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)
|
ITEM 2.02.
|
RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
|
ITEM 9.01.
|
FINANCIAL STATEMENTS AND EXHIBITS.
|
|
|
|
|
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|
99.1
|
|
Press Release issued by Argo Group International Holdings, Ltd. dated May 2, 2016.
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD. | |||
Dated: May 2, 2016
|
By:
|
/s/ Jay S. Bullock | |
Name: Jay S. Bullock | |||
Title: Executive Vice President and Chief Financial Officer |
Gross Written
Premium
$519.8 M
↑ 9.0%
from 1Q 2015
|
Combined
Ratio
94.0%
vs. 93.6%
in 1Q 2015
|
Pre-tax
Underwriting
Income
$20.7 M
↓ 2.8%
from 1Q 2015
|
After-tax
Operating
Income
$29.9 M
↓ 10.5%
from 1Q 2015
|
Book Value
Per Share
$61.71
↑ 3.3%
from 4Q 2015
|
"Argo's first quarter 2016 results represent a solid start to 2016 following a record year of underwriting profits in 2015," said CEO Mark E. Watson III. "We remain focused on improving margings in our niche markets through disciplined underwriting, product innovation, and streamlining our business processes."
|
HIGHLIGHTS FOR THE FIRST QUARTER ENDED MARCH 31, 2016 | ||
●
|
|
Gross written premiums were up 9.0% to $519.8 million from $476.7 million in the first quarter of 2015
|
●
|
|
After-tax operating income was $29.9 million or $1.06 per diluted share, compared to $33.4 million or $1.16 per diluted share for the first quarter of 2015.
|
●
|
|
Net income was $27.7 million or $0.98 per diluted share, compared to $58.8 million or $2.05 per diluted share for the first quarter of 2015.
|
●
|
|
Pre-tax underwriting income of $20.7 million in the first quarter of 2016 compared to $21.3 million in the first quarter of 2015.
|
●
|
|
Combined ratio was 94.0% compared to 93.6% for the first quarter of 2015. The loss and expense ratios for the quarter were 55.5% and 38.5%, respectively, compared to 54.9% and 38.7% for the first quarter of 2015.
|
●
|
|
Net favorable prior-year reserve development was $3.2 million (benefiting the combined ratio by 0.9 points), compared with $3.7 million (benefiting the combined ratio by 1.1 points) for the first quarter of 2015. |
●
|
|
Estimated pre-tax catastrophe losses were $3.3 million or 0.9 points on the combined ratio, compared to $3.0 million or 0.9 points on the combined ratio for the first quarter of 2015.
|
●
|
|
Loss ratio excluding catastrophes and reserve development for the first quarter of 2016 was 55.5%, compared to 55.1% for the first quarter of 2015.
|
●
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During the quarter, the Company repurchased $19.0 million or 343,652 shares of its common stock at an average share price of $55.32, which represents 1.2% of net shares outstanding at Dec. 31, 2015. |
●
|
|
Book value per share increased to $61.71, up 3.3% from $59.74 at Dec. 31, 2015.
|
●
|
|
Cash and investments at March 31, 2016 totaled $4.3 billion with a net pre-tax unrealized gain of approximately $92.6 million
|
Notes | ||
● | During the quarter the following changes were made to the reporting structure effective January 1, 2016: (1) reclassification of Argo Pro results and identifiable assets from Excess and Surplus lines to the Commercial Specialty segment which more appropriately matches segment distribution strategy; and (2) alternative investment income was moved from realized gains and losses to net investment income. | |
●
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|
All references to catastrophe losses are pre-tax and net of reinsurance and estimated reinstatement premiums. Point impacts on the combined ratio are calculated as the difference between the reported combined ratio and the combined ratio excluding incurred catastrophe losses and associated reinstatement premiums.
|
●
|
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After-tax operating income is defined as net income before taxes excluding net realized investment gains/losses and foreign currency exchange gains/losses at an assumed 20% effective tax rate.
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|
·
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Gross written premiums were up 5.4% primarily driven by casualty lines.
|
·
|
The current year loss ratio excluding cats benefited from lower non-cat property losses in the quarter.
|
·
|
Gross written premiums were up 8.0% driven by program, surety, and public entity businesses.
|
·
|
The combined ratio improved to 88.0% from 95.6% in the first quarter of 2015.
|
·
|
Gross premiums written were up 14.2% driven by new business and higher renewals in both our property and liability businesses.
|
·
|
The loss ratio includes the impact of a large onshore energy loss.
|
·
|
Gross written premiums rose 7.2% driven by new business opportunities and strong renewal retention in our insurance lines at Argo Re. Premium growth in Brazil was down modestly reflecting the slowdown in the current economic environment.
|
·
|
The combined ratio improved to 79.7% from 81.2% in the same period of 2015.
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
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||||||||
CONSOLIDATED BALANCE SHEETS
|
||||||||
(in millions, except per share amounts)
|
||||||||
March 31,
|
December 31,
|
|||||||
2016
|
2015
|
|||||||
(unaudited)
|
||||||||
Assets
|
||||||||
Total investments
|
$
|
4,127.1
|
$
|
4,115.7
|
||||
Cash
|
122.9
|
121.7
|
||||||
Accrued investment income
|
21.3
|
21.6
|
||||||
Receivables
|
1,599.5
|
1,525.6
|
||||||
Goodwill and intangible assets
|
224.1
|
225.5
|
||||||
Deferred acquisition costs, net
|
136.4
|
132.4
|
||||||
Ceded unearned premiums
|
308.0
|
250.8
|
||||||
Other assets
|
280.4
|
232.3
|
||||||
Total assets
|
$
|
6,819.7
|
$
|
6,625.6
|
||||
Liabilities and Shareholders' Equity
|
||||||||
Reserves for losses and loss adjustment expenses
|
$
|
3,141.5
|
$
|
3,123.6
|
||||
Unearned premiums
|
907.8
|
886.7
|
||||||
Ceded reinsurance payable, net
|
410.1
|
312.4
|
||||||
Senior unsecured fixed rate notes
|
139.4
|
139.3
|
||||||
Other indebtedness
|
56.4
|
55.2
|
||||||
Junior subordinated debentures
|
172.7
|
172.7
|
||||||
Other liabilities
|
286.4
|
267.6
|
||||||
Total liabilities
|
5,114.3
|
4,957.5
|
||||||
Total shareholders' equity
|
1,705.4
|
1,668.1
|
||||||
Total liabilities and shareholders' equity
|
$
|
6,819.7
|
$
|
6,625.6
|
||||
Book value per common share
|
$
|
61.71
|
$
|
59.74
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||
FINANCIAL HIGHLIGHTS
|
||||||||
ALL SEGMENTS
|
||||||||
(in millions, except per share amounts)
|
||||||||
Three Months Ended
|
||||||||
March 31,
|
||||||||
2016
|
2015
|
|||||||
(unaudited)
|
||||||||
Gross written premiums
|
$
|
519.8
|
$
|
476.7
|
||||
Net written premiums
|
303.4
|
296.0
|
||||||
Earned premiums
|
344.9
|
334.6
|
||||||
Net investment income
|
21.2
|
25.7
|
||||||
Net realized investment and other (losses) gains
|
(2.8
|
)
|
11.1
|
|||||
Fee and other income
|
6.8
|
4.6
|
||||||
Total revenue
|
370.1
|
376.0
|
||||||
Losses and loss adjustment expenses
|
191.6
|
183.7
|
||||||
Underwriting, acquisition and insurance expenses
|
132.6
|
129.6
|
||||||
Interest expense
|
4.8
|
4.9
|
||||||
Fee and other expense, net
|
6.5
|
5.0
|
||||||
Foreign currency exchange loss (gain)
|
1.5
|
(9.6
|
)
|
|||||
Total expenses
|
337.0
|
313.6
|
||||||
Income before taxes
|
33.1
|
62.4
|
||||||
Income tax provision
|
5.4
|
3.6
|
||||||
Net income
|
$
|
27.7
|
$
|
58.8
|
||||
Net income per common share (basic)
|
$
|
1.00
|
$
|
2.09
|
||||
Net income per common share (diluted)
|
$
|
0.98
|
$
|
2.05
|
||||
Weighted average common shares:
|
||||||||
Basic
|
27.7
|
28.1
|
||||||
Diluted
|
28.3
|
28.7
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||
SEGMENT DATA
|
||||||||
(in millions)
|
||||||||
Three Months Ended
|
||||||||
March 31,
|
||||||||
2016
|
2015
|
|||||||
(unaudited) | ||||||||
Excess & Surplus Lines
|
||||||||
Gross written premiums
|
$
|
146.2
|
$
|
138.7
|
||||
Net written premiums
|
114.5
|
112.8
|
||||||
Earned premiums
|
119.8
|
111.9
|
||||||
111.9
|
||||||||
Underwriting income
|
$
|
13.9
|
$
|
14.9
|
||||
Net investment income
|
8.7
|
8.0
|
||||||
Interest expense
|
(1.4
|
)
|
(1.5
|
)
|
||||
Operating income before taxes
|
$
|
21.2
|
$
|
21.4
|
||||
Loss ratio
|
57.4
|
%
|
55.0
|
%
|
||||
Expense ratio
|
31.1
|
31.7
|
||||||
GAAP combined ratio
|
88.5
|
%
|
86.7
|
%
|
||||
Commercial Specialty
|
||||||||
Gross written premiums
|
$
|
141.4
|
$
|
130.9
|
||||
Net written premiums
|
74.9
|
77.1
|
||||||
Earned premiums
|
86.8
|
83.8
|
||||||
Underwriting income
|
$
|
10.3
|
$
|
3.7
|
||||
Net investment income
|
5.1
|
5.0
|
||||||
Interest expense
|
(0.8
|
)
|
(0.8
|
)
|
||||
Fee expense, net
|
(0.9
|
)
|
(0.8
|
)
|
||||
Operating income before taxes
|
$
|
13.7
|
$
|
7.1
|
||||
Loss ratio
|
53.9
|
%
|
62.9
|
%
|
||||
Expense ratio
|
34.1
|
32.7
|
||||||
GAAP combined ratio
|
88.0
|
%
|
95.6
|
%
|
||||
Syndicate 1200
|
||||||||
Gross written premiums
|
$
|
162.0
|
$
|
141.9
|
||||
Net written premiums
|
80.1
|
80.5
|
||||||
Earned premiums
|
100.5
|
103.0
|
||||||
Underwriting income
|
$
|
4.1
|
$
|
9.3
|
||||
Net investment income
|
2.8
|
2.2
|
||||||
Interest expense
|
(0.6
|
)
|
(0.7
|
)
|
||||
Fee income, net
|
1.1
|
0.4
|
||||||
Operating income before taxes
|
$
|
7.4
|
$
|
11.2
|
||||
Loss ratio
|
55.0
|
%
|
51.4
|
%
|
||||
Expense ratio
|
40.8
|
39.6
|
||||||
GAAP combined ratio
|
95.8
|
%
|
91.0
|
%
|
||||
International Specialty
|
||||||||
Gross written premiums
|
$
|
70.2
|
$
|
65.5
|
||||
Net written premiums
|
33.9
|
25.9
|
||||||
Earned premiums
|
37.8
|
36.2
|
||||||
Underwriting income
|
$
|
7.7
|
$
|
6.8
|
||||
Net investment income
|
3.3
|
2.9
|
||||||
Interest expense
|
(0.7
|
)
|
(0.8
|
)
|
||||
Operating income before taxes
|
$
|
10.3
|
$
|
8.9
|
||||
Loss ratio
|
51.3
|
%
|
45.3
|
%
|
||||
Expense ratio
|
28.4
|
35.9
|
||||||
GAAP combined ratio
|
79.7
|
%
|
81.2
|
%
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
|||||||||
(in millions)
|
|||||||||
(unaudited)
|
|||||||||
For the Three Months
|
|||||||||
Ended March 31,
|
|||||||||
Net Prior Year Development
|
2016
|
2015
|
|||||||
(Favorable)/Unfavorable
|
|||||||||
E&S
|
$
|
(2.9
|
)
|
$
|
(5.7
|
)
|
|||
Commercial Specialty
|
-
|
4.7
|
|||||||
Syndicate 1200
|
(0.8
|
)
|
(0.3
|
)
|
|||||
International Specialty
|
(0.9
|
)
|
(2.5
|
)
|
|||||
Run-off
|
1.4
|
0.1
|
|||||||
Total
|
$
|
(3.2
|
)
|
$
|
(3.7
|
)
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET INCOME (LOSS)
|
||||||||
(in millions, except per share amounts)
|
||||||||
Three Months Ended
|
||||||||
March 31,
|
||||||||
2016
|
2015
|
|||||||
(unaudited)
|
||||||||
Income Before Taxes:
|
||||||||
From operations
|
$
|
37.4
|
$
|
41.7
|
||||
Foreign currency exchange (loss) gain
|
(1.5
|
)
|
9.6
|
|||||
Net realized investment (losses) gains
|
(2.8
|
)
|
11.1
|
|||||
Income before taxes
|
33.1
|
62.4
|
||||||
Income tax provision
|
5.4
|
3.6
|
||||||
Net income
|
$
|
27.7
|
$
|
58.8
|
||||
Net income per common share (diluted)
|
$
|
0.98
|
$
|
2.05
|
||||
Operating income per common share (diluted)
|
||||||||
At assumed tax rate:
|
||||||||
Income (a)
|
$
|
0.94
|
$
|
1.74
|
||||
Foreign currency exchange loss (gains) (a)
|
0.04
|
(0.27
|
)
|
|||||
Net realized investment losses (gains) (a)
|
0.08
|
(0.31
|
)
|
|||||
Operating income per common share (diluted)
|
$
|
1.06
|
$
|
1.16
|
||||
(a) Per diluted share at assumed tax rate of 20%.
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||
RECONCILIATION OF UNDERWRITING INCOME TO NET INCOME
|
||||||||
(in millions)
|
||||||||
Three Months Ended
|
||||||||
March 31,
|
||||||||
2016
|
2015
|
|||||||
(unaudited)
|
||||||||
Earned Premiums
|
$
|
344.9
|
$
|
334.6
|
||||
Losses and Loss Adjustment Expenses
|
191.6
|
183.7
|
||||||
Underwriting, Acquisition and Insurance Expenses
|
132.6
|
129.6
|
||||||
Underwriting Income
|
20.7
|
21.3
|
||||||
Net investment income
|
21.2
|
25.7
|
||||||
Net realized investment and other (losses) gains
|
(2.8
|
)
|
11.1
|
|||||
Fee and other income
|
6.8
|
4.6
|
||||||
Interest expense
|
(4.8
|
)
|
(4.9
|
)
|
||||
Fee and other expense
|
(6.5
|
)
|
(5.0
|
)
|
||||
Foreign currency exchange (loss) gain
|
(1.5
|
)
|
9.6
|
|||||
Income Before Taxes
|
33.1
|
62.4
|
||||||
Income Tax Provision
|
5.4
|
3.6
|
||||||
Net Income
|
$
|
27.7
|
$
|
58.8
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||||||
SHAREHOLDER RETURN ANALYSIS
|
||||||||||||
(in millions)
|
||||||||||||
Three Months Ended March 31
|
||||||||||||
2016
|
2015
|
% Change
|
||||||||||
Net income
|
$
|
27.7
|
$
|
58.8
|
(52.9
|
%)
|
||||||
Operating income (a)
|
29.9
|
33.4
|
(10.5
|
%)
|
||||||||
Shareholders' Equity - Beginning of the period
|
$
|
1,668.1
|
$
|
1,646.7
|
1.3
|
%
|
||||||
Shareholders' Equity - End of current period
|
1,705.4
|
1,662.8
|
2.6
|
%
|
||||||||
Average Shareholders' Equity
|
$
|
1,686.8
|
$
|
1,654.8
|
1.9
|
%
|
||||||
Annualized return on average shareholders' equity
|
6.6
|
%
|
14.2
|
%
|
||||||||
Annualized operating return on average shareholders' equity
|
7.1
|
%
|
8.1
|
%
|
||||||||
(a) at assumed 20% tax rate
|
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
|
||||||||||||||||||||||||
COMPONENTS OF INVESTMENT INCOME
|
||||||||||||||||||||||||
ALL SEGMENTS
|
||||||||||||||||||||||||
(in millions)
|
||||||||||||||||||||||||
|
Three Months Ended
|
|||||||||||||||||||||||
March 31
|
June 30
|
September 30
|
December 31
|
March 31
|
||||||||||||||||||||
2015
|
2015
|
2015
|
2015
|
2016
|
||||||||||||||||||||
Net Investment Income
|
$
|
20.8
|
$
|
21.8
|
$
|
21.3
|
$
|
21.7
|
$
|
22.7
|
||||||||||||||
Alternative Investments
|
4.9
|
2.6
|
(2.9
|
)
|
(1.6
|
)
|
(1.6
|
)
|
||||||||||||||||
Total
|
$
|
25.7
|
$
|
24.4
|
$
|
18.4
|
$
|
20.1
|
$
|
21.2
|