short-term investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
1,157.3 |
|
|
$ |
45.3 |
|
|
$ |
108.1 |
|
|
$ |
2.2 |
|
|
$ |
1,265.4 |
|
|
$ |
47.5 |
|
We regularly evaluate our investments for other-than-temporary impairment. For fixed maturity securities, the evaluation for a credit loss is generally based on the present value of expected cash flows of the security as compared to the amortized book value. For structured securities, frequency and severity of loss inputs are used in projecting future cash flows of the securities. Loss frequency is measured as the credit default rate, which includes such factors as loan-to-value ratios and credit scores of borrowers. For equity securities and other investments, the length of time and the amount of decline in fair value are the principal factors in determining other-than-temporary impairment. We also recognize other-than-temporary losses on fixed maturity securities that we intend to sell.
We hold a total of 6,805 securities, of which 2,909 were in an unrealized loss position for less than one year and 193 were in an unrealized loss position for a period one year or greater as of September 30, 2015. Unrealized losses greater than twelve months on fixed maturities were the result of a number of factors, including increased credit spreads, foreign currency fluctuations and higher market yields relative to the date the securities were purchased, and for structured securities, by the performance of the underlying collateral, as well. In considering whether an investment is other-than-temporarily impaired or not, we also considered that we do not intend to sell the investments and it is unlikely that we will be required to sell the investments before recovery of their amortized cost bases, which may be maturity. In situations where we did not recognize other-than-temporary losses on investments in our equity portfolio, we have evaluated the near-term prospects of the investment in relation to the severity and duration of the impairment and based on that evaluation, have the ability and intent to hold these investments until a recovery of the cost basis. We do not consider these investments to be other-than-temporarily impaired at September 30, 2015.
There was no recognized other-than-temporary loss on our fixed maturities portfolio for the three months ended September 30, 2015 and September 30, 2014. We recognized other-than-temporary losses on our fixed maturities portfolio of $0.9 million and $1.2 million for the nine months ended September 30, 2015 and 2014, respectively. We recognized other-than-temporary losses on our equity portfolio of $3.4 million and $4.4 million for the three and nine months ended September 30, 2015, respectively. We recognized other-than-temporary losses on our equity portfolio of $0.2 million and $0.4 million for the three and nine months ended September 30, 2014, respectively.
Realized Gains and Losses
The following table presents our gross realized investment and other gains (losses):
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Realized gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities |
|
$ |
2.9 |
|
|
$ |
4.5 |
|
|
$ |
10.5 |
|
|
$ |
15.2 |
|
Equity securities |
|
|
9.8 |
|
|
|
0.7 |
|
|
|
22.6 |
|
|
|
16.1 |
|
Other investments |
|
|
14.6 |
|
|
|
13.6 |
|
|
|
44.9 |
|
|
|
36.5 |
|
Short-term investments |
|
|
— |
|
|
|
— |
|
|
|
1.1 |
|
|
|
0.1 |
|
Other assets |
|
|
— |
|
|
|
2.0 |
|
|
|
— |
|
|
|
2.0 |
|
Gain on sale of real estate holdings |
|
|
— |
|
|
|
— |
|
|
|
0.4 |
|
|
|
— |
|
Gross realized investment gains |
|
|
27.3 |
|
|
|
20.8 |
|
|
|
79.5 |
|
|
|
69.9 |
|
Realized losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities |
|
|
(4.1 |
) |
|
|
(1.1 |
) |
|
|
(13.1 |
) |
|
|
(8.7 |
) |
Equity securities |
|
|
(2.5 |
) |
|
|
(0.1 |
) |
|
|
(3.6 |
) |
|
|
(0.2 |
) |
Other investments |
|
|
(13.4 |
) |
|
|
(6.5 |
) |
|
|
(30.9 |
) |
|
|
(12.6 |
) |
Short-term investments |
|
|
(0.1 |
) |
|
|
— |
|
|
|
(1.5 |
) |
|
|
(0.3 |
) |
Other assets |
|
|
(0.1 |
) |
|
|
— |
|
|
|
(0.1 |
) |
|
|
(4.0 |
) |
Other-than-temporary impairment losses on fixed maturities |
|
|
— |
|
|
|
— |
|
|
|
(0.9 |
) |
|
|
(1.2 |
) |
Other-than-temporary impairment losses on equity securities |
|
|
(3.4 |
) |
|
|
(0.2 |
) |
|
|
(4.4 |
) |
|
|
(0.4 |
) |
Gross realized investment and other losses |
|
|
(23.6 |
) |
|
|
(7.9 |
) |
|
|
(54.5 |
) |
|
|
(27.4 |
) |
Net realized investment and other gains |
|
$ |
3.7 |
|
|
$ |
12.9 |
|
|
$ |
25.0 |
|
|
$ |
42.5 |
|
The cost of securities sold is based on the specific identification method.
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments are summarized as follows:
(in millions) |
|
Fixed Maturities |
|
|
Equity Maturities |
|
|
Other Investments |
|
|
Short Term |
|
|
Real Estate Holdings and Other |
|
|
Tax Effects |
|
|
Total |
|
|||||||
Three Months Ended September 30, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized before impairments |
|
$ |
(1.2 |
) |
|
$ |
7.3 |
|
|
$ |
1.2 |
|
|
$ |
(0.1 |
) |
|
$ |
(0.1 |
) |
|
$ |
(2.1 |
) |
|
$ |
5.0 |
|
Realized - impairments |
|
|
— |
|
|
|
(3.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.2 |
|
|
|
(2.2 |
) |
Change in unrealized |
|
|
(22.6 |
) |
|
|
(46.7 |
) |
|
|
— |
|
|
|
(0.2 |
) |
|
|
— |
|
|
|
20.1 |
|
|
|
(49.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized before impairments |
|
$ |
3.4 |
|
|
$ |
0.6 |
|
|
$ |
7.1 |
|
|
$ |
— |
|
|
$ |
2.0 |
|
|
$ |
(5.3 |
) |
|
$ |
7.8 |
|
Realized - impairments |
|
|
— |
|
|
|
(0.2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.4 |
|
|
|
0.2 |
|
Change in unrealized |
|
|
(33.9 |
) |
|
|
(10.7 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9.0 |
|
|
|
(35.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized before impairments |
|
$ |
(2.6 |
) |
|
$ |
19.0 |
|
|
$ |
14.0 |
|
|
$ |
(0.4 |
) |
|
$ |
0.3 |
|
|
$ |
(10.5 |
) |
|
$ |
19.8 |
|
Realized - impairments |
|
|
(0.9 |
) |
|
|
(4.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.8 |
|
|
|
(3.5 |
) |
Change in unrealized |
|
|
(40.9 |
) |
|
|
(71.5 |
) |
|
|
1.5 |
|
|
|
(0.2 |
) |
|
|
— |
|
|
|
33.3 |
|
|
|
(77.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized before impairments |
|
$ |
6.5 |
|
|
$ |
15.9 |
|
|
$ |
23.9 |
|
|
$ |
(0.2 |
) |
|
$ |
(2.0 |
) |
|
$ |
(13.4 |
) |
|
$ |
30.7 |
|
Realized - impairments |
|
|
(1.2 |
) |
|
|
(0.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.5 |
|
|
|
(1.1 |
) |
Change in unrealized |
|
|
(12.0 |
) |
|
|
5.0 |
|
|
|
1.1 |
|
|
|
— |
|
|
|
— |
|
|
|
(3.5 |
) |
|
|
(9.4 |
) |
We entered into foreign currency exchange forward contracts to manage currency exposure on losses related to certain global catastrophe events. We did not renew this program in the third quarter of 2015 as the currency exposure has become immaterial. These currency forward contracts were carried at fair value in our Consolidated Balance Sheets in “Other investments” at September 30, 2014. The realized and unrealized gains and losses on these contracts are included in “Net realized investment and other gains” in our Consolidated Statements of Income. The notional amount of these currency forward contracts was $25.6 million at September 30, 2014. The fair value of these currency forward contracts was a loss of $2.0 million at September 30, 2014. For the three and nine months ended September 30, 2015, we recognized $0.0 million and $0.5 million in realized gains and $0.3 million and $2.3 million in realized losses, respectively, from these currency forward contracts. For the three and nine months ended September 30, 2014, we recognized $0.1 million and $3.9 million in realized gains and $2.2 million and $4.1 million in realized losses, respectively, from these currency forward contracts.
We enter into foreign currency exchange forward contracts to manage currency exposure on our Canadian dollar (“CAD”) investment portfolio, certain Euro and other non-U.S. dollar denominated investments, and to minimize negative impacts to our investment portfolio returns. The currency forward contracts are carried at fair value in our Consolidated Balance Sheets in “Other investments.” The realized and unrealized gains and losses are included in “Net realized investment and other gains” in our Consolidated Statements of Income. The notional amount of the Canadian dollar forward contracts was CAD 160.7 million (USD $119.9 million) and CAD 132.0 million (USD $118.3 million) as of September 30, 2015 and 2014, respectively. The notional amount of the remaining forward contracts was not material as of September 30, 2015 and 2014. The fair value of the currency forward contracts was a gain of $5.1 million and a loss of $0.4 million as of September 30, 2015 and 2014, respectively. For the three and nine months ended September 30, 2015, we recognized $8.6 million and $26.4 million in realized gains and $3.9 million and $13.4 million in realized losses, respectively, from the currency forward contracts. For both the three and nine months ended September 30, 2014, we recognized $5.7 million and $2.6 million in realized gains and realized losses, respectively.
Regulatory Deposits, Pledged Securities and Letters of Credit
At September 30, 2015, the amortized cost and fair value of investments on deposit with U.S., Canadian and various other agencies for regulatory purposes were $185.9 million and $192.3 million, respectively. At December 31, 2014, the amortized cost and fair value of investments on deposit with U.S., Canadian and various other agencies for regulatory purposes were $186.6 million and $194.2 million, respectively.
At September 30, 2015, investments with an amortized cost of $34.6 million and fair value of $34.8 million were pledged as collateral in support of irrevocable letters of credit (“LOCs”) in the amount of $28.2 million issued under the terms of certain reinsurance agreements in respect of reported loss and loss expense reserves. At December 31, 2014, investments with an amortized cost of $55.0 million and fair value of $55.3 million were pledged as collateral in support of irrevocable LOCs in the amount of $43.6 million issued under the terms of certain reinsurance agreements in respect of reported loss and loss expense reserves.
Our Corporate member’s capital supporting our Lloyd’s business was $211.9 million and $217.9 million at September 30, 2015 and December 31, 2014, respectively.
Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability, or in the absence of a principal market, the most advantageous market. Market participants are buyers and sellers in the principal (or most advantageous) market that are independent, knowledgeable, able to transact for the asset or liability and willing to transfer the asset or liability.
Valuation techniques consistent with the market approach, income approach and/or cost approach are used to measure fair value. The inputs of these valuation techniques are categorized into three levels.
|
● |
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that can be accessed at the reporting date. We define actively traded as a security that has traded in the past seven days. We receive one quote per instrument for Level 1 inputs. |
|
● |
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. We receive one quote per instrument for Level 2 inputs. |
|
● |
Level 3 inputs are unobservable inputs. Unobservable inputs reflect our own judgments about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. |
We receive fair value prices from third-party pricing services and our outside investment managers. These prices are determined using observable market information such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things. We have reviewed the processes used by the third-party providers for pricing the securities, and have determined that these processes result in fair values consistent with GAAP requirements. In addition, we review these prices for reasonableness, and have not adjusted any prices received from the third-party providers as of September 30, 2015. A description of the valuation techniques we use to measure assets at fair value is as follows:
Fixed Maturities (Available-for-Sale) Levels 1 and 2:
|
● |
United States Treasury securities are typically valued using Level 1 inputs. For these securities, we obtain fair value measurements from third-party pricing services using quoted prices (unadjusted) in active markets at the reporting date. |
|
● |
United States Government agencies, non-U.S. Government securities, obligations of states and political subdivisions, credit securities and foreign denominated securities are reported at fair value using Level 2 inputs. For these securities, we obtain fair value measurements from third-party pricing services. Observable data may include dealer quotes, market spreads, yield curves, live trading levels, trade execution data, credit information and the security’s terms and conditions, among other things. |
|
● |
CMO/MBS agency, CMO/MBS non-agency, CMBS, ABS and CLO securities are reported at fair value using Level 2 inputs. For these securities, we obtain fair value measurements from third-party pricing services. Observable data may include dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things. |
Equity Securities Level 1: Equity securities are principally reported at fair value using Level 1 inputs. For these securities, we obtain fair value measurements from a third-party pricing service using quoted prices (unadjusted) in active markets at the reporting date.
Equity Securities Level 3: We own certain equity securities that are reported at fair value using Level 3 inputs. The valuation techniques for these securities include the following:
|
|
Fair value measurements are obtained from the National Association of Insurance Commissioners’ Security Valuation Office at the reporting date. |
|
|
Fair value measurements for an investment in an equity fund obtained by applying final prices provided by the administrator of the fund, which is based upon certain estimates and assumptions. |
Other Investments Level 2: Foreign regulatory deposits are assets held in trust in jurisdictions where there is a legal and regulatory requirement to maintain funds locally in order to protect policyholders. Lloyd’s is the appointed investment manager for the funds. These assets are invested in short-term government securities, agency securities and corporate bonds and are valued using Level 2 inputs based upon values obtained from Lloyd’s. Foreign currency future contracts are valued by our counterparty using market driven foreign currency exchange rates and are considered Level 2 investments.
Short-term Investments: Short-term investments are principally reported at fair value using Level 1 inputs, with the exception of short-term corporate bonds reported at fair value using Level 2 inputs as described in the fixed maturities section above. Values for the investments categorized as Level 1 are obtained from various financial institutions as of the reporting date.
Transfers Between Level 1 and Level 2 Securities: There were no transfers between Level 1 and Level 2 securities during the three months ended September 30, 2015.
Based on an analysis of the inputs, our financial assets measured at fair value on a recurring basis have been categorized as follows:
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using |
|
|||||||||
(in millions) |
|
September 30, 2015 |
|
|
Level 1 (a) |
|
|
Level 2 (b) |
|
|
Level 3 (c) |
|
||||
Fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Governments |
|
$ |
168.9 |
|
|
$ |
110.4 |
|
|
$ |
58.5 |
|
|
$ |
— |
|
Non-U.S. Governments |
|
|
86.0 |
|
|
|
— |
|
|
|
86.0 |
|
|
|
— |
|
Obligations of states and political subdivisions |
|
|
492.5 |
|
|
|
— |
|
|
|
492.5 |
|
|
|
— |
|
Credit-Financial |
|
|
497.1 |
|
|
|
— |
|
|
|
497.1 |
|
|
|
— |
|
Credit-Industrial |
|
|
492.9 |
|
|
|
— |
|
|
|
492.9 |
|
|
|
— |
|
Credit-Utility |
|
|
143.5 |
|
|
|
— |
|
|
|
143.5 |
|
|
|
— |
|
Structured securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMO/MBS-agency |
|
|
138.6 |
|
|
|
— |
|
|
|
138.6 |
|
|
|
— |
|
CMO/MBS-non agency |
|
|
12.4 |
|
|
|
— |
|
|
|
12.4 |
|
|
|
— |
|
CMBS |
|
|
165.7 |
|
|
|
— |
|
|
|
165.7 |
|
|
|
— |
|
ABS |
|
|
128.0 |
|
|
|
— |
|
|
|
128.0 |
|
|
|
— |
|
CLO |
|
|
135.6 |
|
|
|
— |
|
|
|
135.6 |
|
|
|
— |
|
Foreign denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Governments |
|
|
152.3 |
|
|
|
— |
|
|
|
152.3 |
|
|
|
— |
|
Credit |
|
|
109.0 |
|
|
|
— |
|
|
|
109.0 |
|
|
|
— |
|
ABS/CMBS |
|
|
22.1 |
|
|
|
— |
|
|
|
22.1 |
|
|
|
— |
|
CLO |
|
|
77.6 |
|
|
|
— |
|
|
|
77.6 |
|
|
|
— |
|
Total fixed maturities |
|
|
2,822.2 |
|
|
|
110.4 |
|
|
|
2,711.8 |
|
|
|
— |
|
Equity securities |
|
|
466.0 |
|
|
|
465.2 |
|
|
|
— |
|
|
|
0.8 |
|
Other investments |
|
|
91.2 |
|
|
|
— |
|
|
|
91.2 |
|
|
|
— |
|
Short-term investments |
|
|
344.8 |
|
|
|
323.8 |
|
|
|
21.0 |
|
|
|
— |
|
|
|
$ |
3,724.2 |
|
|
$ |
899.4 |
|
|
$ |
2,824.0 |
|
|
$ |
0.8 |
|
(a) |
Quoted prices in active markets for identical assets |
(b) |
Significant other observable inputs |
(c) |
Significant unobservable inputs |
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using |
|
|||||||||
(in millions) |
|
December 31, 2014 |
|
|
Level 1 (a) |
|
|
Level 2 (b) |
|
|
Level 3 (c) |
|
||||
Fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Governments |
|
$ |
185.0 |
|
|
$ |
99.2 |
|
|
$ |
85.8 |
|
|
$ |
— |
|
Non-U.S. Governments |
|
|
79.9 |
|
|
|
— |
|
|
|
79.9 |
|
|
|
— |
|
Obligations of states and political subdivisions |
|
|
490.7 |
|
|
|
— |
|
|
|
490.7 |
|
|
|
— |
|
Credit-Financial |
|
|
518.1 |
|
|
|
— |
|
|
|
518.1 |
|
|
|
— |
|
Credit-Industrial |
|
|
499.6 |
|
|
|
— |
|
|
|
499.6 |
|
|
|
— |
|
Credit-Utility |
|
|
142.0 |
|
|
|
— |
|
|
|
142.0 |
|
|
|
— |
|
Structured securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMO/MBS-agency |
|
|
175.3 |
|
|
|
— |
|
|
|
175.3 |
|
|
|
— |
|
CMO/MBS-non agency |
|
|
14.0 |
|
|
|
— |
|
|
|
14.0 |
|
|
|
— |
|
CMBS |
|
|
180.0 |
|
|
|
— |
|
|
|
180.0 |
|
|
|
— |
|
ABS |
|
|
142.6 |
|
|
|
— |
|
|
|
142.6 |
|
|
|
— |
|
CLO |
|
|
78.4 |
|
|
|
— |
|
|
|
78.4 |
|
|
|
— |
|
Foreign denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Governments |
|
|
140.2 |
|
|
|
— |
|
|
|
140.2 |
|
|
|
— |
|
Credit |
|
|
126.0 |
|
|
|
— |
|
|
|
126.0 |
|
|
|
— |
|
ABS/CMBS |
|
|
27.2 |
|
|
|
— |
|
|
|
27.2 |
|
|
|
— |
|
CLO |
|
|
41.7 |
|
|
|
— |
|
|
|
41.7 |
|
|
|
— |
|
Total fixed maturities |
|
|
2,840.7 |
|
|
|
99.2 |
|
|
|
2,741.5 |
|
|
|
— |
|
Equity securities |
|
|
486.3 |
|
|
|
485.4 |
|
|
|
— |
|
|
|
0.9 |
|
Other investments |
|
|
97.3 |
|
|
|
— |
|
|
|
97.3 |
|
|
|
— |
|
Short-term investments |
|
|
275.8 |
|
|
|
273.9 |
|
|
|
1.9 |
|
|
|
— |
|
|
|
$ |
3,700.1 |
|
|
$ |
858.5 |
|
|
$ |
2,840.7 |
|
|
$ |
0.9 |
|
(a) |
Quoted prices in active markets for identical assets |
(b) |
Significant other observable inputs |
(c) |
Significant unobservable inputs |
The fair value measurements in the tables above do not equal “Total investments” on our Consolidated Balance Sheets as they exclude certain other investments that are accounted for under the equity-method of accounting.
A reconciliation of the beginning and ending balances for the investments categorized as Level 3 are as follows:
Fair Value Measurements Using Observable Inputs (Level 3)
(in millions) |
|
Equity Securities |
|
|
Total |
|
||
Beginning balance, January 1, 2015 |
|
$ |
0.9 |
|
|
$ |
0.9 |
|
Transfers into Level 3 |
|
|
— |
|
|
|
— |
|
Transfers out of Level 3 |
|
|
— |
|
|
|
— |
|
Total gains or losses (realized/unrealized): |
|
|
|
|
|
|
|
|
Included in net income (loss) |
|
|
— |
|
|
|
— |
|
Included in other comprehensive income (loss) |
|
|
— |
|
|
|
— |
|
Purchases, issuances, sales, and settlements |
|
|
|
|
|
|
|
|
Purchases |
|
|
— |
|
|
|
— |
|
Issuances |
|
|
— |
|
|
|
— |
|
Sales |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
Settlements |
|
|
— |
|
|
|
— |
|
Ending balance, September 30, 2015 |
|
$ |
0.8 |
|
|
$ |
0.8 |
|
Amount of total gains or losses for the year included in net income (loss) attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2015 |
|
$ |
— |
|
|
$ |
— |
|
(in millions) |
|
Equity Securities |
|
|
Other Assets |
|
|
Total |
|
|||
Beginning balance, January 1, 2014 |
|
$ |
1.3 |
|
|
$ |
2.6 |
|
|
$ |
3.9 |
|
Transfers into Level 3 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Transfers out of Level 3 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total gains or losses (realized/unrealized): |
|
|
|
|
|
|
|
|
|
|
|
|
Included in net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Included in other comprehensive income (loss) |
|
|
0.1 |
|
|
|
— |
|
|
|
0.1 |
|
Purchases, issuances, sales, and settlements |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuances |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Sales |
|
|
(0.5 |
) |
|
|
— |
|
|
|
(0.5 |
) |
Settlements |
|
|
— |
|
|
|
(2.6 |
) |
|
|
(2.6 |
) |
Ending balance, December 31, 2014 |
|
$ |
0.9 |
|
|
$ |
— |
|
|
$ |
0.9 |
|
Amount of total gains or losses for the year included in net income (loss) attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2014 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
At September 30, 2015 and December 31, 2014, we did not have any financial assets or financial liabilities measured at fair value on a nonrecurring basis or any financial liabilities on a recurring basis.
|
4. |
Reserves for Losses and Loss Adjustment Expenses |
The following table provides a reconciliation of reserves for losses and loss adjustment expenses (“LAE”):
|
|
For the Nine Months Ended September 30, |
|
|||||
(in millions) |
|
2015 |
|
|
2014 |
|
||
Net reserves beginning of the year |
|
$ |
2,137.1 |
|
|
$ |
2,107.6 |
|
Add: |
|
|
|
|
|
|
|
|
Losses and LAE incurred during current calendar year, net of reinsurance: |
|
|
|
|
|
|
|
|
Current accident year |
|
|
589.6 |
|
|
|
585.9 |
|
Prior accident years |
|
|
(15.3 |
) |
|
|
(26.4 |
) |
Losses and LAE incurred during calendar year, net of reinsurance |
|
|
574.3 |
|
|
|
559.5 |
|
Deduct: |
|
|
|
|
|
|
|
|
Losses and LAE payments made during current calendar year, net of reinsurance: |
|
|
|
|
|
|
|
|
Current accident year |
|
|
105.2 |
|
|
|
115.3 |
|
Prior accident years |
|
|
435.5 |
|
|
|
435.5 |
|
Losses and LAE payments made during current calendar year, net of reinsurance: |
|
|
540.7 |
|
|
|
550.8 |
|
Change in participation interest (1) |
|
|
(1.2 |
) |
|
|
24.7 |
|
Foreign exchange adjustments |
|
|
(27.7 |
) |
|
|
(4.9 |
) |
Net reserves - end of period |
|
|
2,141.8 |
|
|
|
2,136.1 |
|
Add: |
|
|
|
|
|
|
|
|
Reinsurance recoverables on unpaid losses and LAE, end of period |
|
|
962.3 |
|
|
|
926.5 |
|
Gross reserves - end of period |
|
$ |
3,104.1 |
|
|
$ |
3,062.6 |
|
(1) |
Amount represents (decreases) increases in reserves due to change in syndicate participation |
Reserves for losses and LAE represent the estimated indemnity cost and related adjustment expenses necessary to investigate and settle claims. Such estimates are based upon individual case estimates for reported claims, estimates from ceding companies for reinsurance assumed and actuarial estimates for losses that have been incurred but not yet reported to the insurer. Any change in probable ultimate liabilities is reflected in current operating results.
Impacting losses and LAE for the nine months ended September 30, 2015 was $15.3 million in favorable prior years’ loss reserve development comprised of the following: $25.1 million of net favorable development in the Excess and Surplus Lines segment primarily the result of favorable development in the general and products liability lines and commercial automobile, partially offset by unfavorable development in property lines; $10.4 million of net unfavorable development in the Commercial Specialty segment, primarily driven by unfavorable development in general liability and workers compensation due to increases in claim severity, partially offset by favorable development in auto liability and short tail lines; $5.8 million of net favorable development in the International Specialty segment primarily driven by favorable development in Argo Insurance Bermuda and Argo Re, partially offset by unfavorable development in the Brazil unit; $2.8 million of net favorable development in the Syndicate 1200 segment primarily driven by favorable development in property, general liability and marine & energy, partially offset by unfavorable development in other liability classes and aerospace; and $8.0 million of unfavorable development in the Run-off Lines segment primarily caused by unfavorable development in workers compensation lines and asbestos and environmental liability, offset in part by favorable development in run-off reinsurance claims.
Impacting losses and LAE for the nine months ended September 30, 2014 was $26.4 million in favorable prior years’ loss reserve development comprised of the following: $34.6 million of net favorable development in the Excess and Surplus Lines segment primarily caused by favorable development in the general and products liability lines, partially offset by unfavorable development in commercial automobile and property lines; $5.2 million of net unfavorable development in the Commercial Specialty segment, primarily driven by unfavorable development in general liability lines due to increases in claim severity, as well as unfavorable development in auto liability lines, partially offset by favorable development in workers compensation and short-tail lines; $0.1 million of net favorable development in the International Specialty segment; $15.8 million of net favorable development in the Syndicate 1200 segment primarily driven by favorable development in various property classes, as well as favorable development in professional indemnity and aerospace, partially offset by unfavorable development in general liability; and $18.9 million of unfavorable development in the Run-off Lines segment primarily caused by unfavorable development in workers compensation lines driven by increasing medical costs on older claims, as well as unfavorable development in asbestos liability on assumed business.
In the opinion of management, our reserves represent the best estimate of our ultimate liabilities, based on currently known facts, current law, current technology and assumptions considered reasonable where facts are not known. Due to the significant uncertainties and related management judgments, there can be no assurance that future loss development, favorable or unfavorable, will not occur.
|
5. |
Debt |
Revolving Credit Facility
On March 7, 2014, each of Argo Group, Argo Group US, Inc., Argo International Holdings Limited and Argo Underwriting Agency Limited (the “Borrowers”) entered into a $175 million credit agreement (“Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement provides for a $175.0 million revolving credit facility with a maturity date of March 7, 2018 unless extended in accordance with the terms of the Credit Agreement. Borrowings under the Credit Agreement may be used for general corporate purposes, including working capital and permitted acquisitions, and each of the Borrowers has agreed to be jointly and severally liable for the obligations of the other Borrowers under the Credit Agreement.
The Credit Agreement contains customary events of default. If an event of default occurs and is continuing, the Borrowers might be required immediately to repay all amounts outstanding under the Credit Agreement. Lenders holding at least a majority of the loans and commitments under the Credit Agreement may elect to accelerate the maturity of the loans and/or terminate the commitments under the Credit Agreement upon the occurrence and during the continuation of an event of default.
Included in the Credit Agreement is a provision that allows up to $17.5 million of the revolving credit facility to be used for LOCs, subject to availability. As of September 30, 2015 and December 31, 2014, there were no borrowings outstanding and $0.2 million in LOCs against the Credit Facility.
Junior Subordinated Debentures
On July 16, 2014, Argo Group US, Inc. purchased the outstanding PXRE Capital Trust V $20,000,000 Junior Subordinated Debt Securities (“Capital Trust V”) at a discount equal to 90.0% of the principal amount plus accrued and unpaid interest through the date of purchase for a total price of $18.2 million, resulting in the recognition of a $2.0 million pre-tax realized gain. The Capital Trust V was redeemed on April 29, 2015.
|
6. |
Disclosures about Fair Value of Financial Instruments |
Cash. The carrying amount approximates fair value.
Investment securities and short-term investments. See Note 3, “Investments,” for additional information.
Premiums receivable and reinsurance recoverables on paid losses. The carrying value of current receivables approximates fair value. At September 30, 2015 and December 31, 2014, the carrying values of premiums receivable over 90 days were $12.2 million and $12.4 million, respectively. Included in “Reinsurance recoverables” in our Consolidated Balance Sheets at September 30, 2015 and December 31, 2014, are amounts that are due from trade capital providers associated with the operations of Syndicate 1200. Upon settlement, the receivable is offset against the liability also reflected in our accompanying Consolidated Balance Sheets. At September 30, 2015 and December 31, 2014, the payable was in excess of the receivable. Of our reinsurance recoverables on paid losses, excluding amounts attributable to Syndicate 1200’s trade capital providers, at September 30, 2015 and December 31, 2014, the carrying values over 90 days were $9.1 million and $9.9 million, respectively. Our methodology for establishing our allowances for doubtful accounts includes specifically identifying all potential uncollectible balances regardless of aging. At September 30, 2015 and December 31, 2014, the allowance for doubtful accounts for premiums receivable was $3.7 million and $5.2 million, respectively, and the allowance for doubtful accounts for reinsurance recoverables on paid losses was $2.4 million and $1.8 million, respectively. Premiums receivable over 90 days were secured by collateral in the amount of $0.3 million and $0.3 million at September 30, 2015 and December 31, 2014, respectively. Reinsurance recoverables on paid losses over 90 days were secured by collateral in the amount of $0.6 million and $0.4 at September 30, 2015 and December 31, 2014, respectively.
Debt. At September 30, 2015 and December 31, 2014, the fair value of our Junior subordinated debentures, Senior unsecured fixed rate notes and Other indebtedness was estimated using appropriate market indices or quoted prices from external sources based on current market conditions.
A summary of our financial instruments whose carrying value did not equal fair value is shown below:
|
|
September 30, 2015 |
|
|
December 31, 2014 |
|
||||||||||
(in millions) |
|
Carrying Amount |
|
|
Fair Value |
|
|
Carrying Amount |
|
|
Fair Value |
|
||||
Junior subordinated debentures |
|
$ |
172.7 |
|
|
$ |
153.0 |
|
|
$ |
172.7 |
|
|
$ |
155.5 |
|
Senior unsecured fixed rate notes |
|
|
143.8 |
|
|
|
144.6 |
|
|
|
143.8 |
|
|
|
132.3 |
|
Other indebtedness: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating rate loan stock |
|
|
56.8 |
|
|
|
50.3 |
|
|
|
61.3 |
|
|
|
55.2 |
|
Note payable |
|
|
0.6 |
|
|
|
0.6 |
|
|
|
0.7 |
|
|
|
0.6 |
|
|
|
$ |
373.9 |
|
|
$ |
348.5 |
|
|
$ |
378.5 |
|
|
$ |
343.6 |
|
|
7. |
Shareholders’ Equity |
On February 17, 2015, our Board of Directors declared a 10% stock dividend, payable on March 16, 2015, to shareholders of record at the close of business on March 2, 2015. As a result of the stock dividend, 2,554,506 additional shares were issued. Cash was paid in lieu of fractional shares of our common shares. All references to share and per share amounts in this document and related disclosures have been adjusted to reflect the stock dividend for all periods presented.
On August 4, 2015, our Board of Directors declared a quarterly cash dividend in the amount of $0.20 on each share of common stock outstanding. On September 15, 2015, we paid $5.6 million to our shareholders of record on September 1, 2015.
On August 5, 2014, our Board of Directors declared a quarterly cash dividend in the amount of $0.16 on each share of common stock outstanding, on a post-stock dividend basis. On September 15, 2014, we paid $4.7 million to our shareholders of record on September 1, 2014.
On November 5, 2013, our Board of Directors authorized the repurchase of up to $150.0 million of our common shares (“2013 Repurchase Authorization”). The 2013 Repurchase Authorization supersedes all the previous Repurchase Authorizations. As of September 30, 2015, availability under the 2013 Repurchase Authorization for future repurchases of our common shares was $63.1 million.
For the three and nine months ended September 30, 2015, we repurchased a total of 85,959 common shares and 575,055, respectively, for $4.8 million and $29.7 million, respectively. A summary of activity from January 1, 2015 through September 30, 2015 follows.
A summary of common shares repurchased for the nine months ended September 30, 2015 is shown below:
Repurchase Type |
|
Date Trading Plan Initiated |
|
2015 Purchase Period |
|
Number of Shares Repurchased |
|
|
Average Price of Shares Repurchased |
|
|
Total Cost (in millions) |
|
|
Repurchase Authorization Year |
|||
10b5-1 Trading Plan |
|
12/15/2014 |
|
01/05/2015-02/12/2015 |
|
|
117,482 |
|
|
$ |
53.50 |
|
|
$ |
6.3 |
|
|
2013 |
10b5-1 Trading Plan |
|
03/16/2015 |
|
03/18/2015-05/06/2015 |
|
|
150,050 |
|
|
$ |
49.56 |
|
|
|
7.4 |
|
|
2013 |
Open Market |
|
N/A |
|
01/01/2015-09/30/2015 |
|
|
307,523 |
|
|
$ |
51.83 |
|
|
|
16.0 |
|
|
2013 |
Total |
|
|
|
|
|
|
575,055 |
|
|
$ |
51.58 |
|
|
$ |
29.7 |
|
|
|
|
8. |
Accumulated Other Comprehensive Income (Loss) |
A summary of changes in accumulated other comprehensive income (loss), net of taxes (where applicable) by component for the nine months ended September 30, 2015 and 2014 is presented below:
(in millions) |
|
Foreign Currency Translation Adjustments |
|
|
Unrealized Holding Gains on Securities |
|
|
Defined Benefit Pension Plans |
|
|
Total |
|
||||
Balance, January 1, 2015 |
|
$ |
(15.6 |
) |
|
$ |
130.7 |
|
|
$ |
(7.0 |
) |
|
$ |
108.1 |
|
Other comprehensive loss before reclassifications |
|
|
(6.6 |
) |
|
|
(75.7 |
) |
|
|
— |
|
|
|
(82.3 |
) |
Amounts reclassified from accumulated other comprehensive loss |
|
|
— |
|
|
|
(2.3 |
) |
|
|
— |
|
|
|
(2.3 |
) |
Net current-period other comprehensive loss |
|
|
(6.6 |
) |
|
|
(78.0 |
) |
|
|
— |
|
|
|
(84.6 |
) |
Balance at September 30, 2015 |
|
$ |
(22.2 |
) |
|
$ |
52.7 |
|
|
$ |
(7.0 |
) |
|
$ |
23.5 |
|
(in millions) |
|
Foreign Currency Translation Adjustments |
|
|
Unrealized Holding Gains on Securities |
|
|
Defined Benefit Pension Plans |
|
|
Total |
|
||||
Balance, January 1, 2014 |
|
$ |
(11.5 |
) |
|
$ |
163.9 |
|
|
$ |
(4.6 |
) |
|
$ |
147.8 |
|
Other comprehensive income before reclassifications |
|
|
(1.9 |
) |
|
|
5.4 |
|
|
|
— |
|
|
|
3.5 |
|
Amounts reclassified from accumulated other comprehensive income |
|
|
— |
|
|
|
(14.8 |
) |
|
|
— |
|
|
|
(14.8 |
) |
Net current-period other comprehensive income |
|
|
(1.9 |
) |
|
|
(9.4 |
) |
|
|
— |
|
|
|
(11.3 |
) |
Balance at September 30, 2014 |
|
$ |
(13.4 |
) |
|
$ |
154.5 |
|
|
$ |
(4.6 |
) |
|
$ |
136.5 |
|
The following tables illustrate the amounts reclassified from accumulated other comprehensive (loss) income shown in the above tables that have been included in our Consolidated Statements of Income:
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Unrealized gains and losses on securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized investment losses |
|
$ |
0.1 |
|
|
$ |
(5.8 |
) |
|
$ |
(6.9 |
) |
|
$ |
(22.0 |
) |
Benefit for income taxes |
|
|
1.7 |
|
|
|
4.1 |
|
|
|
4.6 |
|
|
|
7.2 |
|
Net of taxes |
|
$ |
1.8 |
|
|
$ |
(1.7 |
) |
|
$ |
(2.3 |
) |
|
$ |
(14.8 |
) |
|
9. |
Net Income Per Common Share |
The following table presents the calculation of net income per common share on a basic and diluted basis (all balances have been adjusted to reflect the 10% stock dividend):
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions, except number of shares and per share amounts) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Net income |
|
$ |
35.3 |
|
|
$ |
44.7 |
|
|
$ |
122.0 |
|
|
$ |
123.5 |
|
Weighted average common shares outstanding - basic |
|
|
27,916,586 |
|
|
|
28,552,240 |
|
|
|
27,997,638 |
|
|
|
28,824,182 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation awards |
|
|
557,918 |
|
|
|
528,368 |
|
|
|
542,456 |
|
|
|
512,993 |
|
Weighted average common shares outstanding - diluted |
|
|
28,474,504 |
|
|
|
29,080,608 |
|
|
|
28,540,094 |
|
|
|
29,337,175 |
|
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.27 |
|
|
$ |
1.57 |
|
|
$ |
4.36 |
|
|
$ |
4.28 |
|
Diluted |
|
$ |
1.24 |
|
|
$ |
1.54 |
|
|
$ |
4.28 |
|
|
$ |
4.21 |
|
Excluded from the weighted average common shares outstanding calculation at September 30, 2015, and 2014 are 9,181,544 shares and 8,440,355 shares, respectively, which are held as treasury shares. The shares are excluded as of their repurchase date. For the three and nine months ended September 30, 2015, there were no equity compensation awards with an anti-dilutive effect. For the three and nine months ended September 30, 2014, equity compensation awards to purchase 1,879 shares of common stock were excluded from the computation of diluted net income per common share as these instruments were anti-dilutive. These instruments expired or will expire at varying times from 2014 through 2016.
|
10. |
Supplemental Cash Flow Information |
Income taxes paid. We paid income taxes of $ 10.8 million and $23.8 million during the nine months ended September 30, 2015 and 2014, respectively.
Income taxes recovered. During the nine months ended September 30, 2015, $11.5 million of income taxes was recovered. No income taxes were recovered during the nine months ended September 30, 2014.
Interest paid was as follows:
|
|
For the Nine Months Ended September 30, |
|
|||||
(in millions) |
|
2015 |
|
|
2014 |
|
||
Senior unsecured fixed rate notes |
|
$ |
7.0 |
|
|
$ |
7.0 |
|
Junior subordinated debentures |
|
|
5.3 |
|
|
|
5.8 |
|
Other indebtedness |
|
|
2.0 |
|
|
|
2.3 |
|
Total interest paid |
|
$ |
14.3 |
|
|
$ |
15.1 |
|
|
11. |
Share-based Compensation |
The fair value method of accounting is used for equity-based compensation plans. Under the fair value method, compensation cost is measured based on the fair value of the award at the measurement date and recognized over the requisite service period. We use the Black-Scholes model to estimate the fair values on the measurement date for share options and share appreciation rights (“SARs”). The Black-Scholes model uses several assumptions to value a share award. The volatility assumption is based on the historical change in our stock price over the previous five years preceding the measurement date. The risk-free rate of return assumption is based on the five-year U.S. Treasury constant maturity rate on the measurement date. The expected award life is based upon the average holding period over the history of the incentive plan. The expected dividend yield is based on our history and expected dividend payouts.
The following table summarizes the assumptions we used for the nine months ended September 30, 2015 and 2014:
|
|
For the Nine Months Ended September 30, |
|
|||||
|
|
2015 |
|
|
2014 |
|
||
Risk-free rate of return |
|
|
1.44% |
|
|
|
1.77% |
|
Expected dividend yields |
|
|
1.52% |
|
|
|
1.49% |
|
Expected award life (years) |
|
|
4.64 |
|
|
4.67 |
|
|
Expected volatility |
|
|
20.81% |
|
|
|
22.84% |
|
All outstanding awards were adjusted to reflect the 10% stock dividend, resulting in a 10% increase to the number of awards outstanding and a 9.09% reduction in the exercise price.
Argo Group’s Long-Term Incentive Plans
In November 2007, our shareholders approved the 2007 Long-Term Incentive Plan (the “2007 Plan”), which provides for an aggregate of 4.5 million shares of our common stock that may be issued to executives, non-employee directors, and other key employees. As of May 2014, 1.46 million shares remained available for grant under the 2007 Plan. In May 2014, our shareholders approved the 2014 Long-Term Incentive Plan (the “2014 Plan”), which provides for an additional 2.8 million shares of our common stock to be available for issuance to executives, non-employee directors and other key employees. The share awards may be in the form of share options, SARs, restricted shares, restricted share awards, restricted share units awards, performance awards, other share-based awards and other cash-based awards. Shares issued under this plan may be shares that are authorized and unissued or shares that we reacquired, including shares purchased on the open market. Share options and SARs will count as one share for the purposes of the limits under the incentive plans; restricted shares, restricted share units, performance units, performance shares or other share-based incentive awards which settle in common shares will count as 2.75 shares for purpose of the limits under the 2014 Plan.
Share options may be in the form of incentive share options, non-qualified share options and restorative options. Share options are required to have an exercise price that is not less than the market value on the date of grant. We are prohibited from repricing the options. The term of the share options cannot exceed seven years from the grant date.
A summary of restricted share activity as of September 30, 2015 and changes during the nine months then ended is as follows:
|
|
Shares |
|
|
Weighted-Average Grant Date Fair Value |
|
||
Outstanding at January 1, 2015 |
|
|
313,716 |
|
|
$ |
31.38 |
|
Granted |
|
|
297,873 |
|
|
$ |
39.21 |
|
Vested and issued |
|
|
(119,295 |
) |
|
$ |
26.83 |
|
Expired or forfeited |
|
|
(8,938 |
) |
|
$ |
41.76 |
|
Outstanding at September 30, 2015 |
|
|
483,356 |
|
|
$ |
37.14 |
|
The restricted shares vest over two to four years. Expense recognized under this plan for the restricted shares was $1.4 million and $4.4 million for the three and nine months ended September 30, 2015, respectively, as compared to $0.8 million and $2.2 million for the three and nine months ended September 30, 2014, respectively. Compensation expense for all share-based compensation awards is included in “Underwriting, acquisition and insurance expense” in the accompanying Consolidated Statements of Income. As of September 30, 2015, there was $13.9 million of total unrecognized compensation cost related to restricted share compensation arrangements granted by Argo Group.
A summary of stock-settled SARs activity as of September 30, 2015 and changes during the nine months then ended is as follows:
|
|
Shares |
|
|
Weighted-Average Exercise Price |
|
||
Outstanding at January 1, 2015 |
|
|
1,313,726 |
|
|
$ |
28.57 |
|
Granted |
|
|
243,305 |
|
|
$ |
39.43 |
|
Exercised |
|
|
(165,036 |
) |
|
$ |
24.15 |
|
Expired or forfeited |
|
|
(7,231 |
) |
|
$ |
31.68 |
|
Outstanding at September 30, 2015 |
|
|
1,384,764 |
|
|
$ |
30.14 |
|
The stock-settled SARs vest over a one to four year period. Upon exercise of the stock-settled SARs, the employee is entitled to receive shares of our common stock equal to the appreciation of the stock as compared to the exercise price. Expense recognized for the stock-settled SARs was $0.3 million and $1.3 for the three and nine months ended September 30, 2015, respectively, as compared to $0.3 million and $1.6 million for the three and nine months ended September 30, 2014, respectively. As of September 30, 2015, there was $3.3 million of total unrecognized compensation cost related to stock-settled SARs outstanding.
A summary of cash-settled SARs activity as of September 30, 2015 and changes during the nine months then ended is as follows:
|
|
Shares |
|
|
Weighted-Average Exercise Price |
|
||
Outstanding at January 1, 2015 |
|
|
2,001,451 |
|
|
$ |
32.76 |
|
Granted |
|
|
913,157 |
|
|
$ |
47.48 |
|
Exercised |
|
|
(366,527 |
) |
|
$ |
29.19 |
|
Expired or forfeited |
|
|
(216,354 |
) |
|
$ |
39.40 |
|
Outstanding at September 30, 2015 |
|
|
2,331,727 |
|
|
$ |
38.46 |
|
The cash-settled SARs vest over a one to four year period. Upon exercise of the cash-settled SARs, the employee is entitled to receive cash payment for the appreciation in the value of our common stock over the exercise price. We account for the cash-settled SARs as liability awards, which require the awards to be revalued at each reporting period. Expense recognized for the cash-settled SARs was $2.8 million and $14.1 million for the three and nine months ended September 30, 2015, respectively, as compared to $1.2 million and $9.2 million for the three and nine months ended September 30, 2014, respectively. As of September 30, 2015, there was $13.2 million of total unrecognized compensation cost related to cash-settled SARs outstanding.
|
12. |
Underwriting, Acquisition and Insurance Expenses |
Underwriting, acquisition and insurance expenses were as follows:
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Commissions |
|
$ |
56.5 |
|
|
$ |
59.8 |
|
|
$ |
182.4 |
|
|
$ |
178.0 |
|
General expenses |
|
|
69.6 |
|
|
|
69.0 |
|
|
|
222.2 |
|
|
|
211.9 |
|
Premium taxes, boards and bureaus |
|
|
7.5 |
|
|
|
7.2 |
|
|
|
8.1 |
|
|
|
19.5 |
|
|
|
|
133.6 |
|
|
|
136.0 |
|
|
|
412.7 |
|
|
|
409.4 |
|
Net deferral of policy acquisition costs |
|
|
(0.8 |
) |
|
|
(2.2 |
) |
|
|
(10.8 |
) |
|
|
(10.1 |
) |
Total underwriting, acquisition and insurance expenses |
|
$ |
132.8 |
|
|
$ |
133.8 |
|
|
$ |
401.9 |
|
|
$ |
399.3 |
|
Included in general expenses for the three months ended September 30, 2015 and 2014 was $5.5 million and $2.2 million, respectively, and $20.8 million and $13.3 million for the nine months ended September 30, 2015 and 2014, respectively, of expense for our total equity compensation.
|
13. |
Income Taxes |
We are incorporated under the laws of Bermuda and, under current Bermuda law, are not obligated to pay any taxes in Bermuda based upon income or capital gains. We have received an undertaking from the Supervisor of Insurance in Bermuda pursuant to the provisions of the Exempted Undertakings Tax Protection Act, 2011, which exempts us from any Bermuda taxes computed on profits, income or any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, at least until the year 2035.
We do not consider ourselves to be engaged in a trade or business in the United States or the United Kingdom and, accordingly, do not expect to be subject to direct United States or United Kingdom income taxation.
We have subsidiaries based in the United Kingdom that are subject to the tax laws of that country. Under current law, these subsidiaries are taxed at the applicable corporate tax rates. Six of the United Kingdom subsidiaries are deemed to be engaged in business in the United States, and therefore, are subject to United States corporate tax in respect of a proportion of their United States underwriting business only. Relief is available against the United Kingdom tax liabilities in respect of overseas taxes paid that arise from the underwriting business. Corporate income tax losses incurred in the United Kingdom can be carried forward, for application against future income, indefinitely. Our United Kingdom subsidiaries file separate United Kingdom income tax returns.
We have subsidiaries based in the United States that are subject to United States tax laws. Under current law, these subsidiaries are taxed at the applicable corporate tax rates. Our United States subsidiaries file a consolidated United States federal income tax return.
We also have operations in Belgium, Switzerland, Brazil, France, Malta, Spain and Ireland, which also are subject to income taxes imposed by the jurisdiction in which they operate. We have operations in the United Arab Emirates, which are not subject to income tax under the laws of that country.
Our income tax provision includes the following components:
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Current tax provision |
|
$ |
(11.3 |
) |
|
$ |
(15.0 |
) |
|
$ |
(2.5 |
) |
|
$ |
(10.7 |
) |
Deferred tax (benefit) provision related to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future tax deductions |
|
|
14.1 |
|
|
|
19.7 |
|
|
|
16.7 |
|
|
|
52.9 |
|
Valuation allowance change |
|
|
(1.9 |
) |
|
|
(1.1 |
) |
|
|
(2.9 |
) |
|
|
(30.0 |
) |
Income tax provision |
|
$ |
0.9 |
|
|
$ |
3.6 |
|
|
$ |
11.3 |
|
|
$ |
12.2 |
|
Our expected income tax provision computed on pre-tax income (loss) at the weighted average tax rate has been calculated as the sum of the pre-tax income (loss) in each jurisdiction multiplied by that jurisdiction’s applicable statutory tax rate. For the three and nine months ended September 30, 2015 and 2014, pre-tax income (loss) attributable to our operations and the operations’ effective tax rates were as follows:
|
|
For the Three Months Ended September 30, |
|
|||||||||||||
(in millions) |
|
2015 |
|
|
2014 |
|
||||||||||
|
|
Pre-Tax Income (Loss) |
|
|
Effective Tax Rate |
|
|
Pre-Tax Income (Loss) |
|
|
Effective Tax Rate |
|
||||
Bermuda |
|
$ |
24.6 |
|
|
|
0.0 |
% |
|
$ |
27.5 |
|
|
|
0.0 |
% |
United States |
|
|
10.5 |
|
|
|
19.6 |
% |
|
|
13.5 |
|
|
|
16.2 |
% |
United Kingdom |
|
|
1.9 |
|
|
|
-58.5 |
% |
|
|
9.2 |
|
|
|
15.4 |
% |
Belgium |
|
|
— |
|
(1) |
|
31.4 |
% |
|
|
(0.1 |
) |
|
|
-7.9 |
% |
Brazil |
|
|
(0.7 |
) |
|
|
0.0 |
% |
|
|
(1.2 |
) |
|
|
0.0 |
% |
United Arab Emirates |
|
|
0.1 |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
Ireland |
|
|
— |
|
(1) |
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
Malta |
|
|
(0.3 |
) |
|
|
0.0 |
% |
|
|
(0.8 |
) |
|
|
0.0 |
% |
Switzerland |
|
|
0.1 |
|
|
|
-20.0 |
% |
|
|
0.2 |
|
|
|
4.8 |
% |
Pre-tax income |
|
$ |
36.2 |
|
|
|
|
|
|
$ |
48.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|||||||||||||
(in millions) |
|
2015 |
|
|
2014 |
|
||||||||||
|
|
Pre-Tax Income (Loss) |
|
|
Effective Tax Rate |
|
|
Pre-Tax Income (Loss) |
|
|
Effective Tax Rate |
|
||||
Bermuda |
|
$ |
68.8 |
|
|
|
0.0 |
% |
|
|
74.3 |
|
|
|
0.0 |
% |
United States |
|
|
59.1 |
|
|
|
22.4 |
% |
|
|
49.2 |
|
|
|
20.9 |
% |
United Kingdom |
|
|
9.1 |
|
|
|
-21.4 |
% |
|
|
11.1 |
|
|
|
17.1 |
% |
Belgium |
|
|
(0.1 |
) |
|
|
-50.5 |
% |
|
|
(0.1 |
) |
|
|
-32.4 |
% |
Brazil |
|
|
(3.7 |
) |
|
|
0.0 |
% |
|
|
3.9 |
|
|
|
0.0 |
% |
United Arab Emirates |
|
|
0.2 |
|
|
|
0.0 |
% |
|
|
(0.9 |
) |
|
|
0.0 |
% |
Ireland |
|
|
(0.1 |
) |
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
Malta |
|
|
— |
|
(1) |
|
0.0 |
% |
|
|
(1.8 |
) |
|
|
0.0 |
% |
Switzerland |
|
|
— |
|
(1) |
|
-21.3 |
% |
|
|
— |
|
(1) |
|
24.2 |
% |
Pre-tax income |
|
$ |
133.3 |
|
|
|
|
|
|
$ |
135.7 |
|
|
|
|
|
(1) |
Pre-tax income for the respective year was less than $0.1 million. |
A reconciliation of the difference between the provision for income taxes and the expected tax provision at the weighted average tax rate is as follows:
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Income tax provision at expected rate |
|
$ |
3.7 |
|
|
$ |
6.1 |
|
|
$ |
21.1 |
|
|
$ |
20.6 |
|
Tax effect of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-exempt interest |
|
|
(1.2 |
) |
|
|
(1.1 |
) |
|
|
(3.1 |
) |
|
|
(3.4 |
) |
Dividends received deduction |
|
|
(0.6 |
) |
|
|
(0.5 |
) |
|
|
(1.8 |
) |
|
|
(1.7 |
) |
Valuation allowance change |
|
|
(1.9 |
) |
|
|
(1.1 |
) |
|
|
(2.9 |
) |
|
|
(30.0 |
) |
Other permanent adjustments, net |
|
|
0.1 |
|
|
|
(0.1 |
) |
|
|
0.3 |
|
|
|
(1.0 |
) |
Adjustment for prior year tax return |
|
|
(0.6 |
) |
|
|
(1.1 |
) |
|
|
(0.6 |
) |
|
|
(1.1 |
) |
Adjustment for annualized rate |
|
|
0.8 |
|
|
|
0.8 |
|
|
|
0.6 |
|
|
|
(0.9 |
) |
United States state tax (benefit) expense |
|
|
— |
|
|
|
— |
|
|
|
(2.5 |
) |
|
|
— |
|
Capital loss carryforward from prior merger |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
29.8 |
|
Other foreign adjustments |
|
|
0.1 |
|
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
Prior period adjustments to deferred |
|
|
— |
|
|
|
0.8 |
|
|
|
— |
|
|
|
(0.3 |
) |
Prior year foreign taxes recovered |
|
|
— |
|
|
|
— |
|
|
|
(1.2 |
) |
|
|
— |
|
Foreign exchange adjustments |
|
|
0.5 |
|
|
|
(0.2 |
) |
|
|
0.9 |
|
|
|
(0.1 |
) |
Foreign withholding taxes |
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
|
|
0.3 |
|
Income tax provision |
|
$ |
0.9 |
|
|
$ |
3.6 |
|
|
$ |
11.3 |
|
|
$ |
12.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) provision - Foreign |
|
$ |
(1.2 |
) |
|
$ |
1.5 |
|
|
$ |
(2.0 |
) |
|
$ |
2.0 |
|
Income tax provision - United States, Federal |
|
|
2.1 |
|
|
|
2.1 |
|
|
|
16.8 |
|
|
|
9.8 |
|
Income tax (benefit) provision - United States, state |
|
|
— |
|
|
|
— |
|
|
|
(3.8 |
) |
|
|
0.1 |
|
Foreign withholding tax - United States |
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
|
|
0.3 |
|
Income tax provision |
|
$ |
0.9 |
|
|
$ |
3.6 |
|
|
$ |
11.3 |
|
|
$ |
12.2 |
|
We recognize potential accrued interest and penalties within our global operations in “Interest expense” and “Underwriting, acquisition and insurance expenses,” respectively, in our Consolidated Statements of Income.
Our net deferred tax assets (liabilities) are supported by taxes paid in previous periods, reversal of taxable temporary differences and recognition of future income. Management regularly evaluates the recoverability of the deferred tax assets and makes any necessary adjustments to them based upon any changes in management’s expectations of future taxable income. Realization of deferred tax assets is dependent upon our generation of sufficient taxable income in the future to recover tax benefits that cannot be recovered from taxes paid in the carryback period, which is generally two years for net operating losses and three years for capital losses for our United States operations. At September 30, 2015, we had a total net deferred tax liability of $10.8 million prior to any valuation allowance. Management has concluded that a valuation allowance is required for a portion of the tax effected net operating loss carryforward of $17.1 million generated from a prior merger and for the tax effected net operating loss carryforward of $1.0 million from ARIS. Of the net operating carryforwards from a prior merger, $15.6 million will expire if not used by December 31, 2025 and $1.5 million will expire if not used by December 31, 2027. Of the ARIS loss carryforward, $0.2 million will expire if not used by December 31, 2027, $0.4 million will expire if not used by December 31, 2028 and $0.4 million will expire if not used by December 31, 2029. The valuation allowances have been established as Internal Revenue Code Section 382 limits the application of net operating loss and net capital loss carryforwards following an ownership change. The loss carryforwards available per year are $2.8 million as required by Internal Revenue Code Section 382. Further, due to cumulative losses since inception, management has concluded that a valuation allowance is required for the full amount of the tax effected net operating losses generated by our Brazil and Malta entities. Accordingly, a valuation allowance of $22.6 million is required as of September 30, 2015 of which $15.1 million relates to the prior merger and ARIS loss carryforwards, $5.5 million relates to Brazil operations, and $2.0 million relates to Malta operations. For the nine months ended September 30, 2015, the valuation allowance was reduced by $0.7 million pertaining to the prior merger and ARIS loss carryforwards, decreased by $2.1 million pertaining to our Brazil operations and decreased by $0.1 million pertaining to our Malta operations.
We had no material unrecognized tax benefits as of September 30, 2015 and 2014. Our United States subsidiaries are no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2011. Our United Kingdom subsidiaries are no longer subject to United Kingdom income tax examinations by Her Majesty’s Revenue and Customs for years before 2012.
|
14. |
Commitments and Contingencies |
Argo Group’s subsidiaries are parties to legal actions incidental to their business. Based on the opinion of counsel, management believes that the resolution of these matters will not materially affect our financial condition or results of operations.
We have contractual commitments to invest up to $71.6 million related to our limited partnership investments at September 30, 2015. These commitments will be funded as required by the partnership agreements and range in duration from one to thirteen years.
|
15. |
Segment Information |
We are primarily engaged in underwriting property and casualty insurance and reinsurance. We have four ongoing reporting segments: Excess and Surplus Lines, Commercial Specialty, International Specialty and Syndicate 1200. Additionally, we have a Run-off Lines segment for certain products that we no longer underwrite.
We consider many factors, including the nature of each segment’s insurance and reinsurance products, production sources, distribution strategies and the regulatory environment, in determining how to aggregate reporting segments.
In evaluating the operating performance of our segments, we focus on core underwriting and investing results before the consideration of realized gains or losses from the sales of investments. Realized investment gains are reported as a component of the Corporate and Other segment, as decisions regarding the acquisition and disposal of securities reside with the investment function and are not under the control of the individual business segments. Identifiable assets by segment are those assets used in the operation of each segment.
Revenue and income (loss) before income taxes for each segment were as follows:
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions) |
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned premiums |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess and Surplus Lines |
$ |
135.7 |
|
|
$ |
121.2 |
|
|
$ |
389.9 |
|
|
$ |
363.9 |
|
Commercial Specialty |
|
73.3 |
|
|
|
72.7 |
|
|
|
217.6 |
|
|
|
215.5 |
|
International Specialty |
|
37.6 |
|
|
|
38.0 |
|
|
|
113.2 |
|
|
|
112.6 |
|
Syndicate 1200 |
|
99.1 |
|
|
|
104.4 |
|
|
|
305.5 |
|
|
|
305.9 |
|
Run-off Lines |
|
0.3 |
|
|
|
1.3 |
|
|
|
0.4 |
|
|
|
1.5 |
|
Total earned premiums |
|
346.0 |
|
|
|
337.6 |
|
|
|
1,026.6 |
|
|
|
999.4 |
|
Net investment income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess and Surplus Lines |
|
8.8 |
|
|
|
8.9 |
|
|
|
26.3 |
|
|
|
27.2 |
|
Commercial Specialty |
|
4.6 |
|
|
|
4.5 |
|
|
|
13.8 |
|
|
|
13.8 |
|
International Specialty |
|
2.9 |
|
|
|
2.3 |
|
|
|
8.8 |
|
|
|
6.1 |
|
Syndicate 1200 |
|
2.3 |
|
|
|
2.1 |
|
|
|
6.9 |
|
|
|
7.9 |
|
Run-off Lines |
|
2.1 |
|
|
|
2.4 |
|
|
|
6.2 |
|
|
|
7.2 |
|
Corporate and Other |
|
0.6 |
|
|
|
0.6 |
|
|
|
1.9 |
|
|
|
2.5 |
|
Total net investment income |
|
21.3 |
|
|
|
20.8 |
|
|
|
63.9 |
|
|
|
64.7 |
|
Fee and other income (expense), net |
|
1.0 |
|
|
|
1.6 |
|
|
|
(0.1 |
) |
|
|
0.1 |
|
Net realized investment and other gains |
|
3.7 |
|
|
|
12.9 |
|
|
|
25.0 |
|
|
|
42.5 |
|
Total revenue |
$ |
372.0 |
|
|
$ |
372.9 |
|
|
$ |
1,115.4 |
|
|
$ |
1,106.7 |
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions) |
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Income (loss) before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess and Surplus Lines |
$ |
26.5 |
|
|
$ |
27.6 |
|
|
$ |
75.4 |
|
|
$ |
75.9 |
|
Commercial Specialty |
|
12.4 |
|
|
|
8.0 |
|
|
|
20.8 |
|
|
|
9.2 |
|
International Specialty |
|
3.5 |
|
|
|
4.0 |
|
|
|
21.4 |
|
|
|
16.4 |
|
Syndicate 1200 |
|
6.9 |
|
|
|
8.8 |
|
|
|
28.0 |
|
|
|
34.7 |
|
Run-off Lines |
|
(7.1 |
) |
|
|
(8.3 |
) |
|
|
(7.0 |
) |
|
|
(17.6 |
) |
Total segment income before taxes |
|
42.2 |
|
|
|
40.1 |
|
|
|
138.6 |
|
|
|
118.6 |
|
Corporate and Other |
|
(9.7 |
) |
|
|
(4.7 |
) |
|
|
(30.3 |
) |
|
|
(25.4 |
) |
Net realized investment and other gains |
|
3.7 |
|
|
|
12.9 |
|
|
|
25.0 |
|
|
|
42.5 |
|
Total income before income taxes |
$ |
36.2 |
|
|
$ |
48.3 |
|
|
$ |
133.3 |
|
|
$ |
135.7 |
|
The table below presents earned premiums by geographic location for the three and nine months ended September 30, 2015 and 2014. For this disclosure, we determine geographic location by the country of domicile of our subsidiaries that underwrite the business and not by the location of insureds or reinsureds from whom the business was generated.
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions) |
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Bermuda |
$ |
26.8 |
|
|
$ |
27.0 |
|
|
$ |
76.8 |
|
|
$ |
75.7 |
|
Brazil |
|
10.3 |
|
|
|
11.0 |
|
|
|
34.7 |
|
|
|
35.4 |
|
Malta |
|
0.5 |
|
|
|
0.5 |
|
|
|
1.4 |
|
|
|
1.6 |
|
United Kingdom |
|
99.1 |
|
|
|
104.4 |
|
|
|
305.5 |
|
|
|
305.9 |
|
United States |
|
209.3 |
|
|
|
194.7 |
|
|
|
608.2 |
|
|
|
580.8 |
|
Total earned premiums |
$ |
346.0 |
|
|
$ |
337.6 |
|
|
$ |
1,026.6 |
|
|
$ |
999.4 |
|
The following table represents identifiable assets:
|
|
September 30, |
|
|
December 31, |
|
||
(in millions) |
|
2015 |
|
|
2014 |
|
||
Excess and Surplus Lines |
|
$ |
2,461.4 |
|
|
$ |
2,350.7 |
|
Commercial Specialty |
|
|
1,387.9 |
|
|
|
1,358.5 |
|
International Specialty |
|
|
801.0 |
|
|
|
776.8 |
|
Syndicate 1200 |
|
|
1,353.1 |
|
|
|
1,258.5 |
|
Run-off Lines |
|
|
557.7 |
|
|
|
552.8 |
|
Corporate and Other |
|
|
66.4 |
|
|
|
59.0 |
|
Total |
|
$ |
6,627.5 |
|
|
$ |
6,356.3 |
|
Included in total assets at September 30, 2015 and December 31, 2014 are $396.3 million and $315.4 million, respectively, in assets associated with trade capital providers.
|
16. |
Information Provided in Connection with Outstanding Debt of Subsidiaries |
The following tables present condensed consolidating financial information at September 30, 2015 and December 31, 2014 and for the three and nine months ended September 30, 2015 and 2014, for Argo Group (the “Parent Guarantor”) and Argo Group US (the “Subsidiary Issuer”). The Subsidiary Issuer is an indirect wholly-owned subsidiary of the Parent Guarantor. Investments in subsidiaries are accounted for by the Parent Guarantor under the equity method for purposes of the supplemental consolidating presentation. Earnings of subsidiaries are reflected in the Parent Guarantor’s investment accounts and earnings.
The Parent Guarantor fully and unconditionally guarantees certain of the debt of the Subsidiary Issuer. Condensed consolidating financial information of the Subsidiary Issuer is presented on a consolidated basis and consists principally of the net assets, results of operations and cash flows of operating insurance company subsidiaries.
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2015
(in millions)
|
|
Argo Group International Holdings, Ltd (Parent Guarantor) |
|
|
Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer) |
|
|
Other Subsidiaries and Eliminations (1) |
|
|
Consolidating Adjustments (2) |
|
|
Total |
|
|||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
$ |
6.4 |
|
|
$ |
2,830.2 |
|
|
$ |
1,296.4 |
|
|
$ |
— |
|
|
$ |
4,133.0 |
|
Cash |
|
|
— |
|
|
|
84.8 |
|
|
|
11.4 |
|
|
|
— |
|
|
|
96.2 |
|
Accrued investment income |
|
|
— |
|
|
|
15.9 |
|
|
|
5.1 |
|
|
|
— |
|
|
|
21.0 |
|
Premiums receivable |
|
|
— |
|
|
|
166.7 |
|
|
|
270.7 |
|
|
|
— |
|
|
|
437.4 |
|
Reinsurance recoverables |
|
|
— |
|
|
|
1,195.4 |
|
|
|
(128.1 |
) |
|
|
— |
|
|
|
1,067.3 |
|
Goodwill and other intangible assets, net |
|
|
— |
|
|
|
130.0 |
|
|
|
96.6 |
|
|
|
— |
|
|
|
226.6 |
|
Current income taxes receivable, net |
|
|
— |
|
|
|
12.3 |
|
|
|
4.8 |
|
|
|
— |
|
|
|
17.1 |
|
Deferred acquisition costs, net |
|
|
— |
|
|
|
61.8 |
|
|
|
79.6 |
|
|
|
— |
|
|
|
141.4 |
|
Ceded unearned premiums |
|
|
— |
|
|
|
119.8 |
|
|
|
142.7 |
|
|
|
— |
|
|
|
262.5 |
|
Other assets |
|
|
9.7 |
|
|
|
155.3 |
|
|
|
66.4 |
|
|
|
(6.4 |
) |
|
|
225.0 |
|
Due (to) from affiliates |
|
|
(52.5 |
) |
|
|
1.5 |
|
|
|
(1.5 |
) |
|
|
52.5 |
|
|
|
— |
|
Intercompany note receivable |
|
|
— |
|
|
|
41.7 |
|
|
|
(41.7 |
) |
|
|
— |
|
|
|
— |
|
Investments in subsidiaries |
|
|
1,722.3 |
|
|
|
— |
|
|
|
— |
|
|
|
(1,722.3 |
) |
|
|
— |
|
Total assets |
|
$ |
1,685.9 |
|
|
|
4,815.4 |
|
|
|
1,802.4 |
|
|
$ |
(1,676.2 |
) |
|
$ |
6,627.5 |
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves for losses and loss adjustment expenses |
|
$ |
— |
|
|
|
2,177.9 |
|
|
|
926.2 |
|
|
$ |
— |
|
|
$ |
3,104.1 |
|
Unearned premiums |
|
|
— |
|
|
|
506.9 |
|
|
|
425.8 |
|
|
|
— |
|
|
|
932.7 |
|
Funds held and ceded reinsurance payable, net |
|
|
— |
|
|
|
695.5 |
|
|
|
(328.6 |
) |
|
|
— |
|
|
|
366.9 |
|
Long-term debt |
|
|
28.3 |
|
|
|
288.7 |
|
|
|
56.9 |
|
|
|
— |
|
|
|
373.9 |
|
Deferred tax liabilities, net |
|
|
— |
|
|
|
24.0 |
|
|
|
9.4 |
|
|
|
— |
|
|
|
33.4 |
|
Accrued underwriting expenses and other liabilities |
|
|
16.1 |
|
|
|
98.4 |
|
|
|
60.5 |
|
|
|
— |
|
|
|
175.0 |
|
Total liabilities |
|
|
44.4 |
|
|
|
3,791.4 |
|
|
|
1,150.2 |
|
|
|
— |
|
|
|
4,986.0 |
|
Total shareholders' equity |
|
|
1,641.5 |
|
|
|
1,024.0 |
|
|
|
652.2 |
|
|
|
(1,676.2 |
) |
|
|
1,641.5 |
|
Total liabilities and shareholders' equity |
|
$ |
1,685.9 |
|
|
$ |
4,815.4 |
|
|
$ |
1,802.4 |
|
|
$ |
(1,676.2 |
) |
|
$ |
6,627.5 |
|
(1) |
Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations. |
(2) |
Includes all Argo Group parent company eliminations. |
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2014
(in millions)
|
|
Argo Group International Holdings, Ltd (Parent Guarantor) |
|
|
Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer) |
|
|
Other Subsidiaries and Eliminations (1) |
|
|
Consolidating Adjustments (2) |
|
|
Total |
|
|||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
$ |
0.7 |
|
|
$ |
2,841.5 |
|
|
$ |
1,255.7 |
|
|
$ |
— |
|
|
$ |
4,097.9 |
|
Cash |
|
|
— |
|
|
|
49.3 |
|
|
|
31.7 |
|
|
|
— |
|
|
|
81.0 |
|
Accrued investment income |
|
|
— |
|
|
|
17.8 |
|
|
|
4.3 |
|
|
|
— |
|
|
|
22.1 |
|
Premiums receivable |
|
|
— |
|
|
|
154.6 |
|
|
|
199.0 |
|
|
|
— |
|
|
|
353.6 |
|
Reinsurance recoverables |
|
|
— |
|
|
|
1,173.6 |
|
|
|
(176.4 |
) |
|
|
— |
|
|
|
997.2 |
|
Goodwill and other intangible assets, net |
|
|
— |
|
|
|
131.7 |
|
|
|
99.1 |
|
|
|
— |
|
|
|
230.8 |
|
Current income taxes receivable, net |
|
|
— |
|
|
|
10.1 |
|
|
|
4.8 |
|
|
|
— |
|
|
|
14.9 |
|
Deferred acquisition costs, net |
|
|
— |
|
|
|
58.0 |
|
|
|
66.6 |
|
|
|
— |
|
|
|
124.6 |
|
Ceded unearned premiums |
|
|
— |
|
|
|
98.5 |
|
|
|
109.1 |
|
|
|
— |
|
|
|
207.6 |
|
Other assets |
|
|
9.6 |
|
|
|
174.1 |
|
|
|
67.9 |
|
|
|
(25.0 |
) |
|
|
226.6 |
|
Due from (to) affiliates |
|
|
2.9 |
|
|
|
(19.8 |
) |
|
|
19.8 |
|
|
|
(2.9 |
) |
|
|
— |
|
Intercompany note receivable |
|
|
— |
|
|
|
72.0 |
|
|
|
(72.0 |
) |
|
|
— |
|
|
|
— |
|
Investments in subsidiaries |
|
|
1,698.0 |
|
|
|
— |
|
|
|
— |
|
|
|
(1,698.0 |
) |
|
|
— |
|
Total assets |
|
$ |
1,711.2 |
|
|
$ |
4,761.4 |
|
|
$ |
1,609.6 |
|
|
$ |
(1,725.9 |
) |
|
$ |
6,356.3 |
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves for losses and loss adjustment expenses |
|
$ |
— |
|
|
$ |
2,136.4 |
|
|
$ |
906.0 |
|
|
$ |
— |
|
|
$ |
3,042.4 |
|
Unearned premiums |
|
|
— |
|
|
|
448.9 |
|
|
|
368.3 |
|
|
|
— |
|
|
|
817.2 |
|
Funds held and ceded reinsurance payable, net |
|
|
— |
|
|
|
675.1 |
|
|
|
(441.3 |
) |
|
|
— |
|
|
|
233.8 |
|
Long-term debt |
|
|
49.0 |
|
|
|
288.7 |
|
|
|
61.4 |
|
|
|
(20.6 |
) |
|
|
378.5 |
|
Deferred tax liabilities, net |
|
|
— |
|
|
|
41.2 |
|
|
|
11.8 |
|
|
|
— |
|
|
|
53.0 |
|
Accrued underwriting expenses and other liabilities |
|
|
15.5 |
|
|
|
104.2 |
|
|
|
65.0 |
|
|
|
— |
|
|
|
184.7 |
|
Total liabilities |
|
|
64.5 |
|
|
|
3,694.5 |
|
|
|
971.2 |
|
|
|
(20.6 |
) |
|
|
4,709.6 |
|
Total shareholders' equity |
|
|
1,646.7 |
|
|
|
1,066.9 |
|
|
|
638.4 |
|
|
|
(1,705.3 |
) |
|
|
1,646.7 |
|
Total liabilities and shareholders' equity |
|
$ |
1,711.2 |
|
|
$ |
4,761.4 |
|
|
$ |
1,609.6 |
|
|
$ |
(1,725.9 |
) |
|
$ |
6,356.3 |
|
(1) |
Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations. |
(2) |
Includes all Argo Group parent company eliminations. |
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015
(in millions)
|
|
Argo Group International Holdings, Ltd (Parent Guarantor) |
|
|
Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer) |
|
|
Other Subsidiaries and Eliminations (1) |
|
|
Consolidating Adjustments (2) |
|
|
Total |
|
|||||
Premiums and other revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned premiums |
|
$ |
— |
|
|
$ |
122.1 |
|
|
$ |
223.9 |
|
|
$ |
— |
|
|
$ |
346.0 |
|
Net investment income |
|
|
(0.2 |
) |
|
|
14.1 |
|
|
|
7.6 |
|
|
|
(0.2 |
) |
|
|
21.3 |
|
Fee and other income (expense), net |
|
|
— |
|
|
|
— |
|
|
|
1.0 |
|
|
|
— |
|
|
|
1.0 |
|
Net realized investment and other gains |
|
|
— |
|
|
|
1.4 |
|
|
|
2.3 |
|
|
|
— |
|
|
|
3.7 |
|
Total revenue |
|
|
(0.2 |
) |
|
|
137.6 |
|
|
|
234.8 |
|
|
|
(0.2 |
) |
|
|
372.0 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
|
|
— |
|
|
|
75.4 |
|
|
|
124.6 |
|
|
|
— |
|
|
|
200.0 |
|
Underwriting, acquisition and insurance expenses |
|
|
4.9 |
|
|
|
48.0 |
|
|
|
79.9 |
|
|
|
— |
|
|
|
132.8 |
|
Interest expense |
|
|
0.5 |
|
|
|
3.8 |
|
|
|
0.7 |
|
|
|
(0.2 |
) |
|
|
4.8 |
|
Foreign currency exchange gain |
|
|
— |
|
|
|
0.1 |
|
|
|
(1.9 |
) |
|
|
— |
|
|
|
(1.8 |
) |
Total expenses |
|
|
5.4 |
|
|
|
127.3 |
|
|
|
203.3 |
|
|
|
(0.2 |
) |
|
|
335.8 |
|
Income before income taxes |
|
|
(5.6 |
) |
|
|
10.3 |
|
|
|
31.5 |
|
|
|
— |
|
|
|
36.2 |
|
Provision for income taxes |
|
|
— |
|
|
|
2.1 |
|
|
|
(1.2 |
) |
|
|
— |
|
|
|
0.9 |
|
Net income before equity in earnings of subsidiaries |
|
|
(5.6 |
) |
|
|
8.2 |
|
|
|
32.7 |
|
|
|
— |
|
|
|
35.3 |
|
Equity in undistributed earnings of subsidiaries |
|
|
40.9 |
|
|
|
— |
|
|
|
— |
|
|
|
(40.9 |
) |
|
|
— |
|
Net income |
|
$ |
35.3 |
|
|
$ |
8.2 |
|
|
$ |
32.7 |
|
|
$ |
(40.9 |
) |
|
$ |
35.3 |
|
(1) |
Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations. |
(2) |
Includes all Argo Group parent company eliminations. |
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2014
(in millions)
|
|
Argo Group International Holdings, Ltd (Parent Guarantor) |
|
|
Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer) |
|
|
Other Subsidiaries and Eliminations (1) |
|
|
Consolidating Adjustments (2) |
|
|
Total |
|
|||||
Premiums and other revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned premiums |
|
$ |
— |
|
|
$ |
114.2 |
|
|
$ |
223.4 |
|
|
$ |
— |
|
|
$ |
337.6 |
|
Net investment income |
|
|
(0.1 |
) |
|
|
13.6 |
|
|
|
7.3 |
|
|
|
— |
|
|
|
20.8 |
|
Fee and other income (expense), net |
|
|
— |
|
|
|
1.5 |
|
|
|
0.1 |
|
|
|
— |
|
|
|
1.6 |
|
Net realized investment and other gains |
|
|
— |
|
|
|
9.2 |
|
|
|
3.7 |
|
|
|
— |
|
|
|
12.9 |
|
Total revenue |
|
|
(0.1 |
) |
|
|
138.5 |
|
|
|
234.5 |
|
|
|
— |
|
|
|
372.9 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
|
|
— |
|
|
|
69.9 |
|
|
|
122.0 |
|
|
|
— |
|
|
|
191.9 |
|
Underwriting, acquisition and insurance expenses |
|
|
2.3 |
|
|
|
51.6 |
|
|
|
79.9 |
|
|
|
— |
|
|
|
133.8 |
|
Interest expense |
|
|
0.7 |
|
|
|
3.8 |
|
|
|
0.6 |
|
|
|
(0.2 |
) |
|
|
4.9 |
|
Foreign currency exchange gain |
|
|
— |
|
|
|
0.3 |
|
|
|
(6.3 |
) |
|
|
— |
|
|
|
(6.0 |
) |
Total expenses |
|
|
3.0 |
|
|
|
125.6 |
|
|
|
196.2 |
|
|
|
(0.2 |
) |
|
|
324.6 |
|
Income before income taxes |
|
|
(3.1 |
) |
|
|
12.9 |
|
|
|
38.3 |
|
|
|
0.2 |
|
|
|
48.3 |
|
Provision for income taxes |
|
|
— |
|
|
|
2.1 |
|
|
|
1.5 |
|
|
|
— |
|
|
|
3.6 |
|
Net income before equity in earnings of subsidiaries |
|
|
(3.1 |
) |
|
|
10.8 |
|
|
|
36.8 |
|
|
|
0.2 |
|
|
|
44.7 |
|
Equity in undistributed earnings of subsidiaries |
|
|
47.9 |
|
|
|
— |
|
|
|
— |
|
|
|
(47.9 |
) |
|
|
— |
|
Net income |
|
$ |
44.8 |
|
|
$ |
10.8 |
|
|
$ |
36.8 |
|
|
$ |
(47.7 |
) |
|
$ |
44.7 |
|
(1) |
Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations. |
(2) |
Includes all Argo Group parent company eliminations. |
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
(in millions)
|
|
Argo Group International Holdings, Ltd (Parent Guarantor) |
|
|
Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer) |
|
|
Other Subsidiaries and Eliminations (1) |
|
|
Consolidating Adjustments (2) |
|
|
Total |
|
|||||
Premiums and other revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned premiums |
|
$ |
— |
|
|
$ |
376.0 |
|
|
$ |
650.6 |
|
|
$ |
— |
|
|
$ |
1,026.6 |
|
Net investment income |
|
|
(0.7 |
) |
|
|
42.6 |
|
|
|
22.2 |
|
|
|
(0.2 |
) |
|
|
63.9 |
|
Fee and other income (expense), net |
|
|
— |
|
|
|
(2.4 |
) |
|
|
2.3 |
|
|
|
— |
|
|
|
(0.1 |
) |
Net realized investment and other gains |
|
|
2.0 |
|
|
|
24.7 |
|
|
|
0.3 |
|
|
|
(2.0 |
) |
|
|
25.0 |
|
Total revenue |
|
|
1.3 |
|
|
|
440.9 |
|
|
|
675.4 |
|
|
|
(2.2 |
) |
|
|
1,115.4 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
|
|
— |
|
|
|
220.0 |
|
|
|
354.3 |
|
|
|
— |
|
|
|
574.3 |
|
Underwriting, acquisition and insurance expenses |
|
|
14.4 |
|
|
|
149.5 |
|
|
|
238.0 |
|
|
|
— |
|
|
|
401.9 |
|
Interest expense |
|
|
1.2 |
|
|
|
11.4 |
|
|
|
1.9 |
|
|
|
(0.2 |
) |
|
|
14.3 |
|
Foreign currency exchange gain |
|
|
— |
|
|
|
1.0 |
|
|
|
(9.4 |
) |
|
|
— |
|
|
|
(8.4 |
) |
Total expenses |
|
|
15.6 |
|
|
|
381.9 |
|
|
|
584.8 |
|
|
|
(0.2 |
) |
|
|
982.1 |
|
Income before income taxes |
|
|
(14.3 |
) |
|
|
59.0 |
|
|
|
90.6 |
|
|
|
(2.0 |
) |
|
|
133.3 |
|
Provision for income taxes |
|
|
— |
|
|
|
13.3 |
|
|
|
(2.0 |
) |
|
|
— |
|
|
|
11.3 |
|
Net income before equity in earnings of subsidiaries |
|
|
(14.3 |
) |
|
|
45.7 |
|
|
|
92.6 |
|
|
|
(2.0 |
) |
|
|
122.0 |
|
Equity in undistributed earnings of subsidiaries |
|
|
136.3 |
|
|
|
— |
|
|
|
— |
|
|
|
(136.3 |
) |
|
|
— |
|
Net income |
|
$ |
122.0 |
|
|
$ |
45.7 |
|
|
$ |
92.6 |
|
|
$ |
(138.3 |
) |
|
$ |
122.0 |
|
(1) |
Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations. |
(2) |
Includes all Argo Group parent company eliminations. |
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014
(in millions)
|
|
Argo Group International Holdings, Ltd (Parent Guarantor) |
|
|
Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer) |
|
|
Other Subsidiaries and Eliminations (1) |
|
|
Consolidating Adjustments (2) |
|
|
Total |
|
|||||
Premiums and other revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned premiums |
|
$ |
— |
|
|
$ |
343.7 |
|
|
$ |
655.7 |
|
|
$ |
— |
|
|
$ |
999.4 |
|
Net investment income |
|
|
(0.3 |
) |
|
|
42.4 |
|
|
|
22.6 |
|
|
|
— |
|
|
|
64.7 |
|
Fee and other (expense) income, net |
|
|
— |
|
|
|
(1.5 |
) |
|
|
1.6 |
|
|
|
— |
|
|
|
0.1 |
|
Net realized investment and other gains |
|
|
— |
|
|
|
34.6 |
|
|
|
7.9 |
|
|
|
— |
|
|
|
42.5 |
|
Total revenue |
|
|
(0.3 |
) |
|
|
419.2 |
|
|
|
687.8 |
|
|
|
— |
|
|
|
1,106.7 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
|
|
— |
|
|
|
211.2 |
|
|
|
348.3 |
|
|
|
— |
|
|
|
559.5 |
|
Underwriting, acquisition and insurance expenses |
|
|
12.5 |
|
|
|
147.9 |
|
|
|
238.9 |
|
|
|
— |
|
|
|
399.3 |
|
Interest expense |
|
|
1.8 |
|
|
|
11.4 |
|
|
|
2.1 |
|
|
|
(0.3 |
) |
|
|
15.0 |
|
Foreign currency exchange gain |
|
|
— |
|
|
|
0.1 |
|
|
|
(2.9 |
) |
|
|
— |
|
|
|
(2.8 |
) |
Total expenses |
|
|
14.3 |
|
|
|
370.6 |
|
|
|
586.4 |
|
|
|
(0.3 |
) |
|
|
971.0 |
|
Income before income taxes |
|
|
(14.6 |
) |
|
|
48.6 |
|
|
|
101.4 |
|
|
|
0.3 |
|
|
|
135.7 |
|
Provision for income taxes |
|
|
— |
|
|
|
10.2 |
|
|
|
2.0 |
|
|
|
— |
|
|
|
12.2 |
|
Net income before equity in earnings of subsidiaries |
|
|
(14.6 |
) |
|
|
38.4 |
|
|
|
99.4 |
|
|
|
0.3 |
|
|
|
123.5 |
|
Equity in undistributed earnings of subsidiaries |
|
|
138.1 |
|
|
|
— |
|
|
|
— |
|
|
|
(138.1 |
) |
|
|
— |
|
Net income |
|
$ |
123.5 |
|
|
$ |
38.4 |
|
|
$ |
99.4 |
|
|
$ |
(137.8 |
) |
|
$ |
123.5 |
|
(1) |
Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations. |
(2) |
Includes all Argo Group parent company eliminations. |
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
(in millions)
|
|
Argo Group International Holdings, Ltd (Parent Guarantor) |
|
|
Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer) |
|
|
Other Subsidiaries and Eliminations (1) |
|
|
Consolidating Adjustments (2) |
|
|
Total |
|
|||||
Net cash flows from operating activities |
|
$ |
16.5 |
|
|
$ |
130.6 |
|
|
$ |
88.7 |
|
|
$ |
— |
|
|
$ |
235.8 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of investments |
|
|
— |
|
|
|
524.5 |
|
|
|
204.3 |
|
|
|
— |
|
|
|
728.8 |
|
Maturities and mandatory calls of fixed maturity investments |
|
|
— |
|
|
|
509.5 |
|
|
|
127.9 |
|
|
|
— |
|
|
|
637.4 |
|
Purchases of investments |
|
|
— |
|
|
|
(1,073.2 |
) |
|
|
(395.3 |
) |
|
|
— |
|
|
|
(1,468.5 |
) |
Change in short-term investments and foreign regulatory deposits |
|
|
1.3 |
|
|
|
(34.5 |
) |
|
|
(29.2 |
) |
|
|
— |
|
|
|
(62.4 |
) |
Settlements of foreign currency exchange forward contracts |
|
|
1.5 |
|
|
|
— |
|
|
|
(8.2 |
) |
|
|
— |
|
|
|
(6.7 |
) |
Issuance of intercompany note, net |
|
|
— |
|
|
|
15.0 |
|
|
|
(15.0 |
) |
|
|
— |
|
|
|
— |
|
Purchases of fixed assets and other, net |
|
|
(3.8 |
) |
|
|
(7.3 |
) |
|
|
6.5 |
|
|
|
— |
|
|
|
(4.6 |
) |
Cash used by investing activities |
|
|
(1.0 |
) |
|
|
(66.0 |
) |
|
|
(109.0 |
) |
|
|
— |
|
|
|
(176.0 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under intercompany note, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Activity under stock incentive plans |
|
|
1.6 |
|
|
|
— |
|
|
|
(0.1 |
) |
|
|
— |
|
|
|
1.5 |
|
Repurchase of Company's common shares |
|
|
— |
|
|
|
(29.7 |
) |
|
|
— |
|
|
|
— |
|
|
|
(29.7 |
) |
Excess tax expense from share-based payment arrangements |
|
|
— |
|
|
|
0.6 |
|
|
|
— |
|
|
|
— |
|
|
|
0.6 |
|
Payment of cash dividend to common shareholders |
|
|
(17.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(17.1 |
) |
Cash used by financing activities |
|
|
(15.5 |
) |
|
|
(29.1 |
) |
|
|
(0.1 |
) |
|
|
— |
|
|
|
(44.7 |
) |
Effect of exchange rate changes on cash |
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
0.1 |
|
Change in cash |
|
|
— |
|
|
|
35.5 |
|
|
|
(20.3 |
) |
|
|
— |
|
|
|
15.2 |
|
Cash, beginning of the period |
|
|
— |
|
|
|
49.3 |
|
|
|
31.7 |
|
|
|
— |
|
|
|
81.0 |
|
Cash, end of period |
|
$ |
— |
|
|
$ |
84.8 |
|
|
$ |
11.4 |
|
|
$ |
— |
|
|
$ |
96.2 |
|
(1) |
Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations. |
(2) |
Includes all Argo Group parent company eliminations. |
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014
(in millions)
|
|
Argo Group International Holdings, Ltd (Parent Guarantor) |
|
|
Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer) |
|
|
Other Subsidiaries and Eliminations (1) |
|
|
Consolidating Adjustments (2) |
|
|
Total |
|
|||||
Net cash flows (used by) from operating activities |
|
$ |
(16.5 |
) |
|
$ |
11.8 |
|
|
$ |
70.0 |
|
|
$ |
6.4 |
|
|
$ |
71.7 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of investments |
|
|
— |
|
|
|
609.2 |
|
|
|
366.9 |
|
|
|
— |
|
|
|
976.1 |
|
Maturities and mandatory calls of fixed maturity investments |
|
|
— |
|
|
|
148.0 |
|
|
|
95.6 |
|
|
|
— |
|
|
|
243.6 |
|
Purchases of investments |
|
|
— |
|
|
|
(773.1 |
) |
|
|
(491.7 |
) |
|
|
— |
|
|
|
(1,264.8 |
) |
Change in short-term investments and foreign regulatory deposits |
|
|
0.1 |
|
|
|
(12.5 |
) |
|
|
18.4 |
|
|
|
— |
|
|
|
6.0 |
|
Settlements of foreign currency exchange forward contracts |
|
|
(0.5 |
) |
|
|
— |
|
|
|
1.1 |
|
|
|
— |
|
|
|
0.6 |
|
Issuance of intercompany note, net |
|
|
— |
|
|
|
14.5 |
|
|
|
(48.5 |
) |
|
|
34.0 |
|
|
|
— |
|
Purchases of fixed assets and other, net |
|
|
(7.0 |
) |
|
|
(20.1 |
) |
|
|
(14.7 |
) |
|
|
(6.4 |
) |
|
|
(48.2 |
) |
Cash (used) provided by investing activities |
|
|
(7.4 |
) |
|
|
(34.0 |
) |
|
|
(72.9 |
) |
|
|
27.6 |
|
|
|
(86.7 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under intercompany note, net |
|
|
34.0 |
|
|
|
— |
|
|
|
— |
|
|
|
(34.0 |
) |
|
|
— |
|
Activity under stock incentive plans |
|
|
3.3 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3.3 |
|
Redemption of trust preferred securities, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(18.0 |
) |
|
|
(18.0 |
) |
Payment on note payable |
|
|
— |
|
|
|
(0.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(0.1 |
) |
Repurchase of Company's common shares |
|
|
— |
|
|
|
(41 |
) |
|
|
— |
|
|
|
— |
|
|
|
(40.9 |
) |
Excess tax expense from share-based payment arrangements |
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
Payment of cash dividend to common shareholders |
|
|
(13.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(13.4 |
) |
Cash provided (used) by financing activities |
|
|
23.9 |
|
|
|
(40.9 |
) |
|
|
— |
|
|
|
(52.0 |
) |
|
|
(69.0 |
) |
Effect of exchange rate changes on cash |
|
|
— |
|
|
|
- |
|
|
|
(0.3 |
) |
|
|
— |
|
|
|
(0.3 |
) |
Change in cash |
|
|
— |
|
|
|
(63.1 |
) |
|
|
(3.2 |
) |
|
|
(18.0 |
) |
|
|
(84.3 |
) |
Cash, beginning of period |
|
|
— |
|
|
|
132.1 |
|
|
|
25.3 |
|
|
|
— |
|
|
|
157.4 |
|
Cash, end of period |
|
$ |
— |
|
|
$ |
69.0 |
|
|
$ |
22.1 |
|
|
$ |
(18.0 |
) |
|
$ |
73.1 |
|
(1) |
Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations. |
(2) |
Includes all Argo Group parent company eliminations. |
|
1. |
Basis of Presentation |
The accompanying consolidated financial statements of Argo Group International Holdings, Ltd. (“Argo Group,” “we” or the “Company”) and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. The preparation of interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The major estimates reflected in our consolidated financial statements include, but are not limited to, reserves for losses and loss adjustment expenses; reinsurance recoverables, including the reinsurance recoverables allowance for doubtful accounts; estimates of written and earned premiums; reinsurance premium receivable; fair value of investments and assessment of potential impairment; valuation of goodwill and intangibles and our deferred tax asset valuation allowance. Actual results could differ from those estimates. Certain financial information that normally is included in annual financial statements, including certain financial statement footnotes, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on February 27, 2015.
The interim financial information as of, and for the three and nine months ended, September 30, 2015 and 2014 is unaudited. However, in the opinion of management, the interim information includes all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results presented for the interim periods. The operating results for the interim periods are not necessarily indicative of the results to be expected for the full year. All significant intercompany amounts have been eliminated in consolidation. Certain amounts in prior years’ financial statements have been reclassified to conform to the current presentation.
10% Stock Dividend
On February 17, 2015, our Board of Directors declared a 10% stock dividend, payable on March 16, 2015, to shareholders of record at the close of business on March 2, 2015. As a result of the stock dividend, 2,554,506 additional shares were issued. Cash was paid in lieu of fractional shares of our common shares. All references to share and per share amounts in this document and related disclosures have been adjusted to reflect the stock dividend for all periods presented.
|
The amortized cost, gross unrealized gains, gross unrealized losses and fair value of investments were as follows:
September 30, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
||||
Fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Governments |
|
$ |
167.8 |
|
|
$ |
1.4 |
|
|
$ |
0.3 |
|
|
$ |
168.9 |
|
Non-U.S. Governments |
|
|
87.4 |
|
|
|
0.4 |
|
|
|
1.8 |
|
|
|
86.0 |
|
Obligations of states and political subdivisions |
|
|
473.6 |
|
|
|
19.4 |
|
|
|
0.5 |
|
|
|
492.5 |
|
Credit-Financial |
|
|
491.4 |
|
|
|
8.2 |
|
|
|
2.5 |
|
|
|
497.1 |
|
Credit-Industrial |
|
|
493.0 |
|
|
|
6.7 |
|
|
|
6.8 |
|
|
|
492.9 |
|
Credit-Utility |
|
|
148.8 |
|
|
|
2.1 |
|
|
|
7.4 |
|
|
|
143.5 |
|
Structured securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMO/MBS-agency (1) |
|
|
132.8 |
|
|
|
6.0 |
|
|
|
0.2 |
|
|
|
138.6 |
|
CMO/MBS-non agency |
|
|
11.7 |
|
|
|
0.7 |
|
|
|
— |
|
|
|
12.4 |
|
CMBS (2) |
|
|
165.5 |
|
|
|
0.9 |
|
|
|
0.7 |
|
|
|
165.7 |
|
ABS (3) |
|
|
127.8 |
|
|
|
0.5 |
|
|
|
0.3 |
|
|
|
128.0 |
|
CLO (4) |
|
|
136.0 |
|
|
|
0.4 |
|
|
|
0.8 |
|
|
|
135.6 |
|
Foreign denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Governments |
|
|
171.4 |
|
|
|
1.0 |
|
|
|
20.1 |
|
|
|
152.3 |
|
Credit |
|
|
126.0 |
|
|
|
1.3 |
|
|
|
18.3 |
|
|
|
109.0 |
|
ABS/CMBS |
|
|
24.9 |
|
|
|
0.1 |
|
|
|
2.9 |
|
|
|
22.1 |
|
CLO |
|
|
83.6 |
|
|
|
1.2 |
|
|
|
7.2 |
|
|
|
77.6 |
|
Total fixed maturities |
|
|
2,841.7 |
|
|
|
50.3 |
|
|
|
69.8 |
|
|
|
2,822.2 |
|
Equity securities |
|
|
358.5 |
|
|
|
129.7 |
|
|
|
22.2 |
|
|
|
466.0 |
|
Other investments |
|
|
488.1 |
|
|
|
12.6 |
|
|
|
0.7 |
|
|
|
500.0 |
|
Short-term investments |
|
|
345.0 |
|
|
|
— |
|
|
|
0.2 |
|
|
|
344.8 |
|
Total investments |
|
$ |
4,033.3 |
|
|
$ |
192.6 |
|
|
$ |
92.9 |
|
|
$ |
4,133.0 |
|
(1) |
Collateralized mortgage obligations/mortgage-backed securities (“CMO/MBS”). |
(2) |
Commercial mortgage-backed securities (“CMBS”). |
(3) |
Asset-backed securities (“ABS”). |
(4) |
Collateralized loan obligations (“CLO”). |
December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
||||
Fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Governments |
|
$ |
184.0 |
|
|
$ |
1.3 |
|
|
$ |
0.3 |
|
|
$ |
185.0 |
|
Non-U.S. Governments |
|
|
79.9 |
|
|
|
0.6 |
|
|
|
0.6 |
|
|
|
79.9 |
|
Obligations of states and political subdivisions |
|
|
468.1 |
|
|
|
22.9 |
|
|
|
0.3 |
|
|
|
490.7 |
|
Credit-Financial |
|
|
508.1 |
|
|
|
12.3 |
|
|
|
2.3 |
|
|
|
518.1 |
|
Credit-Industrial |
|
|
493.7 |
|
|
|
9.4 |
|
|
|
3.5 |
|
|
|
499.6 |
|
Credit-Utility |
|
|
142.7 |
|
|
|
3.2 |
|
|
|
3.9 |
|
|
|
142.0 |
|
Structured securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMO/MBS-agency (1) |
|
|
168.0 |
|
|
|
8.0 |
|
|
|
0.7 |
|
|
|
175.3 |
|
CMO/MBS-non agency |
|
|
13.2 |
|
|
|
0.8 |
|
|
|
— |
|
|
|
14.0 |
|
CMBS (2) |
|
|
178.6 |
|
|
|
1.6 |
|
|
|
0.2 |
|
|
|
180.0 |
|
ABS (3) |
|
|
142.7 |
|
|
|
0.4 |
|
|
|
0.5 |
|
|
|
142.6 |
|
CLO (4) |
|
|
78.7 |
|
|
|
0.2 |
|
|
|
0.5 |
|
|
|
78.4 |
|
Foreign denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Governments |
|
|
148.4 |
|
|
|
1.2 |
|
|
|
9.4 |
|
|
|
140.2 |
|
Credit |
|
|
136.7 |
|
|
|
1.8 |
|
|
|
12.5 |
|
|
|
126.0 |
|
ABS/CMBS |
|
|
29.5 |
|
|
|
0.2 |
|
|
|
2.5 |
|
|
|
27.2 |
|
CLO |
|
|
44.9 |
|
|
|
0.7 |
|
|
|
3.9 |
|
|
|
41.7 |
|
Total fixed maturities |
|
|
2,817.2 |
|
|
|
64.6 |
|
|
|
41.1 |
|
|
|
2,840.7 |
|
Equity securities |
|
|
307.3 |
|
|
|
184.1 |
|
|
|
5.1 |
|
|
|
486.3 |
|
Other investments |
|
|
488.9 |
|
|
|
7.5 |
|
|
|
1.3 |
|
|
|
495.1 |
|
Short-term investments |
|
|
275.8 |
|
|
|
— |
|
|
|
— |
|
|
|
275.8 |
|
Total investments |
|
$ |
3,889.2 |
|
|
$ |
256.2 |
|
|
$ |
47.5 |
|
|
$ |
4,097.9 |
|
(1) |
Collateralized mortgage obligations/mortgage-backed securities (“CMO/MBS”). |
(2) |
Commercial mortgage-backed securities (“CMBS”). |
(3) |
Asset-backed securities (“ABS”). |
(4) |
Collateralized loan obligations (“CLO”). |
The amortized cost and fair values of fixed maturity investments as of September 30, 2015, by contractual maturity, were as follows:
(in millions) |
|
Amortized Cost |
|
|
Fair Value |
|
||
Due in one year or less |
|
$ |
219.8 |
|
|
$ |
208.4 |
|
Due after one year through five years |
|
|
1,295.9 |
|
|
|
1,285.8 |
|
Due after five years through ten years |
|
|
480.4 |
|
|
|
481.0 |
|
Thereafter |
|
|
163.3 |
|
|
|
167.0 |
|
Structured securities |
|
|
682.3 |
|
|
|
680.0 |
|
Total |
|
$ |
2,841.7 |
|
|
$ |
2,822.2 |
|
Details regarding the carrying value and unfunded investment commitments of the other invested assets portfolio as of September 30, 2015 and December 31, 2014 were as follows:
September 30, 2015 |
|
|
|
|
|
|
|
|
(in millions) |
|
Carrying Value |
|
|
Unfunded Commitments |
|
||
Investment Type |
|
|
|
|
|
|
|
|
Hedge funds |
|
$ |
141.3 |
|
|
$ |
— |
|
Private equity |
|
|
143.7 |
|
|
|
71.6 |
|
Long only funds |
|
|
195.1 |
|
|
|
— |
|
Other investments |
|
|
19.9 |
|
|
|
— |
|
Total other invested assets |
|
$ |
500.0 |
|
|
$ |
71.6 |
|
December 31, 2014 |
|
|
|
|
|
|
|
|
(in millions) |
|
Carrying Value |
|
|
Unfunded Commitments |
|
||
Investment Type |
|
|
|
|
|
|
|
|
Hedge funds |
|
$ |
153.2 |
|
|
$ |
— |
|
Private equity |
|
|
123.6 |
|
|
|
72.9 |
|
Long only funds |
|
|
200.7 |
|
|
|
— |
|
Other investments |
|
|
17.6 |
|
|
|
— |
|
Total other invested assets |
|
$ |
495.1 |
|
|
$ |
72.9 |
|
An aging of unrealized losses on our investments in fixed maturities, equity securities, other investments and short-term investments is presented below:
September 30, 2015 |
|
Less Than One Year |
|
|
One Year or Greater |
|
|
Total |
|
|||||||||||||||
(in millions) |
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
||||||
Fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Governments (2) |
|
$ |
33.6 |
|
|
$ |
0.3 |
|
|
$ |
0.4 |
|
|
$ |
— |
|
|
$ |
34.0 |
|
|
$ |
0.3 |
|
Non-U.S. Governments |
|
|
32.9 |
|
|
|
1.5 |
|
|
|
3.1 |
|
|
|
0.3 |
|
|
|
36.0 |
|
|
|
1.8 |
|
Obligations of states and political subdivisions |
|
|
27.2 |
|
|
|
0.2 |
|
|
|
8.5 |
|
|
|
0.3 |
|
|
|
35.7 |
|
|
|
0.5 |
|
Credit-Financial |
|
|
197.9 |
|
|
|
2.2 |
|
|
|
19.1 |
|
|
|
0.3 |
|
|
|
217.0 |
|
|
|
2.5 |
|
Credit-Industrial |
|
|
218.4 |
|
|
|
5.2 |
|
|
|
30.6 |
|
|
|
1.6 |
|
|
|
249.0 |
|
|
|
6.8 |
|
Credit-Utility |
|
|
75.0 |
|
|
|
3.9 |
|
|
|
13.3 |
|
|
|
3.5 |
|
|
|
88.3 |
|
|
|
7.4 |
|
Structured securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMO/MBS-agency (1) |
|
|
7.9 |
|
|
|
— |
|
|
|
8.2 |
|
|
|
0.2 |
|
|
|
16.1 |
|
|
|
0.2 |
|
CMBS (2) |
|
|
54.9 |
|
|
|
0.7 |
|
|
|
4.5 |
|
|
|
— |
|
|
|
59.4 |
|
|
|
0.7 |
|
ABS (1) |
|
|
27.5 |
|
|
|
— |
|
|
|
12.1 |
|
|
|
0.3 |
|
|
|
39.6 |
|
|
|
0.3 |
|
CLO |
|
|
95.2 |
|
|
|
0.7 |
|
|
|
8.9 |
|
|
|
0.1 |
|
|
|
104.1 |
|
|
|
0.8 |
|
Foreign denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Governments (2) |
|
|
136.3 |
|
|
|
20.1 |
|
|
|
0.3 |
|
|
|
— |
|
|
|
136.6 |
|
|
|
20.1 |
|
Credit |
|
|
104.2 |
|
|
|
18.3 |
|
|
|
— |
|
|
|
— |
|
|
|
104.2 |
|
|
|
18.3 |
|
ABS/CMBS |
|
|
21.8 |
|
|
|
2.9 |
|
|
|
— |
|
|
|
— |
|
|
|
21.8 |
|
|
|
2.9 |
|
CLO |
|
|
75.6 |
|
|
|
7.2 |
|
|
|
— |
|
|
|
— |
|
|
|
75.6 |
|
|
|
7.2 |
|
Total fixed maturities |
|
|
1,108.4 |
|
|
|
63.2 |
|
|
|
109.0 |
|
|
|
6.6 |
|
|
|
1,217.4 |
|
|
|
69.8 |
|
Equity securities |
|
|
136.0 |
|
|
|
22.2 |
|
|
|
— |
|
|
|
— |
|
|
|
136.0 |
|
|
|
22.2 |
|
Other investments |
|
|
(0.4 |
) |
|
|
0.7 |
|
|
|
— |
|
|
|
— |
|
|
|
(0.4 |
) |
|
|
0.7 |
|
Short-term investments |
|
|
20.5 |
|
|
|
0.2 |
|
|
|
— |
|
|
|
— |
|
|
|
20.5 |
|
|
|
0.2 |
|
Total |
|
$ |
1,264.5 |
|
|
$ |
86.3 |
|
|
$ |
109.0 |
|
|
$ |
6.6 |
|
|
$ |
1,373.5 |
|
|
$ |
92.9 |
|
(1) |
Unrealized losses less than one year are less than $0.1 million. |
(2) |
Unrealized losses one year or greater are less than $0.1 million. |
December 31, 2014 |
|
Less Than One Year |
|
|
One Year or Greater |
|
|
Total |
|
|||||||||||||||
(in millions) |
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
||||||
Fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Governments |
|
$ |
55.0 |
|
|
$ |
0.2 |
|
|
$ |
15.7 |
|
|
$ |
0.1 |
|
|
$ |
70.7 |
|
|
$ |
0.3 |
|
Non-U.S. Governments |
|
|
36.5 |
|
|
|
0.4 |
|
|
|
5.2 |
|
|
|
0.2 |
|
|
|
41.7 |
|
|
|
0.6 |
|
Obligations of states and political subdivisions |
|
|
10.4 |
|
|
|
0.1 |
|
|
|
16.6 |
|
|
|
0.2 |
|
|
|
27.0 |
|
|
|
0.3 |
|
Credit-Financial |
|
|
195.7 |
|
|
|
2.2 |
|
|
|
11.1 |
|
|
|
0.1 |
|
|
|
206.8 |
|
|
|
2.3 |
|
Credit-Industrial |
|
|
240.8 |
|
|
|
3.3 |
|
|
|
12.2 |
|
|
|
0.2 |
|
|
|
253.0 |
|
|
|
3.5 |
|
Credit-Utility |
|
|
63.1 |
|
|
|
3.8 |
|
|
|
1.9 |
|
|
|
0.1 |
|
|
|
65.0 |
|
|
|
3.9 |
|
Structured securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMO/MBS-agency |
|
|
10.1 |
|
|
|
0.1 |
|
|
|
19.2 |
|
|
|
0.6 |
|
|
|
29.3 |
|
|
|
0.7 |
|
CMBS |
|
|
49.3 |
|
|
|
0.1 |
|
|
|
6.0 |
|
|
|
0.1 |
|
|
|
55.3 |
|
|
|
0.2 |
|
ABS |
|
|
68.8 |
|
|
|
0.2 |
|
|
|
8.1 |
|
|
|
0.3 |
|
|
|
76.9 |
|
|
|
0.5 |
|
CLO |
|
|
60.4 |
|
|
|
0.5 |
|
|
|
— |
|
|
|
— |
|
|
|
60.4 |
|
|
|
0.5 |
|
Foreign denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Governments |
|
|
123.7 |
|
|
|
9.3 |
|
|
|
11.2 |
|
|
|
0.1 |
|
|
|
134.9 |
|
|
|
9.4 |
|
Credit |
|
|
122.3 |
|
|
|
12.3 |
|
|
|
0.9 |
|
|
|
0.2 |
|
|
|
123.2 |
|
|
|
12.5 |
|
ABS/CMBS |
|
|
26.8 |
|
|
|
2.5 |
|
|
|
— |
|
|
|
— |
|
|
|
26.8 |
|
|
|
2.5 |
|
CLO |
|
|
41.7 |
|
|
|
3.9 |
|
|
|
— |
|
|
|
— |
|
|
|
41.7 |
|
|
|
3.9 |
|
Total fixed maturities |
|
|
1,104.6 |
|
|
|
38.9 |
|
|
|
108.1 |
|
|
|
2.2 |
|
|
|
1,212.7 |
|
|
|
41.1 |
|
Equity securities |
|
|
53.6 |
|
|
|
5.1 |
|
|
|
— |
|
|
|
— |
|
|
|
53.6 |
|
|
|
5.1 |
|
Other investments |
|
|
(0.9 |
) |
|
|
1.3 |
|
|
|
— |
|
|
|
— |
|
|
|
(0.9 |
) |
|
|
1.3 |
|
Short-term investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
1,157.3 |
|
|
$ |
45.3 |
|
|
$ |
108.1 |
|
|
$ |
2.2 |
|
|
$ |
1,265.4 |
|
|
$ |
47.5 |
|
The following table presents our gross realized investment and other gains (losses):
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Realized gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities |
|
$ |
2.9 |
|
|
$ |
4.5 |
|
|
$ |
10.5 |
|
|
$ |
15.2 |
|
Equity securities |
|
|
9.8 |
|
|
|
0.7 |
|
|
|
22.6 |
|
|
|
16.1 |
|
Other investments |
|
|
14.6 |
|
|
|
13.6 |
|
|
|
44.9 |
|
|
|
36.5 |
|
Short-term investments |
|
|
— |
|
|
|
— |
|
|
|
1.1 |
|
|
|
0.1 |
|
Other assets |
|
|
— |
|
|
|
2.0 |
|
|
|
— |
|
|
|
2.0 |
|
Gain on sale of real estate holdings |
|
|
— |
|
|
|
— |
|
|
|
0.4 |
|
|
|
— |
|
Gross realized investment gains |
|
|
27.3 |
|
|
|
20.8 |
|
|
|
79.5 |
|
|
|
69.9 |
|
Realized losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities |
|
|
(4.1 |
) |
|
|
(1.1 |
) |
|
|
(13.1 |
) |
|
|
(8.7 |
) |
Equity securities |
|
|
(2.5 |
) |
|
|
(0.1 |
) |
|
|
(3.6 |
) |
|
|
(0.2 |
) |
Other investments |
|
|
(13.4 |
) |
|
|
(6.5 |
) |
|
|
(30.9 |
) |
|
|
(12.6 |
) |
Short-term investments |
|
|
(0.1 |
) |
|
|
— |
|
|
|
(1.5 |
) |
|
|
(0.3 |
) |
Other assets |
|
|
(0.1 |
) |
|
|
— |
|
|
|
(0.1 |
) |
|
|
(4.0 |
) |
Other-than-temporary impairment losses on fixed maturities |
|
|
— |
|
|
|
— |
|
|
|
(0.9 |
) |
|
|
(1.2 |
) |
Other-than-temporary impairment losses on equity securities |
|
|
(3.4 |
) |
|
|
(0.2 |
) |
|
|
(4.4 |
) |
|
|
(0.4 |
) |
Gross realized investment and other losses |
|
|
(23.6 |
) |
|
|
(7.9 |
) |
|
|
(54.5 |
) |
|
|
(27.4 |
) |
Net realized investment and other gains |
|
$ |
3.7 |
|
|
$ |
12.9 |
|
|
$ |
25.0 |
|
|
$ |
42.5 |
|
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments are summarized as follows:
(in millions) |
|
Fixed Maturities |
|
|
Equity Maturities |
|
|
Other Investments |
|
|
Short Term |
|
|
Real Estate Holdings and Other |
|
|
Tax Effects |
|
|
Total |
|
|||||||
Three Months Ended September 30, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized before impairments |
|
$ |
(1.2 |
) |
|
$ |
7.3 |
|
|
$ |
1.2 |
|
|
$ |
(0.1 |
) |
|
$ |
(0.1 |
) |
|
$ |
(2.1 |
) |
|
$ |
5.0 |
|
Realized - impairments |
|
|
— |
|
|
|
(3.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.2 |
|
|
|
(2.2 |
) |
Change in unrealized |
|
|
(22.6 |
) |
|
|
(46.7 |
) |
|
|
— |
|
|
|
(0.2 |
) |
|
|
— |
|
|
|
20.1 |
|
|
|
(49.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized before impairments |
|
$ |
3.4 |
|
|
$ |
0.6 |
|
|
$ |
7.1 |
|
|
$ |
— |
|
|
$ |
2.0 |
|
|
$ |
(5.3 |
) |
|
$ |
7.8 |
|
Realized - impairments |
|
|
— |
|
|
|
(0.2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.4 |
|
|
|
0.2 |
|
Change in unrealized |
|
|
(33.9 |
) |
|
|
(10.7 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9.0 |
|
|
|
(35.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized before impairments |
|
$ |
(2.6 |
) |
|
$ |
19.0 |
|
|
$ |
14.0 |
|
|
$ |
(0.4 |
) |
|
$ |
0.3 |
|
|
$ |
(10.5 |
) |
|
$ |
19.8 |
|
Realized - impairments |
|
|
(0.9 |
) |
|
|
(4.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.8 |
|
|
|
(3.5 |
) |
Change in unrealized |
|
|
(40.9 |
) |
|
|
(71.5 |
) |
|
|
1.5 |
|
|
|
(0.2 |
) |
|
|
— |
|
|
|
33.3 |
|
|
|
(77.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized before impairments |
|
$ |
6.5 |
|
|
$ |
15.9 |
|
|
$ |
23.9 |
|
|
$ |
(0.2 |
) |
|
$ |
(2.0 |
) |
|
$ |
(13.4 |
) |
|
$ |
30.7 |
|
Realized - impairments |
|
|
(1.2 |
) |
|
|
(0.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.5 |
|
|
|
(1.1 |
) |
Change in unrealized |
|
|
(12.0 |
) |
|
|
5.0 |
|
|
|
1.1 |
|
|
|
— |
|
|
|
— |
|
|
|
(3.5 |
) |
|
|
(9.4 |
) |
Based on an analysis of the inputs, our financial assets measured at fair value on a recurring basis have been categorized as follows:
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using |
|
|||||||||
(in millions) |
|
September 30, 2015 |
|
|
Level 1 (a) |
|
|
Level 2 (b) |
|
|
Level 3 (c) |
|
||||
Fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Governments |
|
$ |
168.9 |
|
|
$ |
110.4 |
|
|
$ |
58.5 |
|
|
$ |
— |
|
Non-U.S. Governments |
|
|
86.0 |
|
|
|
— |
|
|
|
86.0 |
|
|
|
— |
|
Obligations of states and political subdivisions |
|
|
492.5 |
|
|
|
— |
|
|
|
492.5 |
|
|
|
— |
|
Credit-Financial |
|
|
497.1 |
|
|
|
— |
|
|
|
497.1 |
|
|
|
— |
|
Credit-Industrial |
|
|
492.9 |
|
|
|
— |
|
|
|
492.9 |
|
|
|
— |
|
Credit-Utility |
|
|
143.5 |
|
|
|
— |
|
|
|
143.5 |
|
|
|
— |
|
Structured securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMO/MBS-agency |
|
|
138.6 |
|
|
|
— |
|
|
|
138.6 |
|
|
|
— |
|
CMO/MBS-non agency |
|
|
12.4 |
|
|
|
— |
|
|
|
12.4 |
|
|
|
— |
|
CMBS |
|
|
165.7 |
|
|
|
— |
|
|
|
165.7 |
|
|
|
— |
|
ABS |
|
|
128.0 |
|
|
|
— |
|
|
|
128.0 |
|
|
|
— |
|
CLO |
|
|
135.6 |
|
|
|
— |
|
|
|
135.6 |
|
|
|
— |
|
Foreign denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Governments |
|
|
152.3 |
|
|
|
— |
|
|
|
152.3 |
|
|
|
— |
|
Credit |
|
|
109.0 |
|
|
|
— |
|
|
|
109.0 |
|
|
|
— |
|
ABS/CMBS |
|
|
22.1 |
|
|
|
— |
|
|
|
22.1 |
|
|
|
— |
|
CLO |
|
|
77.6 |
|
|
|
— |
|
|
|
77.6 |
|
|
|
— |
|
Total fixed maturities |
|
|
2,822.2 |
|
|
|
110.4 |
|
|
|
2,711.8 |
|
|
|
— |
|
Equity securities |
|
|
466.0 |
|
|
|
465.2 |
|
|
|
— |
|
|
|
0.8 |
|
Other investments |
|
|
91.2 |
|
|
|
— |
|
|
|
91.2 |
|
|
|
— |
|
Short-term investments |
|
|
344.8 |
|
|
|
323.8 |
|
|
|
21.0 |
|
|
|
— |
|
|
|
$ |
3,724.2 |
|
|
$ |
899.4 |
|
|
$ |
2,824.0 |
|
|
$ |
0.8 |
|
(a) |
Quoted prices in active markets for identical assets |
(b) |
Significant other observable inputs |
(c) |
Significant unobservable inputs |
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using |
|
|||||||||
(in millions) |
|
December 31, 2014 |
|
|
Level 1 (a) |
|
|
Level 2 (b) |
|
|
Level 3 (c) |
|
||||
Fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Governments |
|
$ |
185.0 |
|
|
$ |
99.2 |
|
|
$ |
85.8 |
|
|
$ |
— |
|
Non-U.S. Governments |
|
|
79.9 |
|
|
|
— |
|
|
|
79.9 |
|
|
|
— |
|
Obligations of states and political subdivisions |
|
|
490.7 |
|
|
|
— |
|
|
|
490.7 |
|
|
|
— |
|
Credit-Financial |
|
|
518.1 |
|
|
|
— |
|
|
|
518.1 |
|
|
|
— |
|
Credit-Industrial |
|
|
499.6 |
|
|
|
— |
|
|
|
499.6 |
|
|
|
— |
|
Credit-Utility |
|
|
142.0 |
|
|
|
— |
|
|
|
142.0 |
|
|
|
— |
|
Structured securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMO/MBS-agency |
|
|
175.3 |
|
|
|
— |
|
|
|
175.3 |
|
|
|
— |
|
CMO/MBS-non agency |
|
|
14.0 |
|
|
|
— |
|
|
|
14.0 |
|
|
|
— |
|
CMBS |
|
|
180.0 |
|
|
|
— |
|
|
|
180.0 |
|
|
|
— |
|
ABS |
|
|
142.6 |
|
|
|
— |
|
|
|
142.6 |
|
|
|
— |
|
CLO |
|
|
78.4 |
|
|
|
— |
|
|
|
78.4 |
|
|
|
— |
|
Foreign denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Governments |
|
|
140.2 |
|
|
|
— |
|
|
|
140.2 |
|
|
|
— |
|
Credit |
|
|
126.0 |
|
|
|
— |
|
|
|
126.0 |
|
|
|
— |
|
ABS/CMBS |
|
|
27.2 |
|
|
|
— |
|
|
|
27.2 |
|
|
|
— |
|
CLO |
|
|
41.7 |
|
|
|
— |
|
|
|
41.7 |
|
|
|
— |
|
Total fixed maturities |
|
|
2,840.7 |
|
|
|
99.2 |
|
|
|
2,741.5 |
|
|
|
— |
|
Equity securities |
|
|
486.3 |
|
|
|
485.4 |
|
|
|
— |
|
|
|
0.9 |
|
Other investments |
|
|
97.3 |
|
|
|
— |
|
|
|
97.3 |
|
|
|
— |
|
Short-term investments |
|
|
275.8 |
|
|
|
273.9 |
|
|
|
1.9 |
|
|
|
— |
|
|
|
$ |
3,700.1 |
|
|
$ |
858.5 |
|
|
$ |
2,840.7 |
|
|
$ |
0.9 |
|
(a) |
Quoted prices in active markets for identical assets |
(b) |
Significant other observable inputs |
(c) |
Significant unobservable inputs |
A reconciliation of the beginning and ending balances for the investments categorized as Level 3 are as follows:
Fair Value Measurements Using Observable Inputs (Level 3)
(in millions) |
|
Equity Securities |
|
|
Total |
|
||
Beginning balance, January 1, 2015 |
|
$ |
0.9 |
|
|
$ |
0.9 |
|
Transfers into Level 3 |
|
|
— |
|
|
|
— |
|
Transfers out of Level 3 |
|
|
— |
|
|
|
— |
|
Total gains or losses (realized/unrealized): |
|
|
|
|
|
|
|
|
Included in net income (loss) |
|
|
— |
|
|
|
— |
|
Included in other comprehensive income (loss) |
|
|
— |
|
|
|
— |
|
Purchases, issuances, sales, and settlements |
|
|
|
|
|
|
|
|
Purchases |
|
|
— |
|
|
|
— |
|
Issuances |
|
|
— |
|
|
|
— |
|
Sales |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
Settlements |
|
|
— |
|
|
|
— |
|
Ending balance, September 30, 2015 |
|
$ |
0.8 |
|
|
$ |
0.8 |
|
Amount of total gains or losses for the year included in net income (loss) attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2015 |
|
$ |
— |
|
|
$ |
— |
|
(in millions) |
|
Equity Securities |
|
|
Other Assets |
|
|
Total |
|
|||
Beginning balance, January 1, 2014 |
|
$ |
1.3 |
|
|
$ |
2.6 |
|
|
$ |
3.9 |
|
Transfers into Level 3 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Transfers out of Level 3 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total gains or losses (realized/unrealized): |
|
|
|
|
|
|
|
|
|
|
|
|
Included in net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Included in other comprehensive income (loss) |
|
|
0.1 |
|
|
|
— |
|
|
|
0.1 |
|
Purchases, issuances, sales, and settlements |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuances |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Sales |
|
|
(0.5 |
) |
|
|
— |
|
|
|
(0.5 |
) |
Settlements |
|
|
— |
|
|
|
(2.6 |
) |
|
|
(2.6 |
) |
Ending balance, December 31, 2014 |
|
$ |
0.9 |
|
|
$ |
— |
|
|
$ |
0.9 |
|
Amount of total gains or losses for the year included in net income (loss) attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2014 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
The following table provides a reconciliation of reserves for losses and loss adjustment expenses (“LAE”):
|
|
For the Nine Months Ended September 30, |
|
|||||
(in millions) |
|
2015 |
|
|
2014 |
|
||
Net reserves beginning of the year |
|
$ |
2,137.1 |
|
|
$ |
2,107.6 |
|
Add: |
|
|
|
|
|
|
|
|
Losses and LAE incurred during current calendar year, net of reinsurance: |
|
|
|
|
|
|
|
|
Current accident year |
|
|
589.6 |
|
|
|
585.9 |
|
Prior accident years |
|
|
(15.3 |
) |
|
|
(26.4 |
) |
Losses and LAE incurred during calendar year, net of reinsurance |
|
|
574.3 |
|
|
|
559.5 |
|
Deduct: |
|
|
|
|
|
|
|
|
Losses and LAE payments made during current calendar year, net of reinsurance: |
|
|
|
|
|
|
|
|
Current accident year |
|
|
105.2 |
|
|
|
115.3 |
|
Prior accident years |
|
|
435.5 |
|
|
|
435.5 |
|
Losses and LAE payments made during current calendar year, net of reinsurance: |
|
|
540.7 |
|
|
|
550.8 |
|
Change in participation interest (1) |
|
|
(1.2 |
) |
|
|
24.7 |
|
Foreign exchange adjustments |
|
|
(27.7 |
) |
|
|
(4.9 |
) |
Net reserves - end of period |
|
|
2,141.8 |
|
|
|
2,136.1 |
|
Add: |
|
|
|
|
|
|
|
|
Reinsurance recoverables on unpaid losses and LAE, end of period |
|
|
962.3 |
|
|
|
926.5 |
|
Gross reserves - end of period |
|
$ |
3,104.1 |
|
|
$ |
3,062.6 |
|
|
A summary of our financial instruments whose carrying value did not equal fair value is shown below:
|
|
September 30, 2015 |
|
|
December 31, 2014 |
|
||||||||||
(in millions) |
|
Carrying Amount |
|
|
Fair Value |
|
|
Carrying Amount |
|
|
Fair Value |
|
||||
Junior subordinated debentures |
|
$ |
172.7 |
|
|
$ |
153.0 |
|
|
$ |
172.7 |
|
|
$ |
155.5 |
|
Senior unsecured fixed rate notes |
|
|
143.8 |
|
|
|
144.6 |
|
|
|
143.8 |
|
|
|
132.3 |
|
Other indebtedness: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating rate loan stock |
|
|
56.8 |
|
|
|
50.3 |
|
|
|
61.3 |
|
|
|
55.2 |
|
Note payable |
|
|
0.6 |
|
|
|
0.6 |
|
|
|
0.7 |
|
|
|
0.6 |
|
|
|
$ |
373.9 |
|
|
$ |
348.5 |
|
|
$ |
378.5 |
|
|
$ |
343.6 |
|
|
A summary of common shares repurchased for the nine months ended September 30, 2015 is shown below:
Repurchase Type |
|
Date Trading Plan Initiated |
|
2015 Purchase Period |
|
Number of Shares Repurchased |
|
|
Average Price of Shares Repurchased |
|
|
Total Cost (in millions) |
|
|
Repurchase Authorization Year |
|||
10b5-1 Trading Plan |
|
12/15/2014 |
|
01/05/2015-02/12/2015 |
|
|
117,482 |
|
|
$ |
53.50 |
|
|
$ |
6.3 |
|
|
2013 |
10b5-1 Trading Plan |
|
03/16/2015 |
|
03/18/2015-05/06/2015 |
|
|
150,050 |
|
|
$ |
49.56 |
|
|
|
7.4 |
|
|
2013 |
Open Market |
|
N/A |
|
01/01/2015-09/30/2015 |
|
|
307,523 |
|
|
$ |
51.83 |
|
|
|
16.0 |
|
|
2013 |
Total |
|
|
|
|
|
|
575,055 |
|
|
$ |
51.58 |
|
|
$ |
29.7 |
|
|
|
|
A summary of changes in accumulated other comprehensive income (loss), net of taxes (where applicable) by component for the nine months ended September 30, 2015 and 2014 is presented below:
(in millions) |
|
Foreign Currency Translation Adjustments |
|
|
Unrealized Holding Gains on Securities |
|
|
Defined Benefit Pension Plans |
|
|
Total |
|
||||
Balance, January 1, 2015 |
|
$ |
(15.6 |
) |
|
$ |
130.7 |
|
|
$ |
(7.0 |
) |
|
$ |
108.1 |
|
Other comprehensive loss before reclassifications |
|
|
(6.6 |
) |
|
|
(75.7 |
) |
|
|
— |
|
|
|
(82.3 |
) |
Amounts reclassified from accumulated other comprehensive loss |
|
|
— |
|
|
|
(2.3 |
) |
|
|
— |
|
|
|
(2.3 |
) |
Net current-period other comprehensive loss |
|
|
(6.6 |
) |
|
|
(78.0 |
) |
|
|
— |
|
|
|
(84.6 |
) |
Balance at September 30, 2015 |
|
$ |
(22.2 |
) |
|
$ |
52.7 |
|
|
$ |
(7.0 |
) |
|
$ |
23.5 |
|
(in millions) |
|
Foreign Currency Translation Adjustments |
|
|
Unrealized Holding Gains on Securities |
|
|
Defined Benefit Pension Plans |
|
|
Total |
|
||||
Balance, January 1, 2014 |
|
$ |
(11.5 |
) |
|
$ |
163.9 |
|
|
$ |
(4.6 |
) |
|
$ |
147.8 |
|
Other comprehensive income before reclassifications |
|
|
(1.9 |
) |
|
|
5.4 |
|
|
|
— |
|
|
|
3.5 |
|
Amounts reclassified from accumulated other comprehensive income |
|
|
— |
|
|
|
(14.8 |
) |
|
|
— |
|
|
|
(14.8 |
) |
Net current-period other comprehensive income |
|
|
(1.9 |
) |
|
|
(9.4 |
) |
|
|
— |
|
|
|
(11.3 |
) |
Balance at September 30, 2014 |
|
$ |
(13.4 |
) |
|
$ |
154.5 |
|
|
$ |
(4.6 |
) |
|
$ |
136.5 |
|
The following tables illustrate the amounts reclassified from accumulated other comprehensive (loss) income shown in the above tables that have been included in our Consolidated Statements of Income:
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Unrealized gains and losses on securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized investment losses |
|
$ |
0.1 |
|
|
$ |
(5.8 |
) |
|
$ |
(6.9 |
) |
|
$ |
(22.0 |
) |
Benefit for income taxes |
|
|
1.7 |
|
|
|
4.1 |
|
|
|
4.6 |
|
|
|
7.2 |
|
Net of taxes |
|
$ |
1.8 |
|
|
$ |
(1.7 |
) |
|
$ |
(2.3 |
) |
|
$ |
(14.8 |
) |
|
The following table presents the calculation of net income per common share on a basic and diluted basis (all balances have been adjusted to reflect the 10% stock dividend):
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions, except number of shares and per share amounts) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Net income |
|
$ |
35.3 |
|
|
$ |
44.7 |
|
|
$ |
122.0 |
|
|
$ |
123.5 |
|
Weighted average common shares outstanding - basic |
|
|
27,916,586 |
|
|
|
28,552,240 |
|
|
|
27,997,638 |
|
|
|
28,824,182 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation awards |
|
|
557,918 |
|
|
|
528,368 |
|
|
|
542,456 |
|
|
|
512,993 |
|
Weighted average common shares outstanding - diluted |
|
|
28,474,504 |
|
|
|
29,080,608 |
|
|
|
28,540,094 |
|
|
|
29,337,175 |
|
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.27 |
|
|
$ |
1.57 |
|
|
$ |
4.36 |
|
|
$ |
4.28 |
|
Diluted |
|
$ |
1.24 |
|
|
$ |
1.54 |
|
|
$ |
4.28 |
|
|
$ |
4.21 |
|
|
Interest paid was as follows:
|
|
For the Nine Months Ended September 30, |
|
|||||
(in millions) |
|
2015 |
|
|
2014 |
|
||
Senior unsecured fixed rate notes |
|
$ |
7.0 |
|
|
$ |
7.0 |
|
Junior subordinated debentures |
|
|
5.3 |
|
|
|
5.8 |
|
Other indebtedness |
|
|
2.0 |
|
|
|
2.3 |
|
Total interest paid |
|
$ |
14.3 |
|
|
$ |
15.1 |
|
|
The following table summarizes the assumptions we used for the nine months ended September 30, 2015 and 2014:
|
|
For the Nine Months Ended September 30, |
|
|||||
|
|
2015 |
|
|
2014 |
|
||
Risk-free rate of return |
|
|
1.44% |
|
|
|
1.77% |
|
Expected dividend yields |
|
|
1.52% |
|
|
|
1.49% |
|
Expected award life (years) |
|
|
4.64 |
|
|
4.67 |
|
|
Expected volatility |
|
|
20.81% |
|
|
|
22.84% |
|
A summary of restricted share activity as of September 30, 2015 and changes during the nine months then ended is as follows:
|
|
Shares |
|
|
Weighted-Average Grant Date Fair Value |
|
||
Outstanding at January 1, 2015 |
|
|
313,716 |
|
|
$ |
31.38 |
|
Granted |
|
|
297,873 |
|
|
$ |
39.21 |
|
Vested and issued |
|
|
(119,295 |
) |
|
$ |
26.83 |
|
Expired or forfeited |
|
|
(8,938 |
) |
|
$ |
41.76 |
|
Outstanding at September 30, 2015 |
|
|
483,356 |
|
|
$ |
37.14 |
|
A summary of stock-settled SARs activity as of September 30, 2015 and changes during the nine months then ended is as follows:
|
|
Shares |
|
|
Weighted-Average Exercise Price |
|
||
Outstanding at January 1, 2015 |
|
|
1,313,726 |
|
|
$ |
28.57 |
|
Granted |
|
|
243,305 |
|
|
$ |
39.43 |
|
Exercised |
|
|
(165,036 |
) |
|
$ |
24.15 |
|
Expired or forfeited |
|
|
(7,231 |
) |
|
$ |
31.68 |
|
Outstanding at September 30, 2015 |
|
|
1,384,764 |
|
|
$ |
30.14 |
|
A summary of cash-settled SARs activity as of September 30, 2015 and changes during the nine months then ended is as follows:
|
|
Shares |
|
|
Weighted-Average Exercise Price |
|
||
Outstanding at January 1, 2015 |
|
|
2,001,451 |
|
|
$ |
32.76 |
|
Granted |
|
|
913,157 |
|
|
$ |
47.48 |
|
Exercised |
|
|
(366,527 |
) |
|
$ |
29.19 |
|
Expired or forfeited |
|
|
(216,354 |
) |
|
$ |
39.40 |
|
Outstanding at September 30, 2015 |
|
|
2,331,727 |
|
|
$ |
38.46 |
|
|
Underwriting, acquisition and insurance expenses were as follows:
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Commissions |
|
$ |
56.5 |
|
|
$ |
59.8 |
|
|
$ |
182.4 |
|
|
$ |
178.0 |
|
General expenses |
|
|
69.6 |
|
|
|
69.0 |
|
|
|
222.2 |
|
|
|
211.9 |
|
Premium taxes, boards and bureaus |
|
|
7.5 |
|
|
|
7.2 |
|
|
|
8.1 |
|
|
|
19.5 |
|
|
|
|
133.6 |
|
|
|
136.0 |
|
|
|
412.7 |
|
|
|
409.4 |
|
Net deferral of policy acquisition costs |
|
|
(0.8 |
) |
|
|
(2.2 |
) |
|
|
(10.8 |
) |
|
|
(10.1 |
) |
Total underwriting, acquisition and insurance expenses |
|
$ |
132.8 |
|
|
$ |
133.8 |
|
|
$ |
401.9 |
|
|
$ |
399.3 |
|
|
Our income tax provision includes the following components:
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Current tax provision |
|
$ |
(11.3 |
) |
|
$ |
(15.0 |
) |
|
$ |
(2.5 |
) |
|
$ |
(10.7 |
) |
Deferred tax (benefit) provision related to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future tax deductions |
|
|
14.1 |
|
|
|
19.7 |
|
|
|
16.7 |
|
|
|
52.9 |
|
Valuation allowance change |
|
|
(1.9 |
) |
|
|
(1.1 |
) |
|
|
(2.9 |
) |
|
|
(30.0 |
) |
Income tax provision |
|
$ |
0.9 |
|
|
$ |
3.6 |
|
|
$ |
11.3 |
|
|
$ |
12.2 |
|
For the three and nine months ended September 30, 2015 and 2014, pre-tax income (loss) attributable to our operations and the operations’ effective tax rates were as follows:
|
|
For the Three Months Ended September 30, |
|
|||||||||||||
(in millions) |
|
2015 |
|
|
2014 |
|
||||||||||
|
|
Pre-Tax Income (Loss) |
|
|
Effective Tax Rate |
|
|
Pre-Tax Income (Loss) |
|
|
Effective Tax Rate |
|
||||
Bermuda |
|
$ |
24.6 |
|
|
|
0.0 |
% |
|
$ |
27.5 |
|
|
|
0.0 |
% |
United States |
|
|
10.5 |
|
|
|
19.6 |
% |
|
|
13.5 |
|
|
|
16.2 |
% |
United Kingdom |
|
|
1.9 |
|
|
|
-58.5 |
% |
|
|
9.2 |
|
|
|
15.4 |
% |
Belgium |
|
|
— |
|
(1) |
|
31.4 |
% |
|
|
(0.1 |
) |
|
|
-7.9 |
% |
Brazil |
|
|
(0.7 |
) |
|
|
0.0 |
% |
|
|
(1.2 |
) |
|
|
0.0 |
% |
United Arab Emirates |
|
|
0.1 |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
Ireland |
|
|
— |
|
(1) |
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
Malta |
|
|
(0.3 |
) |
|
|
0.0 |
% |
|
|
(0.8 |
) |
|
|
0.0 |
% |
Switzerland |
|
|
0.1 |
|
|
|
-20.0 |
% |
|
|
0.2 |
|
|
|
4.8 |
% |
Pre-tax income |
|
$ |
36.2 |
|
|
|
|
|
|
$ |
48.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|||||||||||||
(in millions) |
|
2015 |
|
|
2014 |
|
||||||||||
|
|
Pre-Tax Income (Loss) |
|
|
Effective Tax Rate |
|
|
Pre-Tax Income (Loss) |
|
|
Effective Tax Rate |
|
||||
Bermuda |
|
$ |
68.8 |
|
|
|
0.0 |
% |
|
|
74.3 |
|
|
|
0.0 |
% |
United States |
|
|
59.1 |
|
|
|
22.4 |
% |
|
|
49.2 |
|
|
|
20.9 |
% |
United Kingdom |
|
|
9.1 |
|
|
|
-21.4 |
% |
|
|
11.1 |
|
|
|
17.1 |
% |
Belgium |
|
|
(0.1 |
) |
|
|
-50.5 |
% |
|
|
(0.1 |
) |
|
|
-32.4 |
% |
Brazil |
|
|
(3.7 |
) |
|
|
0.0 |
% |
|
|
3.9 |
|
|
|
0.0 |
% |
United Arab Emirates |
|
|
0.2 |
|
|
|
0.0 |
% |
|
|
(0.9 |
) |
|
|
0.0 |
% |
Ireland |
|
|
(0.1 |
) |
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
Malta |
|
|
— |
|
(1) |
|
0.0 |
% |
|
|
(1.8 |
) |
|
|
0.0 |
% |
Switzerland |
|
|
— |
|
(1) |
|
-21.3 |
% |
|
|
— |
|
(1) |
|
24.2 |
% |
Pre-tax income |
|
$ |
133.3 |
|
|
|
|
|
|
$ |
135.7 |
|
|
|
|
|
(1) |
Pre-tax income for the respective year was less than $0.1 million. |
A reconciliation of the difference between the provision for income taxes and the expected tax provision at the weighted average tax rate is as follows:
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Income tax provision at expected rate |
|
$ |
3.7 |
|
|
$ |
6.1 |
|
|
$ |
21.1 |
|
|
$ |
20.6 |
|
Tax effect of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-exempt interest |
|
|
(1.2 |
) |
|
|
(1.1 |
) |
|
|
(3.1 |
) |
|
|
(3.4 |
) |
Dividends received deduction |
|
|
(0.6 |
) |
|
|
(0.5 |
) |
|
|
(1.8 |
) |
|
|
(1.7 |
) |
Valuation allowance change |
|
|
(1.9 |
) |
|
|
(1.1 |
) |
|
|
(2.9 |
) |
|
|
(30.0 |
) |
Other permanent adjustments, net |
|
|
0.1 |
|
|
|
(0.1 |
) |
|
|
0.3 |
|
|
|
(1.0 |
) |
Adjustment for prior year tax return |
|
|
(0.6 |
) |
|
|
(1.1 |
) |
|
|
(0.6 |
) |
|
|
(1.1 |
) |
Adjustment for annualized rate |
|
|
0.8 |
|
|
|
0.8 |
|
|
|
0.6 |
|
|
|
(0.9 |
) |
United States state tax (benefit) expense |
|
|
— |
|
|
|
— |
|
|
|
(2.5 |
) |
|
|
— |
|
Capital loss carryforward from prior merger |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
29.8 |
|
Other foreign adjustments |
|
|
0.1 |
|
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
Prior period adjustments to deferred |
|
|
— |
|
|
|
0.8 |
|
|
|
— |
|
|
|
(0.3 |
) |
Prior year foreign taxes recovered |
|
|
— |
|
|
|
— |
|
|
|
(1.2 |
) |
|
|
— |
|
Foreign exchange adjustments |
|
|
0.5 |
|
|
|
(0.2 |
) |
|
|
0.9 |
|
|
|
(0.1 |
) |
Foreign withholding taxes |
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
|
|
0.3 |
|
Income tax provision |
|
$ |
0.9 |
|
|
$ |
3.6 |
|
|
$ |
11.3 |
|
|
$ |
12.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) provision - Foreign |
|
$ |
(1.2 |
) |
|
$ |
1.5 |
|
|
$ |
(2.0 |
) |
|
$ |
2.0 |
|
Income tax provision - United States, Federal |
|
|
2.1 |
|
|
|
2.1 |
|
|
|
16.8 |
|
|
|
9.8 |
|
Income tax (benefit) provision - United States, state |
|
|
— |
|
|
|
— |
|
|
|
(3.8 |
) |
|
|
0.1 |
|
Foreign withholding tax - United States |
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
|
|
0.3 |
|
Income tax provision |
|
$ |
0.9 |
|
|
$ |
3.6 |
|
|
$ |
11.3 |
|
|
$ |
12.2 |
|
|
Revenue and income (loss) before income taxes for each segment were as follows:
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions) |
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned premiums |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess and Surplus Lines |
$ |
135.7 |
|
|
$ |
121.2 |
|
|
$ |
389.9 |
|
|
$ |
363.9 |
|
Commercial Specialty |
|
73.3 |
|
|
|
72.7 |
|
|
|
217.6 |
|
|
|
215.5 |
|
International Specialty |
|
37.6 |
|
|
|
38.0 |
|
|
|
113.2 |
|
|
|
112.6 |
|
Syndicate 1200 |
|
99.1 |
|
|
|
104.4 |
|
|
|
305.5 |
|
|
|
305.9 |
|
Run-off Lines |
|
0.3 |
|
|
|
1.3 |
|
|
|
0.4 |
|
|
|
1.5 |
|
Total earned premiums |
|
346.0 |
|
|
|
337.6 |
|
|
|
1,026.6 |
|
|
|
999.4 |
|
Net investment income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess and Surplus Lines |
|
8.8 |
|
|
|
8.9 |
|
|
|
26.3 |
|
|
|
27.2 |
|
Commercial Specialty |
|
4.6 |
|
|
|
4.5 |
|
|
|
13.8 |
|
|
|
13.8 |
|
International Specialty |
|
2.9 |
|
|
|
2.3 |
|
|
|
8.8 |
|
|
|
6.1 |
|
Syndicate 1200 |
|
2.3 |
|
|
|
2.1 |
|
|
|
6.9 |
|
|
|
7.9 |
|
Run-off Lines |
|
2.1 |
|
|
|
2.4 |
|
|
|
6.2 |
|
|
|
7.2 |
|
Corporate and Other |
|
0.6 |
|
|
|
0.6 |
|
|
|
1.9 |
|
|
|
2.5 |
|
Total net investment income |
|
21.3 |
|
|
|
20.8 |
|
|
|
63.9 |
|
|
|
64.7 |
|
Fee and other income (expense), net |
|
1.0 |
|
|
|
1.6 |
|
|
|
(0.1 |
) |
|
|
0.1 |
|
Net realized investment and other gains |
|
3.7 |
|
|
|
12.9 |
|
|
|
25.0 |
|
|
|
42.5 |
|
Total revenue |
$ |
372.0 |
|
|
$ |
372.9 |
|
|
$ |
1,115.4 |
|
|
$ |
1,106.7 |
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions) |
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Income (loss) before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess and Surplus Lines |
$ |
26.5 |
|
|
$ |
27.6 |
|
|
$ |
75.4 |
|
|
$ |
75.9 |
|
Commercial Specialty |
|
12.4 |
|
|
|
8.0 |
|
|
|
20.8 |
|
|
|
9.2 |
|
International Specialty |
|
3.5 |
|
|
|
4.0 |
|
|
|
21.4 |
|
|
|
16.4 |
|
Syndicate 1200 |
|
6.9 |
|
|
|
8.8 |
|
|
|
28.0 |
|
|
|
34.7 |
|
Run-off Lines |
|
(7.1 |
) |
|
|
(8.3 |
) |
|
|
(7.0 |
) |
|
|
(17.6 |
) |
Total segment income before taxes |
|
42.2 |
|
|
|
40.1 |
|
|
|
138.6 |
|
|
|
118.6 |
|
Corporate and Other |
|
(9.7 |
) |
|
|
(4.7 |
) |
|
|
(30.3 |
) |
|
|
(25.4 |
) |
Net realized investment and other gains |
|
3.7 |
|
|
|
12.9 |
|
|
|
25.0 |
|
|
|
42.5 |
|
Total income before income taxes |
$ |
36.2 |
|
|
$ |
48.3 |
|
|
$ |
133.3 |
|
|
$ |
135.7 |
|
The table below presents earned premiums by geographic location for the three and nine months ended September 30, 2015 and 2014. For this disclosure, we determine geographic location by the country of domicile of our subsidiaries that underwrite the business and not by the location of insureds or reinsureds from whom the business was generated.
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
(in millions) |
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Bermuda |
$ |
26.8 |
|
|
$ |
27.0 |
|
|
$ |
76.8 |
|
|
$ |
75.7 |
|
Brazil |
|
10.3 |
|
|
|
11.0 |
|
|
|
34.7 |
|
|
|
35.4 |
|
Malta |
|
0.5 |
|
|
|
0.5 |
|
|
|
1.4 |
|
|
|
1.6 |
|
United Kingdom |
|
99.1 |
|
|
|
104.4 |
|
|
|
305.5 |
|
|
|
305.9 |
|
United States |
|
209.3 |
|
|
|
194.7 |
|
|
|
608.2 |
|
|
|
580.8 |
|
Total earned premiums |
$ |
346.0 |
|
|
$ |
337.6 |
|
|
$ |
1,026.6 |
|
|
$ |
999.4 |
|
The following table represents identifiable assets:
|
|
September 30, |
|
|
December 31, |
|
||
(in millions) |
|
2015 |
|
|
2014 |
|
||
Excess and Surplus Lines |
|
$ |
2,461.4 |
|
|
$ |
2,350.7 |
|
Commercial Specialty |
|
|
1,387.9 |
|
|
|
1,358.5 |
|
International Specialty |
|
|
801.0 |
|
|
|
776.8 |
|
Syndicate 1200 |
|
|
1,353.1 |
|
|
|
1,258.5 |
|
Run-off Lines |
|
|
557.7 |
|
|
|
552.8 |
|
Corporate and Other |
|
|
66.4 |
|
|
|
59.0 |
|
Total |
|
$ |
6,627.5 |
|
|
$ |
6,356.3 |
|
|
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2015
(in millions)
|
|
Argo Group International Holdings, Ltd (Parent Guarantor) |
|
|
Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer) |
|
|
Other Subsidiaries and Eliminations (1) |
|
|
Consolidating Adjustments (2) |
|
|
Total |
|
|||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
$ |
6.4 |
|
|
$ |
2,830.2 |
|
|
$ |
1,296.4 |
|
|
$ |
— |
|
|
$ |
4,133.0 |
|
Cash |
|
|
— |
|
|
|
84.8 |
|
|
|
11.4 |
|
|
|
— |
|
|
|
96.2 |
|
Accrued investment income |
|
|
— |
|
|
|
15.9 |
|
|
|
5.1 |
|
|
|
— |
|
|
|
21.0 |
|
Premiums receivable |
|
|
— |
|
|
|
166.7 |
|
|
|
270.7 |
|
|
|
— |
|
|
|
437.4 |
|
Reinsurance recoverables |
|
|
— |
|
|
|
1,195.4 |
|
|
|
(128.1 |
) |
|
|
— |
|
|
|
1,067.3 |
|
Goodwill and other intangible assets, net |
|
|
— |
|
|
|
130.0 |
|
|
|
96.6 |
|
|
|
— |
|
|
|
226.6 |
|
Current income taxes receivable, net |
|
|
— |
|
|
|
12.3 |
|
|
|
4.8 |
|
|
|
— |
|
|
|
17.1 |
|
Deferred acquisition costs, net |
|
|
— |
|
|
|
61.8 |
|
|
|
79.6 |
|
|
|
— |
|
|
|
141.4 |
|
Ceded unearned premiums |
|
|
— |
|
|
|
119.8 |
|
|
|
142.7 |
|
|
|
— |
|
|
|
262.5 |
|
Other assets |
|
|
9.7 |
|
|
|
155.3 |
|
|
|
66.4 |
|
|
|
(6.4 |
) |
|
|
225.0 |
|
Due (to) from affiliates |
|
|
(52.5 |
) |
|
|
1.5 |
|
|
|
(1.5 |
) |
|
|
52.5 |
|
|
|
— |
|
Intercompany note receivable |
|
|
— |
|
|
|
41.7 |
|
|
|
(41.7 |
) |
|
|
— |
|
|
|
— |
|
Investments in subsidiaries |
|
|
1,722.3 |
|
|
|
— |
|
|
|
— |
|
|
|
(1,722.3 |
) |
|
|
— |
|
Total assets |
|
$ |
1,685.9 |
|
|
|
4,815.4 |
|
|
|
1,802.4 |
|
|
$ |
(1,676.2 |
) |
|
$ |
6,627.5 |
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves for losses and loss adjustment expenses |
|
$ |
— |
|
|
|
2,177.9 |
|
|
|
926.2 |
|
|
$ |
— |
|
|
$ |
3,104.1 |
|
Unearned premiums |
|
|
— |
|
|
|
506.9 |
|
|
|
425.8 |
|
|
|
— |
|
|
|
932.7 |
|
Funds held and ceded reinsurance payable, net |
|
|
— |
|
|
|
695.5 |
|
|
|
(328.6 |
) |
|
|
— |
|
|
|
366.9 |
|
Long-term debt |
|
|
28.3 |
|
|
|
288.7 |
|
|
|
56.9 |
|
|
|
— |
|
|
|
373.9 |
|
Deferred tax liabilities, net |
|
|
— |
|
|
|
24.0 |
|
|
|
9.4 |
|
|
|
— |
|
|
|
33.4 |
|
Accrued underwriting expenses and other liabilities |
|
|
16.1 |
|
|
|
98.4 |
|
|
|
60.5 |
|
|
|
— |
|
|
|
175.0 |
|
Total liabilities |
|
|
44.4 |
|
|
|
3,791.4 |
|
|
|
1,150.2 |
|
|
|
— |
|
|
|
4,986.0 |
|
Total shareholders' equity |
|
|
1,641.5 |
|
|
|
1,024.0 |
|
|
|
652.2 |
|
|
|
(1,676.2 |
) |
|
|
1,641.5 |
|
Total liabilities and shareholders' equity |
|
$ |
1,685.9 |
|
|
$ |
4,815.4 |
|
|
$ |
1,802.4 |
|
|
$ |
(1,676.2 |
) |
|
$ |
6,627.5 |
|
(1) |
Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations. |
(2) |
Includes all Argo Group parent company eliminations. |
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2014
(in millions)
|
|
Argo Group International Holdings, Ltd (Parent Guarantor) |
|
|
Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer) |
|
|
Other Subsidiaries and Eliminations (1) |
|
|
Consolidating Adjustments (2) |
|
|
Total |
|
|||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
$ |
0.7 |
|
|
$ |
2,841.5 |
|
|
$ |
1,255.7 |
|
|
$ |
— |
|
|
$ |
4,097.9 |
|
Cash |
|
|
— |
|
|
|
49.3 |
|
|
|
31.7 |
|
|
|
— |
|
|
|
81.0 |
|
Accrued investment income |
|
|
— |
|
|
|
17.8 |
|
|
|
4.3 |
|
|
|
— |
|
|
|
22.1 |
|
Premiums receivable |
|
|
— |
|
|
|
154.6 |
|
|
|
199.0 |
|
|
|
— |
|
|
|
353.6 |
|
Reinsurance recoverables |
|
|
— |
|
|
|
1,173.6 |
|
|
|
(176.4 |
) |
|
|
— |
|
|
|
997.2 |
|
Goodwill and other intangible assets, net |
|
|
— |
|
|
|
131.7 |
|
|
|
99.1 |
|
|
|
— |
|
|
|
230.8 |
|
Current income taxes receivable, net |
|
|
— |
|
|
|
10.1 |
|
|
|
4.8 |
|
|
|
— |
|
|
|
14.9 |
|
Deferred acquisition costs, net |
|
|
— |
|
|
|
58.0 |
|
|
|
66.6 |
|
|
|
— |
|
|
|
124.6 |
|
Ceded unearned premiums |
|
|
— |
|
|
|
98.5 |
|
|
|
109.1 |
|
|
|
— |
|
|
|
207.6 |
|
Other assets |
|
|
9.6 |
|
|
|
174.1 |
|
|
|
67.9 |
|
|
|
(25.0 |
) |
|
|
226.6 |
|
Due from (to) affiliates |
|
|
2.9 |
|
|
|
(19.8 |
) |
|
|
19.8 |
|
|
|
(2.9 |
) |
|
|
— |
|
Intercompany note receivable |
|
|
— |
|
|
|
72.0 |
|
|
|
(72.0 |
) |
|
|
— |
|
|
|
— |
|
Investments in subsidiaries |
|
|
1,698.0 |
|
|
|
— |
|
|
|
— |
|
|
|
(1,698.0 |
) |
|
|
— |
|
Total assets |
|
$ |
1,711.2 |
|
|
$ |
4,761.4 |
|
|
$ |
1,609.6 |
|
|
$ |
(1,725.9 |
) |
|
$ |
6,356.3 |
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves for losses and loss adjustment expenses |
|
$ |
— |
|
|
$ |
2,136.4 |
|
|
$ |
906.0 |
|
|
$ |
— |
|
|
$ |
3,042.4 |
|
Unearned premiums |
|
|
— |
|
|
|
448.9 |
|
|
|
368.3 |
|
|
|
— |
|
|
|
817.2 |
|
Funds held and ceded reinsurance payable, net |
|
|
— |
|
|
|
675.1 |
|
|
|
(441.3 |
) |
|
|
— |
|
|
|
233.8 |
|
Long-term debt |
|
|
49.0 |
|
|
|
288.7 |
|
|
|
61.4 |
|
|
|
(20.6 |
) |
|
|
378.5 |
|
Deferred tax liabilities, net |
|
|
— |
|
|
|
41.2 |
|
|
|
11.8 |
|
|
|
— |
|
|
|
53.0 |
|
Accrued underwriting expenses and other liabilities |
|
|
15.5 |
|
|
|
104.2 |
|
|
|
65.0 |
|
|
|
— |
|
|
|
184.7 |
|
Total liabilities |
|
|
64.5 |
|
|
|
3,694.5 |
|
|
|
971.2 |
|
|
|
(20.6 |
) |
|
|
4,709.6 |
|
Total shareholders' equity |
|
|
1,646.7 |
|
|
|
1,066.9 |
|
|
|
638.4 |
|
|
|
(1,705.3 |
) |
|
|
1,646.7 |
|
Total liabilities and shareholders' equity |
|
$ |
1,711.2 |
|
|
$ |
4,761.4 |
|
|
$ |
1,609.6 |
|
|
$ |
(1,725.9 |
) |
|
$ |
6,356.3 |
|
(1) |
Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations. |
(2) |
Includes all Argo Group parent company eliminations. |
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015
(in millions)
|
|
Argo Group International Holdings, Ltd (Parent Guarantor) |
|
|
Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer) |
|
|
Other Subsidiaries and Eliminations (1) |
|
|
Consolidating Adjustments (2) |
|
|
Total |
|
|||||
Premiums and other revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned premiums |
|
$ |
— |
|
|
$ |
122.1 |
|
|
$ |
223.9 |
|
|
$ |
— |
|
|
$ |
346.0 |
|
Net investment income |
|
|
(0.2 |
) |
|
|
14.1 |
|
|
|
7.6 |
|
|
|
(0.2 |
) |
|
|
21.3 |
|
Fee and other income (expense), net |
|
|
— |
|
|
|
— |
|
|
|
1.0 |
|
|
|
— |
|
|
|
1.0 |
|
Net realized investment and other gains |
|
|
— |
|
|
|
1.4 |
|
|
|
2.3 |
|
|
|
— |
|
|
|
3.7 |
|
Total revenue |
|
|
(0.2 |
) |
|
|
137.6 |
|
|
|
234.8 |
|
|
|
(0.2 |
) |
|
|
372.0 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
|
|
— |
|
|
|
75.4 |
|
|
|
124.6 |
|
|
|
— |
|
|
|
200.0 |
|
Underwriting, acquisition and insurance expenses |
|
|
4.9 |
|
|
|
48.0 |
|
|
|
79.9 |
|
|
|
— |
|
|
|
132.8 |
|
Interest expense |
|
|
0.5 |
|
|
|
3.8 |
|
|
|
0.7 |
|
|
|
(0.2 |
) |
|
|
4.8 |
|
Foreign currency exchange gain |
|
|
— |
|
|
|
0.1 |
|
|
|
(1.9 |
) |
|
|
— |
|
|
|
(1.8 |
) |
Total expenses |
|
|
5.4 |
|
|
|
127.3 |
|
|
|
203.3 |
|
|
|
(0.2 |
) |
|
|
335.8 |
|
Income before income taxes |
|
|
(5.6 |
) |
|
|
10.3 |
|
|
|
31.5 |
|
|
|
— |
|
|
|
36.2 |
|
Provision for income taxes |
|
|
— |
|
|
|
2.1 |
|
|
|
(1.2 |
) |
|
|
— |
|
|
|
0.9 |
|
Net income before equity in earnings of subsidiaries |
|
|
(5.6 |
) |
|
|
8.2 |
|
|
|
32.7 |
|
|
|
— |
|
|
|
35.3 |
|
Equity in undistributed earnings of subsidiaries |
|
|
40.9 |
|
|
|
— |
|
|
|
— |
|
|
|
(40.9 |
) |
|
|
— |
|
Net income |
|
$ |
35.3 |
|
|
$ |
8.2 |
|
|
$ |
32.7 |
|
|
$ |
(40.9 |
) |
|
$ |
35.3 |
|
(1) |
Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations. |
(2) |
Includes all Argo Group parent company eliminations. |
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2014
(in millions)
|
|
Argo Group International Holdings, Ltd (Parent Guarantor) |
|
|
Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer) |
|
|
Other Subsidiaries and Eliminations (1) |
|
|
Consolidating Adjustments (2) |
|
|
Total |
|
|||||
Premiums and other revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned premiums |
|
$ |
— |
|
|
$ |
114.2 |
|
|
$ |
223.4 |
|
|
$ |
— |
|
|
$ |
337.6 |
|
Net investment income |
|
|
(0.1 |
) |
|
|
13.6 |
|
|
|
7.3 |
|
|
|
— |
|
|
|
20.8 |
|
Fee and other income (expense), net |
|
|
— |
|
|
|
1.5 |
|
|
|
0.1 |
|
|
|
— |
|
|
|
1.6 |
|
Net realized investment and other gains |
|
|
— |
|
|
|
9.2 |
|
|
|
3.7 |
|
|
|
— |
|
|
|
12.9 |
|
Total revenue |
|
|
(0.1 |
) |
|
|
138.5 |
|
|
|
234.5 |
|
|
|
— |
|
|
|
372.9 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
|
|
— |
|
|
|
69.9 |
|
|
|
122.0 |
|
|
|
— |
|
|
|
191.9 |
|
Underwriting, acquisition and insurance expenses |
|
|
2.3 |
|
|
|
51.6 |
|
|
|
79.9 |
|
|
|
— |
|
|
|
133.8 |
|
Interest expense |
|
|
0.7 |
|
|
|
3.8 |
|
|
|
0.6 |
|
|
|
(0.2 |
) |
|
|
4.9 |
|
Foreign currency exchange gain |
|
|
— |
|
|
|
0.3 |
|
|
|
(6.3 |
) |
|
|
— |
|
|
|
(6.0 |
) |
Total expenses |
|
|
3.0 |
|
|
|
125.6 |
|
|
|
196.2 |
|
|
|
(0.2 |
) |
|
|
324.6 |
|
Income before income taxes |
|
|
(3.1 |
) |
|
|
12.9 |
|
|
|
38.3 |
|
|
|
0.2 |
|
|
|
48.3 |
|
Provision for income taxes |
|
|
— |
|
|
|
2.1 |
|
|
|
1.5 |
|
|
|
— |
|
|
|
3.6 |
|
Net income before equity in earnings of subsidiaries |
|
|
(3.1 |
) |
|
|
10.8 |
|
|
|
36.8 |
|
|
|
0.2 |
|
|
|
44.7 |
|
Equity in undistributed earnings of subsidiaries |
|
|
47.9 |
|
|
|
— |
|
|
|
— |
|
|
|
(47.9 |
) |
|
|
— |
|
Net income |
|
$ |
44.8 |
|
|
$ |
10.8 |
|
|
$ |
36.8 |
|
|
$ |
(47.7 |
) |
|
$ |
44.7 |
|
(1) |
Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations. |
(2) |
Includes all Argo Group parent company eliminations. |
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
(in millions)
|
|
Argo Group International Holdings, Ltd (Parent Guarantor) |
|
|
Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer) |
|
|
Other Subsidiaries and Eliminations (1) |
|
|
Consolidating Adjustments (2) |
|
|
Total |
|
|||||
Premiums and other revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned premiums |
|
$ |
— |
|
|
$ |
376.0 |
|
|
$ |
650.6 |
|
|
$ |
— |
|
|
$ |
1,026.6 |
|
Net investment income |
|
|
(0.7 |
) |
|
|
42.6 |
|
|
|
22.2 |
|
|
|
(0.2 |
) |
|
|
63.9 |
|
Fee and other income (expense), net |
|
|
— |
|
|
|
(2.4 |
) |
|
|
2.3 |
|
|
|
— |
|
|
|
(0.1 |
) |
Net realized investment and other gains |
|
|
2.0 |
|
|
|
24.7 |
|
|
|
0.3 |
|
|
|
(2.0 |
) |
|
|
25.0 |
|
Total revenue |
|
|
1.3 |
|
|
|
440.9 |
|
|
|
675.4 |
|
|
|
(2.2 |
) |
|
|
1,115.4 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
|
|
— |
|
|
|
220.0 |
|
|
|
354.3 |
|
|
|
— |
|
|
|
574.3 |
|
Underwriting, acquisition and insurance expenses |
|
|
14.4 |
|
|
|
149.5 |
|
|
|
238.0 |
|
|
|
— |
|
|
|
401.9 |
|
Interest expense |
|
|
1.2 |
|
|
|
11.4 |
|
|
|
1.9 |
|
|
|
(0.2 |
) |
|
|
14.3 |
|
Foreign currency exchange gain |
|
|
— |
|
|
|
1.0 |
|
|
|
(9.4 |
) |
|
|
— |
|
|
|
(8.4 |
) |
Total expenses |
|
|
15.6 |
|
|
|
381.9 |
|
|
|
584.8 |
|
|
|
(0.2 |
) |
|
|
982.1 |
|
Income before income taxes |
|
|
(14.3 |
) |
|
|
59.0 |
|
|
|
90.6 |
|
|
|
(2.0 |
) |
|
|
133.3 |
|
Provision for income taxes |
|
|
— |
|
|
|
13.3 |
|
|
|
(2.0 |
) |
|
|
— |
|
|
|
11.3 |
|
Net income before equity in earnings of subsidiaries |
|
|
(14.3 |
) |
|
|
45.7 |
|
|
|
92.6 |
|
|
|
(2.0 |
) |
|
|
122.0 |
|
Equity in undistributed earnings of subsidiaries |
|
|
136.3 |
|
|
|
— |
|
|
|
— |
|
|
|
(136.3 |
) |
|
|
— |
|
Net income |
|
$ |
122.0 |
|
|
$ |
45.7 |
|
|
$ |
92.6 |
|
|
$ |
(138.3 |
) |
|
$ |
122.0 |
|
(1) |
Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations. |
(2) |
Includes all Argo Group parent company eliminations. |
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014
(in millions)
|
|
Argo Group International Holdings, Ltd (Parent Guarantor) |
|
|
Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer) |
|
|
Other Subsidiaries and Eliminations (1) |
|
|
Consolidating Adjustments (2) |
|
|
Total |
|
|||||
Premiums and other revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned premiums |
|
$ |
— |
|
|
$ |
343.7 |
|
|
$ |
655.7 |
|
|
$ |
— |
|
|
$ |
999.4 |
|
Net investment income |
|
|
(0.3 |
) |
|
|
42.4 |
|
|
|
22.6 |
|
|
|
— |
|
|
|
64.7 |
|
Fee and other (expense) income, net |
|
|
— |
|
|
|
(1.5 |
) |
|
|
1.6 |
|
|
|
— |
|
|
|
0.1 |
|
Net realized investment and other gains |
|
|
— |
|
|
|
34.6 |
|
|
|
7.9 |
|
|
|
— |
|
|
|
42.5 |
|
Total revenue |
|
|
(0.3 |
) |
|
|
419.2 |
|
|
|
687.8 |
|
|
|
— |
|
|
|
1,106.7 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
|
|
— |
|
|
|
211.2 |
|
|
|
348.3 |
|
|
|
— |
|
|
|
559.5 |
|
Underwriting, acquisition and insurance expenses |
|
|
12.5 |
|
|
|
147.9 |
|
|
|
238.9 |
|
|
|
— |
|
|
|
399.3 |
|
Interest expense |
|
|
1.8 |
|
|
|
11.4 |
|
|
|
2.1 |
|
|
|
(0.3 |
) |
|
|
15.0 |
|
Foreign currency exchange gain |
|
|
— |
|
|
|
0.1 |
|
|
|
(2.9 |
) |
|
|
— |
|
|
|
(2.8 |
) |
Total expenses |
|
|
14.3 |
|
|
|
370.6 |
|
|
|
586.4 |
|
|
|
(0.3 |
) |
|
|
971.0 |
|
Income before income taxes |
|
|
(14.6 |
) |
|
|
48.6 |
|
|
|
101.4 |
|
|
|
0.3 |
|
|
|
135.7 |
|
Provision for income taxes |
|
|
— |
|
|
|
10.2 |
|
|
|
2.0 |
|
|
|
— |
|
|
|
12.2 |
|
Net income before equity in earnings of subsidiaries |
|
|
(14.6 |
) |
|
|
38.4 |
|
|
|
99.4 |
|
|
|
0.3 |
|
|
|
123.5 |
|
Equity in undistributed earnings of subsidiaries |
|
|
138.1 |
|
|
|
— |
|
|
|
— |
|
|
|
(138.1 |
) |
|
|
— |
|
Net income |
|
$ |
123.5 |
|
|
$ |
38.4 |
|
|
$ |
99.4 |
|
|
$ |
(137.8 |
) |
|
$ |
123.5 |
|
(1) |
Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations. |
(2) |
Includes all Argo Group parent company eliminations. |
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
(in millions)
|
|
Argo Group International Holdings, Ltd (Parent Guarantor) |
|
|
Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer) |
|
|
Other Subsidiaries and Eliminations (1) |
|
|
Consolidating Adjustments (2) |
|
|
Total |
|
|||||
Net cash flows from operating activities |
|
$ |
16.5 |
|
|
$ |
130.6 |
|
|
$ |
88.7 |
|
|
$ |
— |
|
|
$ |
235.8 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of investments |
|
|
— |
|
|
|
524.5 |
|
|
|
204.3 |
|
|
|
— |
|
|
|
728.8 |
|
Maturities and mandatory calls of fixed maturity investments |
|
|
— |
|
|
|
509.5 |
|
|
|
127.9 |
|
|
|
— |
|
|
|
637.4 |
|
Purchases of investments |
|
|
— |
|
|
|
(1,073.2 |
) |
|
|
(395.3 |
) |
|
|
— |
|
|
|
(1,468.5 |
) |
Change in short-term investments and foreign regulatory deposits |
|
|
1.3 |
|
|
|
(34.5 |
) |
|
|
(29.2 |
) |
|
|
— |
|
|
|
(62.4 |
) |
Settlements of foreign currency exchange forward contracts |
|
|
1.5 |
|
|
|
— |
|
|
|
(8.2 |
) |
|
|
— |
|
|
|
(6.7 |
) |
Issuance of intercompany note, net |
|
|
— |
|
|
|
15.0 |
|
|
|
(15.0 |
) |
|
|
— |
|
|
|
— |
|
Purchases of fixed assets and other, net |
|
|
(3.8 |
) |
|
|
(7.3 |
) |
|
|
6.5 |
|
|
|
— |
|
|
|
(4.6 |
) |
Cash used by investing activities |
|
|
(1.0 |
) |
|
|
(66.0 |
) |
|
|
(109.0 |
) |
|
|
— |
|
|
|
(176.0 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under intercompany note, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Activity under stock incentive plans |
|
|
1.6 |
|
|
|
— |
|
|
|
(0.1 |
) |
|
|
— |
|
|
|
1.5 |
|
Repurchase of Company's common shares |
|
|
— |
|
|
|
(29.7 |
) |
|
|
— |
|
|
|
— |
|
|
|
(29.7 |
) |
Excess tax expense from share-based payment arrangements |
|
|
— |
|
|
|
0.6 |
|
|
|
— |
|
|
|
— |
|
|
|
0.6 |
|
Payment of cash dividend to common shareholders |
|
|
(17.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(17.1 |
) |
Cash used by financing activities |
|
|
(15.5 |
) |
|
|
(29.1 |
) |
|
|
(0.1 |
) |
|
|
— |
|
|
|
(44.7 |
) |
Effect of exchange rate changes on cash |
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
0.1 |
|
Change in cash |
|
|
— |
|
|
|
35.5 |
|
|
|
(20.3 |
) |
|
|
— |
|
|
|
15.2 |
|
Cash, beginning of the period |
|
|
— |
|
|
|
49.3 |
|
|
|
31.7 |
|
|
|
— |
|
|
|
81.0 |
|
Cash, end of period |
|
$ |
— |
|
|
$ |
84.8 |
|
|
$ |
11.4 |
|
|
$ |
— |
|
|
$ |
96.2 |
|
(1) |
Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations. |
(2) |
Includes all Argo Group parent company eliminations. |
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014
(in millions)
|
|
Argo Group International Holdings, Ltd (Parent Guarantor) |
|
|
Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer) |
|
|
Other Subsidiaries and Eliminations (1) |
|
|
Consolidating Adjustments (2) |
|
|
Total |
|
|||||
Net cash flows (used by) from operating activities |
|
$ |
(16.5 |
) |
|
$ |
11.8 |
|
|
$ |
70.0 |
|
|
$ |
6.4 |
|
|
$ |
71.7 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of investments |
|
|
— |
|
|
|
609.2 |
|
|
|
366.9 |
|
|
|
— |
|
|
|
976.1 |
|
Maturities and mandatory calls of fixed maturity investments |
|
|
— |
|
|
|
148.0 |
|
|
|
95.6 |
|
|
|
— |
|
|
|
243.6 |
|
Purchases of investments |
|
|
— |
|
|
|
(773.1 |
) |
|
|
(491.7 |
) |
|
|
— |
|
|
|
(1,264.8 |
) |
Change in short-term investments and foreign regulatory deposits |
|
|
0.1 |
|
|
|
(12.5 |
) |
|
|
18.4 |
|
|
|
— |
|
|
|
6.0 |
|
Settlements of foreign currency exchange forward contracts |
|
|
(0.5 |
) |
|
|
— |
|
|
|
1.1 |
|
|
|
— |
|
|
|
0.6 |
|
Issuance of intercompany note, net |
|
|
— |
|
|
|
14.5 |
|
|
|
(48.5 |
) |
|
|
34.0 |
|
|
|
— |
|
Purchases of fixed assets and other, net |
|
|
(7.0 |
) |
|
|
(20.1 |
) |
|
|
(14.7 |
) |
|
|
(6.4 |
) |
|
|
(48.2 |
) |
Cash (used) provided by investing activities |
|
|
(7.4 |
) |
|
|
(34.0 |
) |
|
|
(72.9 |
) |
|
|
27.6 |
|
|
|
(86.7 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under intercompany note, net |
|
|
34.0 |
|
|
|
— |
|
|
|
— |
|
|
|
(34.0 |
) |
|
|
— |
|
Activity under stock incentive plans |
|
|
3.3 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3.3 |
|
Redemption of trust preferred securities, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(18.0 |
) |
|
|
(18.0 |
) |
Payment on note payable |
|
|
— |
|
|
|
(0.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(0.1 |
) |
Repurchase of Company's common shares |
|
|
— |
|
|
|
(41 |
) |
|
|
— |
|
|
|
— |
|
|
|
(40.9 |
) |
Excess tax expense from share-based payment arrangements |
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
Payment of cash dividend to common shareholders |
|
|
(13.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(13.4 |
) |
Cash provided (used) by financing activities |
|
|
23.9 |
|
|
|
(40.9 |
) |
|
|
— |
|
|
|
(52.0 |
) |
|
|
(69.0 |
) |
Effect of exchange rate changes on cash |
|
|
— |
|
|
|
- |
|
|
|
(0.3 |
) |
|
|
— |
|
|
|
(0.3 |
) |
Change in cash |
|
|
— |
|
|
|
(63.1 |
) |
|
|
(3.2 |
) |
|
|
(18.0 |
) |
|
|
(84.3 |
) |
Cash, beginning of period |
|
|
— |
|
|
|
132.1 |
|
|
|
25.3 |
|
|
|
— |
|
|
|
157.4 |
|
Cash, end of period |
|
$ |
— |
|
|
$ |
69.0 |
|
|
$ |
22.1 |
|
|
$ |
(18.0 |
) |
|
$ |
73.1 |
|
(1) |
Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations. |
(2) |
Includes all Argo Group parent company eliminations. |
|
|
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