Argo Group Announces 2013 First Quarter Results

  Argo Group Announces 2013 First Quarter Results

Business Wire

HAMILTON, Bermuda -- May 02, 2013

Argo Group International Holdings, Ltd. (NasdaqGS: AGII) today announced
financial results for the three months ended March 31, 2013.

Argo Group CEO Mark E. Watson III said, "I'm pleased with our first quarter
performance. We generated solid top-line growth in a modestly improving
pricing environment, and generated an underwriting profit in each of our four
business segments. I am optimistic about the outlook for the remainder of
2013."

HIGHLIGHTS FOR THE FIRST QUARTER ENDED MARCH 31, 2013:

  *Gross written premiums were $438.2 million, an increase of $41.9 million
    or 10.6% over the first quarter of 2012.
  *Pre-tax operating income^1 was $24.9 million compared to $17.9 million in
    the first quarter of 2012.
  *Net income was $32.7 million or $1.28 per diluted share compared to $19.6
    million or $0.74 per diluted share in the first quarter of 2012.
  *The combined ratio was 99.4% compared to 103.4% in the first quarter of
    2012.
  *Book value per share increased 3.2% in the quarter to $62.67 and increased
    8.2% over the prior year.
  *During the quarter, the Company repurchased $12.3 million or 325,825
    shares of its common stock at an average share price of $37.71,
    representing 1.3% of net shares outstanding at December 31, 2012.

^1 – Results exclude net realized investment gains/losses and foreign currency
exchange gains/losses.

FINANCIAL RESULTS

For the three months ended March 31, 2013, Argo Group reported net income of
$32.7 million or $1.28 per diluted share and net operating income after tax of
$20.0 million or $0.78 per diluted share. By comparison, the first quarter of
2012 produced net income of $19.6 million or $0.74 per diluted share and net
operating income after tax of $14.3 million or $0.54  per diluted share. (See
the complete reconciliation between net income/loss and operating income/loss
in the following tables.)

Gross written premiums for the three months ended March 31, 2013 and 2012,
were $438.2 million and $396.3 million, respectively. Total revenue for the
three months ended March 31, 2013 and 2012, was $341.6 million and $323.1
million, respectively. Earned premiums for the three months ended March 31,
2013 and 2012, were $304.2 million and $277.3 million, respectively.

Argo Group's combined ratios for the three months ended March 31, 2013 and
2012, were 99.4% and 103.4%, respectively. Catastrophe losses, net of
reinsurance and estimated reinstatement premiums, were $1.9 million in the
first quarter 2013 compared to $4.0 million in the same period in 2012.
Favorable prior year loss development was $4.5 million compared to $3.3
million for the three months ended March 31, 2012. Included in underwriting
expenses was a non-cash equity-based compensation charge of $6.5 million,
compared to $1.0 million in the first quarter of 2012, reflecting the increase
in the Company’s stock price during the quarter.

Net investment income for the three months ended March 31, 2013 and 2012, was
$27.9 million and $31.4 million, respectively. For the three months ended
March 31, 2013, the Company reported a net realized investment gain of $9.5
million versus $13.1 million for the same period in 2012.

At March 31, 2013, the investment portfolio totaled $4.1 billion with a net
pre-tax unrealized gain of approximately $328.5 million.

CONFERENCE CALL

Argo Group management will conduct an investor conference call starting at
10:30 a.m. EDT (11:30 a.m. ADT) tomorrow, May 3, 2013.

A live webcast of the conference call can be accessed by visiting Argo Group’s
Investor Relations Website at
http://www.argolimited.com/pages/investors/events-and-webcasts. Participants
inside the U.S. and Canada can access the call by phone by dialing (888)
895-5271 (pass code: 34754739). Callers dialing from outside the U.S. and
Canada can access the call by dialing (847) 619-6547 (pass code: 34754739).

A webcast replay will be available shortly after the conference call and can
be accessed at http://www.argolimited.com/pages/investors/events-and-webcasts.
In addition, a telephone replay of the call will be available through May 10,
2013, to callers from inside the U.S. and Canada by dialing (888) 843-7419
(pass code: 3475 4739#). Callers dialing from outside the U.S. and Canada can
access the telephone replay by dialing (630) 652-3042 (pass code: 3475 4739#).

ABOUT ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

Argo Group International Holdings, Ltd. (NasdaqGS: 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 four primary segments: Excess & Surplus Lines, Commercial Specialty,
International Specialty and Syndicate 1200. 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.



ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
                                                             
                                                  March 31,       December 31,
                                                  2013            2012
                                                  (unaudited)
Assets
Total investments                                 $  4,133.2      $   4,200.7
Cash and cash equivalents                            91.2             95.8
Accrued investment income                            26.9             30.3
Receivables                                          1,606.4          1,681.9
Goodwill and intangible assets                       243.8            245.3
Deferred acquisition costs                           100.6            99.4
Ceded unearned premiums                              230.9            193.6
Other assets                                        169.5           141.9
Total assets                                      $  6,602.5      $   6,688.9
                                                                  
Liabilities and Shareholders' Equity
Reserves for losses and loss adjustment           $  3,205.0      $   3,223.5
expenses
Unearned premiums                                    737.3            730.2
Ceded reinsurance payable                            475.4            612.1
Senior unsecured fixed rate notes                    143.8            143.8
Other indebtedness                                   64.4             63.8
Junior subordinated debentures                       193.3            193.3
Other liabilities                                   236.7           208.1
Total liabilities                                    5,055.9          5,174.8
                                                                  
Total shareholders' equity                          1,546.6         1,514.1
Total liabilities and shareholders' equity        $  6,602.5      $   6,688.9
                                                                  
Book value per common share                       $  62.67        $   60.75



ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
FINANCIAL HIGHLIGHTS
ALL SEGMENTS
(in millions, except per share amounts)
                                                              
                                                     Three Months Ended
                                                     March 31,
                                                     2013          2012
                                                     (unaudited)
                                                                   
Gross Written Premiums                               $ 438.2       $ 396.3
Net Written Premiums                                   279.0         241.2
                                                                   
Earned Premiums                                        304.2         277.3
Net Investment Income                                  27.9          31.4
Net Realized Investment Gains                          9.5           13.1
Fee Income, net                                       0.0         1.3
Total Revenue                                          341.6         323.1
                                                                   
Losses and Loss Adjustment Expenses                    170.5         165.8
Other Reinsurance-Related Expenses                     5.1           6.9
Underwriting, Acquisition and Insurance Expenses       126.7         113.7
Interest Expense                                       4.9           5.7
Foreign Currency Exchange (Gain) Loss                 (3.1  )      2.9
Total Expenses                                         304.1         295.0
                                                                   
Income Before Taxes                                    37.5          28.1
Income Tax Provision                                  4.8         8.5
Net Income                                           $ 32.7       $ 19.6
                                                                   
                                                                   
Net Income per Common Share (Basic)                  $ 1.32       $ 0.75
                                                                   
                                                                   
Net Income per Common Share (Diluted)                $ 1.28       $ 0.74
                                                                   
Weighted Average Common Shares:
Basic                                                 24.8        26.2
Diluted                                               25.6        26.5



ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
SEGMENT DATA
(in millions)

                                       Three Months Ended
                                         March 31,
                                           2013        2012
                                         (unaudited)
Excess & Surplus Lines
Gross Written Premiums                   $ 127.6       $ 107.3
Net Written Premiums                       100.8         88.9
Earned Premiums                            105.1         96.2
Underwriting Income                      $ 4.6         $ 8.2
Net Investment Income                      10.9          13.0
Interest Expense                          (1.6  )      (2.3  )
Operating Income Before Taxes            $ 13.9       $ 18.9  
Loss Ratio                                 56.5          54.2
Expense Ratio                             39.1        37.3  
GAAP Combined Ratio                       95.6  %     91.5  %
Commercial Specialty
Gross Written Premiums                   $ 106.1       $ 107.7
Net Written Premiums                       71.7          78.7
Earned Premiums                            75.2          82.0
Underwriting Income (Loss)               $ 1.0         $ (6.0  )
Net Investment Income                      5.9           6.9
Interest Expense                           (0.9  )       (1.4  )
Fee Income (Expense), net                 (0.3  )      0.2   
Operating (Loss) Income Before Taxes     $ 5.7        $ (0.3  )
Loss Ratio                                 63.4          72.4
Expense Ratio                             35.2        35.0  
GAAP Combined Ratio                       98.6  %     107.4 %
International Specialty
Gross Written Premiums                   $ 78.2        $ 57.6
Net Written Premiums                       32.2          28.9
Earned Premiums                            32.7          28.0
Underwriting Income                      $ 3.3         $ 2.7
Net Investment Income                      2.3           4.1
Interest Expense                          (0.8  )      (1.0  )
Operating Income Before Taxes            $ 4.8        $ 5.8   
Loss Ratio                                 50.1          51.4
Expense Ratio                             39.5        38.2  
GAAP Combined Ratio                       89.6  %     89.6  %
Syndicate 1200
Gross Written Premiums                   $ 126.1       $ 123.1
Net Written Premiums                       74.1          44.1
Earned Premiums                            90.9          71.1
Underwriting Income (Loss)               $ 6.0         $ (2.4  )
Net Investment Income                      2.8           3.9
Interest Expense                           (0.7  )       (0.9  )
Fee Income, net                           0.3         1.1   
Operating Income Before Taxes            $ 8.4        $ 1.7   
Loss Ratio                                 53.5          56.5
Expense Ratio                             39.8        46.9  
GAAP Combined Ratio                       93.3  %     103.4 %
                                                       
Run-off                                               
Operating (Loss) Income Before Taxes     $ (0.5  )     $ (0.4  )



ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
(in millions)
                                    
Prior Year Development      Three Months Ended
(Favorable)/Adverse         March 31,
                              2013         2012
                            (unaudited)
                                         
E&S                         $ (5.2 )     $ (9.3 )
Commercial Specialty          1.1          4.6
Int'l Specialty               0.9          (0.2 )
Syndicate 1200                (2.2 )       (0.4 )
Runoff                     0.9      2.0  
Combined                      (4.5 )       (3.3 )
                                         
                                         
Catastrophe Losses ^(1)     Three Months Ended
                            March 31,
                              2013         2012
                            (unaudited)
                                         
E&S                         $ 0.8        $ 0.1
Commercial Specialty          1.1          2.3
Int'l Specialty               0.0          1.6
Syndicate 1200             0.0      0.0  
Combined                      1.9          4.0
                                         
^(1) net of reinstatement premiums



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,
                                                         2013          2012
                                                       (unaudited)
                                                                     
Income Before Taxes:
From Operations                                        $ 24.9        $ 17.9
Foreign Currency Exchange Gain (Loss)                    3.1           (2.9  )
Net Realized Investment Gains                           9.5         13.1  
Income Before Taxes                                      37.5          28.1
Income Tax Provision                                    4.8         8.5   
Net Income                                             $ 32.7       $ 19.6  
                                                                     
                                                                     
Net Income per Common Share (Diluted)                  $ 1.28       $ 0.74  
                                                                     
Operating Income (Loss) per Common Share (Diluted)
At Assumed Tax Rate:
Income (a)                                               1.17          0.85
Foreign Currency Exchange (Gain) Loss (a)                (0.09 )       0.09
Net Realized Investment Gains (a)                       (0.30 )      (0.40 )
                                                                     
Operating Income per Common Share (Diluted)             0.78        0.54  
                                                                     
(a) Per diluted share at assumed tax rate of 20%.

Contact:

Argo Group International Holdings, Ltd.
Jay Bullock, 441-278-3727
Chief Financial Officer
or
George Luecke, 212-607-8802
Group Treasurer
 
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