Argo Group International Holdings, Ltd. (Form: 8-K, Received: 05/01/2017 09:30:30)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 1, 2017

Argo Group International Holdings, Ltd.

(Exact name of registrant as specified in its charter)

Bermuda

1-15259

98-0214719

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(I.R.S. Employer

Identification No.)

110 Pitts Bay Road

Pembroke HM 08

Bermuda

P.O. Box HM 1282

Hamilton HM FX

Bermuda

(Address, Including Zip Code,

of Principal Executive Offices)

(Mailing Address)

Registrant’s telephone number, including area code: (441) 296-5858

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

ITEM 7.01. REGULATION FD DISCLOSURE.

Attached hereto as Exhibit 99.1 and incorporated by reference herein is a press release of Argo Group International Holdings, Ltd. (“Argo Group”) dated May 1, 2017, announcing that beginning with the publication of Argo Group’s first-quarter earnings report on Wednesday, May 3, the company will revise the presentation of its financial results to reflect its new operating segments. See Exhibit 99.1 for, among other things, more details about the new segment structure and certain recast segment financial results and information.

Note: The information in this report and Exhibit 99.1 attached hereto are furnished pursuant to Item 7.01 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section. This report will not be deemed an admission as to the materiality of any information in the report that is required to be disclosed solely by Regulation FD.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(d)

Exhibits:

99.1	Argo Group International Holdings, Ltd. Press Release

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

Dated: May 1, 2017	By:	/s/ Jay S. Bullock
		Name: Jay S. Bullock
		Title: Executive Vice President and Chief Financial Officer

Exhibit 99.1

LOGO

Contact:

Susan Spivak Bernstein

Senior Vice President, Investor Relations

212.607.8835

Argo Group Announces Financial Reporting Change

H AMILTON, Bermuda (May 1 , 2017) – Argo Group International Holdings, Ltd. (NASDAQ: AGII), an international underwriter of specialty insurance and reinsurance products, announced today it will make a change to its reporting of financial results aligned with two reportable segments – U.S. Operations and International Operations – rather than the previously reported four segments, representing a simplification of its former operational framework.

“This is an important step better reflecting the way we are managing our businesses and thinking about our operating platforms,” said Argo Group CEO Mark E. Watson III. “We achieved important enhancements last year with the addition of Jose A. Hernandez to lead our international business and the acquisition of Ariel Re, which closed earlier this year. These recent additions combined with the consolidation of our U.S. Operations under the leadership of Kevin J. Rehnberg, allows us to make this change. With these additions and operational changes, we are better positioned as a global underwriter of specialty insurance and reinsurance products.”

The reporting changes are effective with first quarter 2017 earnings. The U.S. Operations will include the Excess & Surplus Lines and Commercial Specialty businesses. International Operations will include Syndicate 1200, International Specialty and the newly acquired Ariel Re business.

To allow investors to view the new reporting segments structure prior to Argo Group’s upcoming earnings report, scheduled for release after the close of markets on Wednesday, May 3, 2017, certain historical information is attached and presented including segment information based on the new framework. The attached historical information includes (1) the recasting of previously issued segment-related financial information to reflect the new framework and (2) certain other historical financial information that is unchanged from previously reported financial information and included herein only for purposes of context. The attached financial information does not represent a restatement of previously issued financial statements and does not affect our consolidated financial statements for any of the previously reported periods.

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ABOUT ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

Argo Group International Holdings, Ltd. (NASDAQ: AGII) is an international underwriter of specialty insurance and reinsurance products in the property and casualty market. Argo Group offers a full line of products and services designed to meet the unique coverage and claims handling needs of businesses in two primary segments: U.S. Operations and International Operations. Argo Group’s insurance subsidiaries are A. M. Best-rated ‘A’ (Excellent) (third highest rating out of 16 rating classifications) with a stable outlook, and Argo’s U.S. insurance subsidiaries are Standard and Poor’s-rated ‘A-’ (Strong) with a stable outlook. More information on Argo Group and its subsidiaries is available at www.argolimited.com.

FORWARD-LOOKING STATEMENTS

This press release contains certain statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are qualified by the inherent risks and uncertainties surrounding future expectations generally and also may differ materially from actual future experience involving any one or more of such statements. For a more detailed discussion of such risks and uncertainties, see Argo Group’s filings with the SEC. The inclusion of a forward-looking statement herein should not be regarded as a representation by Argo Group that Argo Group’s objectives will be achieved. Argo Group undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.

NON-GAAP FINANCIAL MEASURES

In presenting the Company’s results, management has included and discussed in this press release certain non-generally accepted accounting principles (“non-GAAP”) financial measures within the meaning of Regulation G as promulgated by the U.S. Securities and Exchange Commission. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain the Company’s results of operations in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. However, these measures should not be viewed as a substitute for those determined in accordance with generally accepted accounting principles (“U.S. GAAP”). “Underwriting income” is an internal performance measure used in the management of the Company’s operations and represents net amount earned from underwriting activities (net premiums earned less underwriting expenses and claims incurred). Although this measure of profit (loss) does not replace net income (loss) computed in accordance with U.S. GAAP as a measure of profitability, management uses this measure of profit (loss) to focus our reporting segments on generating underwriting income. The Company presents Underwriting income as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information. “Adjusted operating income” is an internal performance measure used in the management of the Company’s operations and represents after-tax (at an assumed effective tax rate of 20%) operational results excluding, as applicable, net realized investment gains or losses, net foreign exchange gain or loss, and other similar non-recurring items. The Company excludes net realized investment gains or losses, net foreign exchange gain or loss, and other similar non-recurring items from the calculation of adjusted operating income because these amounts are influenced by and fluctuate in part, by market conditions that are outside of managements’ control. In addition to presenting net income determined in accordance with U.S. GAAP, the Company believes that showing adjusted operating income enables investors, analysts, rating agencies and other users of the Company’s financial information to more easily analyze our results of operations and underlying business performance. Adjusted operating income should not be viewed as a substitute for U.S. GAAP

net income. “Annualized return on average shareholders’ equity” (“ROAE”) is calculated using average shareholders’ equity. In calculating ROAE, the net income available to shareholders for the period is multiplied by the number of periods in a calendar year to arrive at annualized net income available to shareholders. The Company presents ROAE as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information. “Annualized adjusted operating return on average shareholders’ equity” is calculated using adjusted operating income (as defined above and annualized in the manner described for net income (loss) available to shareholders under ROAE above) and average shareholders’ equity. The assumed tax rate is 20%. Reconciliations of these financial measures to their most directly comparable U.S. GAAP measures are included in the attached tables. (financial tables follow)

Notes:

The presentation of Argo’s financial reporting segments was modified to better reflect its new operating framework and management structure. Under this model, Argo’s Chief Executive Officer, Mark E. Watson, evaluates performance and allocates resources based on the review of the U.S. Operations and International Operations.

The U.S. Operations includes the former Excess & Surplus and Commercial Specialty reportable segments.

The International Operations includes the former Syndicate 1200, International Specialty reportable segments, and the recently acquired Ariel Re business.

It is the business unit that produces the risk and not the location of the underlying exposure that is the primary characteristic in distinguishing U.S Operations from International Operations. For example, a U.S. property exposure underwritten through our Syndicate platform would be included in our International Operations.

Argo’s reportable segments will include four primary insurance and reinsurance services and offerings:

•

Property – includes both property insurance and reinsurance solutions. Insurance products cover commercial properties primarily in North America with some residential and international covers. Reinsurance covers underlying exposures that are located throughout the world, including the United States. These offerings include coverages for man-made and natural disasters.

•

Liability – includes a broad range of primary and excess casualty for risks on both an admitted and non-admitted basis in the United States. Internationally, Argo writes worldwide casualty risks primarily exposed in the UK, Canada, and Australia.

•

Professional – includes various professional lines products including errors and omissions, management liability (including Directors and Officers) and cyber coverages.

•

Specialty – includes niche insurance coverages including marine & energy, accident & health, and surety product offerings.

Corporate and Run-Off include all other activity of Argo. Consistent with prior reporting, amounts for both Corporate and Run-Off are included in the consolidated financial results.

(financial tables follow)

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)


	December 31,		December 31,
	2016		2015
Assets
Total investments	$	4,324.3	$	4,115.7
Cash		86.0		121.7
Accrued investment income		20.7		21.6
Receivables		1,849.4		1,525.6
Goodwill and intangible assets		219.9		225.5
Deferred acquisition costs, net		139.1		132.4
Ceded unearned premiums		302.8		250.8
Other assets		262.8		232.3

Total assets		$7,205.0		$6,625.6

Liabilities and Shareholders’ Equity
Reserves for losses and loss adjustment expenses	$	3,350.8	$	3,123.6
Unearned premiums		970.0		886.7
Ceded reinsurance payable, net		466.6		312.4
Senior unsecured fixed rate notes		139.5		139.3
Other indebtedness		55.4		55.2
Junior subordinated debentures		172.7		172.7
Other liabilities		257.3		267.6

Total liabilities		5,412.3		4,957.5
Total shareholders’ equity		1,792.7		1,668.1

Total liabilities and shareholders’ equity	$	7,205.0	$	6,625.6

Book value per common share	$	59.73	$	54.31

No change to previously reported amounts.

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ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

FINANCIAL HIGHLIGHTS

ALL SEGMENTS

(in millions, except per share amounts)


	Years Ended
	December 31,
	2016			2015
Gross written premiums	$	2,164.8		$	2,012.1
Net written premiums		1,440.2			1,402.1
Earned premiums		1,410.8			1,371.9
Net investment income		115.1			88.6
Fee and other income		24.5			22.2
Net realized investment and other gains		26.1			24.1

Total revenue		1,576.5			1,506.8
Losses and loss adjustment expenses		810.1			766.1
Underwriting, acquisition and insurance expenses		547.0			536.7
Interest expense		19.6			19.0
Fee and other expense, net		22.4			25.8
Foreign currency exchange gain		(4.5	)		(18.3	)

Total expenses		1,394.6			1,329.3
Income before taxes		181.9			177.5
Income tax provision		35.2			14.3

Net income	$	146.7		$	163.2

Net income per common share (basic)	$	4.86		$	5.31

Net income per common share (diluted)	$	4.75		$	5.20

Weighted average common shares:
Basic		30.2			30.8

Diluted		30.8			31.4

No change to previously reported amounts.

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ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

SEGMENT DATA

(in millions)


	Years Ended
	December			December
	2016			2015
US OPERATIONS
Gross written premiums	$	1,277.7		$	1,145.2
Net written premiums		883.5			838.5
Earned premiums		849.5			815.4
Underwriting income		111.5			84.9
Net investment income		71.9			52.2
Fee and other income (expense), net		0.2			(3.5	)
Interest expense		(9.2	)		(9.2	)

Net income before taxes	$	174.4		$	124.4
Loss ratio		55.0	%		57.8	%
Expense ratio		31.8	%		31.8	%

GAAP combined ratio		86.9	%		89.6	%

INTERNATIONAL OPERATIONS
Gross written premiums	$	886.8		$	866.4
Net written premiums		556.4			563.2
Earned premiums		560.9			556.1
Underwriting income		25.8			49.3
Net investment income		28.7			20.3
Fee and other income, net		2.4			0.4
Interest expense		(5.3	)		(5.6	)

Net income before taxes	$	51.6		$	64.4
Loss ratio		57.8	%		51.5	%
Expense ratio		37.6	%		39.6	%

GAAP combined ratio		95.4	%		91.1	%

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ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

QUARTERLY SEGMENT DATA

(in millions)


	December			September			June			March			December			September			June			March
	2016			2016			2016			2016			2015			2015			2015			2015
US OPERATIONS
Gross written premiums	$	307.5		$	360.8		$	321.8		$	287.6		$	276.7		$	310.2		$	288.7		$	269.6
Net written premiums		211.7			258.9			223.5			189.4			197.0			230.0			221.6			189.9
Earned premiums		219.8			216.3			206.8			206.6			207.9			209.0			202.8			195.7
Underwriting income		32.6			27.5			27.2			24.2			19.9			27.3			19.1			18.6
Net investment income		16.1			20.3			21.7			13.8			12.5			11.6			15.1			13.0
Fee and other income (expense), net		1.9			0.3			(1.1	)		(0.9	)		(1.5	)		0.5			(1.7	)		(0.8	)
Interest expense		(2.4	)		(2.2	)		(2.4	)		(2.2	)		(2.3	)		(2.3	)		(2.3	)		(2.3	)

Net income before taxes	$	48.2		$	45.9		$	45.4		$	34.9		$	28.6		$	37.1		$	30.2		$	28.5

Loss ratio		54.3	%		54.3	%		55.7	%		55.9	%		59.2	%		55.1	%		58.4	%		58.4	%
Expense ratio		30.8	%		33.0	%		31.2	%		32.4	%		31.2	%		31.8	%		32.1	%		32.1	%

GAAP combined ratio		85.2	%		87.3	%		86.8	%		88.3	%		90.4	%		86.9	%		90.6	%		90.5	%

INTERNATIONAL OPERATIONS
Gross written premiums	$	191.5		$	224.5		$	238.6		$	232.2		$	169.4		$	220.9		$	268.7		$	207.4
Net written premiums		121.8			156.3			164.3			114.0			111.3			155.9			189.6			106.4
Earned premiums		142.4			142.3			137.9			138.3			137.4			136.7			142.8			139.2
Underwriting income (loss)		(4.8	)		12.5			6.3			11.8			13.8			5.5			13.9			16.1
Net investment income		6.0			7.5			9.1			6.1			4.9			4.4			5.9			5.1
Fee and other income (expense), net		(1.4	)		1.5			1.2			1.1			(2.0	)		1.1			0.9			0.4
Interest expense		(1.3	)		(1.4	)		(1.3	)		(1.3	)		(1.4	)		(1.4	)		(1.3	)		(1.5	)

Net income before taxes	$	(1.5	)	$	20.1		$	15.3		$	17.7		$	15.3		$	9.6		$	19.4		$	20.1

Loss ratio		65.8	%		55.4	%		55.6	%		54.0	%		49.6	%		56.8	%		49.9	%		49.8	%
Expense ratio		37.6	%		35.8	%		39.8	%		37.5	%		40.4	%		39.1	%		40.3	%		38.6	%

GAAP combined ratio		103.4	%		91.2	%		95.4	%		91.5	%		90.0	%		96.0	%		90.3	%		88.4	%

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ANNUAL:

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

GROSS WRITTEN PREMIUM BY SEGMENT

(in millions)


	Years Ended December 31,
	2016		2015
US OPERATIONS
Property	$	239.8	$	185.8
Liability		794.8		770.7
Professional		140.4		119.1
Specialty		102.8		69.6

Total	$	1,277.7	$	1,145.2

INTERNATIONAL OPERATIONS
Property	$	321.8	$	307.1
Liability		145.5		154.4
Professional		159.0		150.3
Specialty		260.5		254.6

Total	$	886.8	$	866.4

HISTORICAL QUARTERLY:

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

GROSS WRITTEN PREMIUM BY SEGMENT

(in millions)


	Three Months Ended
	December 2016		September 2016		June 2016		March 2016		December 2015		September 2015		June 2015		March 2015
US OPERATIONS
Property	$	51.2	$	69.1	$	75.7	$	43.7	$	44.1	$	47.4	$	55.2	$	39.1
Liability		181.6		226.8		192.6		193.9		177.8		212.7		188.9		191.3
Professional		41.5		35.3		34.1		29.5		35.8		29.0		29.2		25.1
Specialty		33.2		29.6		19.4		20.5		19.0		21.1		15.4		14.1

Total	$	307.5	$	360.8	$	321.8	$	287.6	$	276.7	$	310.2	$	288.7	$	269.6

INTERNATIONAL OPERATIONS
Property	$	48.7	$	76.6	$	99.5	$	97.0	$	45.1	$	73.0	$	115.9	$	73.0
Liability		35.6		40.5		33.1		36.3		36.7		42.5		44.0		31.1
Professional		47.8		39.7		39.8		31.7		37.7		41.4		35.7		35.6
Specialty		59.4		67.7		66.2		67.2		49.9		63.9		73.1		67.7

Total	$	191.5	$	224.5	$	238.6	$	232.2	$	169.4	$	220.9	$	268.7	$	207.4

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ANNUAL:

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

NET WRITTEN PREMIUM BY SEGMENT

(in millions)


	Years Ended
	December 31,
	2016		2015
US OPERATIONS
Property	$	125.7	$	135.9
Liability		575.5		578.5
Professional Lines		100.3		69.3
Specialty		81.9		54.9

Total	$	883.5	$	838.5

INTERNATIONAL OPERATIONS
Property	$	200.7	$	202.2
Liability		80.6		91.0
Professional Lines		104.9		101.2
Specialty		170.1		168.8

Total	$	556.4	$	563.2

HISTORICAL QUARTERLY:

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

NET WRITTEN PREMIUM BY SEGMENT

(in millions)


	Three Months Ended
	December		September		June		March		December		September		June		March
	2016		2016		2016		2016		2015		2015		2015		2015
US OPERATIONS
Property	$	23.3	$	42.8	$	40.5	$	19.1	$	28.8	$	38.1	$	45.3	$	23.6
Liability		134.7		164.2		140.9		135.7		133.0		158.7		146.5		140.4
Professional Lines		28.6		28.6		25.8		17.3		20.9		16.5		17.4		14.5
Specialty		25.1		23.3		16.2		17.3		14.3		16.8		12.4		11.4

Total	$	211.7	$	258.9	$	223.5	$	189.4	$	197.0	$	230.0	$	221.6	$	189.9

INTERNATIONAL OPERATIONS
Property	$	30.3	$	58.3	$	70.0	$	42.1		31.0		54.0		91.9		25.3
Liability		18.5		23.0		18.6		20.5		20.4		26.3		25.0		19.3
Professional Lines		34.2		25.9		27.3		17.6		25.6		30.3		22.6		22.8
Specialty		38.7		49.1		48.4		33.9		34.4		45.4		50.0		39.0

Total	$	121.8	$	156.3	$	164.3	$	114.0	$	111.3	$	155.9	$	189.6	$	106.4

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ANNUAL:

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

NET EARNED PREMIUM BY SEGMENT

(in millions)


	Years Ended
	December 31,
	2016		2015
US OPERATIONS
Property	$	124.9	$	138.1
Liability		575.3		567.9
Professional Lines		79.3		57.1
Specialty		70.0		52.5

Total	$	849.5	$	815.4

INTERNATIONAL OPERATIONS
Property	$	205.8	$	199.8
Liability		86.2		88.1
Professional Lines		102.6		99.2
Specialty		166.3		169.0

Total	$	560.9	$	556.1

HISTORICAL QUARTERLY:

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

NET EARNED PREMIUM BY SEGMENT

(in millions)


	Three Months Ended
	December		September		June		March		December		September		June		March
	2016		2016		2016		2016		2015		2015		2015		2015
US OPERATIONS
Property	$	31.2	$	28.6	$	31.6	$	33.5	$	34.2	$	34.5	$	34.8	$	34.6
Liability		146.2		146.3		142.0		140.8		143.0		145.8		141.8		137.3
Professional Lines		22.5		21.2		17.9		17.6		16.7		14.9		13.5		12.0
Specialty		19.8		20.1		15.3		14.7		14.1		13.7		12.8		11.8

Total	$	219.8	$	216.3	$	206.8	$	206.6	$	207.9	$	209.0	$	202.8	$	195.7

INTERNATIONAL OPERATIONS
Property	$	52.0	$	53.3	$	48.8	$	51.7	$	52.1	$	47.2	$	53.3	$	47.2
Liability		20.5		24.3		20.2		21.3		22.4		23.8		21.0		21.0
Professional Lines		30.8		22.3		26.0		23.5		24.6		25.7		23.9		24.9
Specialty		39.2		42.5		42.8		41.8		38.3		39.9		44.7		46.1

Total	$	142.4	$	142.3	$	137.9	$	138.3	$	137.4	$	136.7	$	142.8	$	139.2

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ANNUAL:

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

(in millions)


	Years Ended
Net Prior Year Development	December 31,
(Favorable)/Unfavorable	2016			2015
US Operations	$	(35.9	)	$	(23.0	)
International Operations		(16.0	)		(18.0	)
Run-off		18.6			8.6

Total	$	(33.3	)	$	(32.4	)

HISTORICAL QUARTERLY:

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

(in millions)


Net Prior Year Development	December			September			June			March			December			September			June			March
(Favorable)/Unfavorable	2016			2016			2016			2016			2015			2015			2015			2015
US Operations	$	(10.3	)	$	(13.7	)	$	(9.0	)	$	(2.9	)	$	(8.3	)	$	(11.3	)	$	(2.4	)	$	(1.0	)
International Operations		(5.2	)		(0.6	)		(8.5	)		(1.7	)		(9.4	)		(2.4	)		(3.4	)		(2.8	)
Run-off		1.0			11.4			4.8			1.4			0.6			7.1			0.8			0.1

Total	$	(14.5	)	$	(2.9	)	$	(12.7	)	$	(3.2	)	$	(17.1	)	$	(6.6	)	$	(5.0	)	$	(3.7	)

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ANNUAL:

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

RECONCILIATION OF LOSS RATIOS

(in millions)


	Years Ended December 31,
	2016			2015
US OPERATIONS
Loss ratio		55.0	%		57.8	%
Prior accident year loss development		4.2	%		2.8	%
Catastrophe losses		-1.7	%		-1.3	%
Current accident year ex-cats loss ratio		57.5	%		59.3	%
INTERNATIONAL OPERATIONS
Loss ratio		57.8	%		51.5	%
Prior accident year loss development		2.8	%		3.2	%
Catastrophe losses		-8.6	%		-2.4	%
Current accident year ex-cats loss ratio		52.0	%		52.3	%
CONSOLIDATED
Loss ratio		57.4	%		55.8	%
Prior accident year loss development		2.4	%		2.4	%
Catastrophe losses		-4.4	%		-1.8	%
Current accident year ex-cats loss ratio		55.4	%		56.4	%

HISTORICAL QUARTERLY:

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

RECONCILIATION OF LOSS RATIOS

(in millions)


	December 2016			September 2016			June 2016			March 2016			December 2015			September 2015			June 2015			March 2015
US OPERATIONS
Loss ratio		54.3	%		54.3	%		55.7	%		55.9	%		59.2	%		55.1	%		58.4	%		58.4	%
Prior accident year loss development		4.7	%		6.3	%		4.3	%		1.4	%		4.0	%		5.4	%		1.2	%		0.5	%
Catastrophe losses		-1.2	%		-2.1	%		-2.2	%		-1.1	%		-2.0	%		-1.5	%		-1.1	%		-0.5	%
Current accident year ex-cats loss ratio		57.8	%		58.5	%		57.8	%		56.2	%		61.2	%		59.0	%		58.5	%		58.4	%
INTERNATIONAL OPERATIONS
Loss ratio		65.8	%		55.4	%		55.6	%		54.0	%		49.6	%		56.8	%		49.9	%		49.8	%
Prior accident year loss development		3.6	%		0.4	%		6.4	%		1.3	%		6.8	%		1.8	%		2.4	%		2.0	%
Catastrophe losses		-14.3	%		-5.9	%		-13.8	%		-0.8	%		-0.8	%		-7.7	%		0.0	%		-1.4	%
Current accident year ex-cats loss ratio		55.1	%		49.9	%		48.2	%		54.5	%		55.6	%		50.9	%		52.3	%		50.4	%
CONSOLIDATED
Loss ratio		59.1	%		57.9	%		57.0	%		55.5	%		55.5	%		57.8	%		55.1	%		54.9	%
Prior accident year loss development		4.0	%		0.8	%		3.7	%		0.9	%		5.0	%		1.9	%		1.4	%		1.1	%
Catastrophe losses		-6.4	%		-3.6	%		-6.8	%		-0.9	%		-1.5	%		-3.9	%		-0.6	%		-0.9	%
Current accident year ex-cats loss ratio		56.7	%		55.1	%		53.9	%		55.5	%		59.0	%		55.8	%		55.9	%		55.1	%

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ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

RECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS) TO NET INCOME (LOSS)

(in millions, except per share amounts)

(unaudited)


	Years Ended December 31,
	2016			2015
Net income, as reported	$	146.7		$	163.2
Provision for income taxes		35.2			14.3

Net income, before taxes		181.9			177.5
Add (deduct):
Net realized investment and other gains		(26.1	)		(24.1	)
Foreign currency exchange gains		(4.5	)		(18.3	)

Adjusted operating income before taxes		151.3			135.1
Provision for income taxes, at assumed rate (a)		30.3			27.0

Adjusted operating income	$	121.0		$	108.1

Adjusted operating income per common share (diluted)	$	3.92		$	3.44

Weighted average common shares, diluted		30.8			31.4

(a)	At assumed tax rate of 20%.

No change to previously reported amounts.

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ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

RECONCILIATION OF UNDERWRITING INCOME TO NET INCOME

(in millions)

(unaudited)


	Years Ended December 31,
	2016			2015
Net Income	$	146.7		$	163.2
Add (deduct):
Income tax provision		35.2			14.3
Net investment income		(115.1	)		(88.6	)
Net realized investment and other gains		(26.1	)		(24.1	)
Fee and other income		(24.5	)		(22.2	)
Interest expense		19.6			19.0
Fee and other expense		22.4			25.8
Foreign currency exchange gains		(4.5	)		(18.3	)

Underwriting income	$	53.7		$	69.1

No change to previously reported amounts.

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ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

RECONCILIATION OF SEGMENT INCOME TO NET INCOME

(in millions)

(unaudited)


	For the Years Ended December 31,
	2016			2015
Segment income (loss) before income taxes
US Operations	$	174.4		$	124.4
International Operations		51.6			64.4
Run-off Lines		(15.2	)		(7.4	)
Corporate and Other		(59.5	)		(46.3	)
Realized investment and other gains		26.1			24.1
Foreign currency exchange gains		4.5			18.3

Net income before income taxes		181.9			177.5
Provision for taxes		35.2			14.3

Net income	$	146.7		$	163.2

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ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

SHAREHOLDER RETURN ANALYSIS

(in millions)

(unaudited)


	For the Years Ended December 31,
	2016			2015			% Change
Net income	$	146.7		$	163.2			(10.1	%)
Adjusted operating income ^(a)		121.0			108.1			12.0	%
Shareholders’ Equity - Beginning of the period	$	1,668.1		$	1,646.7			1.3	%
Shareholders’ Equity - End of current period		1,792.7			1,668.1			7.5	%

Average Shareholders’ Equity	$	1,730.4		$	1,657.4			4.4	%
Annualized return on average shareholders’ equity		8.5	%		9.8	%
Annualized adjusted operating return on average shareholders’ equity		7.0	%		6.5	%

^(a)	at assumed 20% tax rate

No change to previously reported amounts.

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