Argo Group Reports Net Income of $31.7 Million, or $1.13 Per Diluted Share

  Argo Group Reports Net Income of $31.7 Million, or $1.13 Per Diluted Share

Business Wire

HAMILTON, Bermuda -- August 6, 2013

Argo Group International Holdings, Ltd. (Nasdaq: AGII) today announced
financial results for the three and six months ended June 30, 2013.

"Our results reflect another improving quarter for Argo,” said Argo Group CEO
Mark E. Watson III. “This performance was driven by better underwriting
margins and strong premium growth as we continue to benefit from our recent
new business and operating initiatives and from improved market conditions.”

HIGHLIGHTS FOR THE SECOND QUARTER ENDED JUNE 30, 2013:

  *Gross written premiums were $542.2 million, an increase of $68 million or
    14.3%.
  *The combined ratio was 98.3% compared to 102.5% in 2012.
  *Net favorable prior-year reserve development was $12.8 million (benefiting
    the combined ratio by 4.0 points), compared with $4.1 million (benefiting
    the combined ratio by 1.5 points) in 2012.
  *Estimated pre-tax catastrophe losses were $9.7 million or 3.1 points on
    the combined ratio compared to $3.9 million or 1.5 points in 2012.
  *The current accident year loss ratio, excluding catastrophes, was 60.6%
    compared to 62.1% in 2012.
  *After-tax operating income ^ was $20.7 million or $0.74 per diluted share.
  *Net income was $31.7 million or $1.13 per diluted share.
  *Book value per share increased to $55.73 at June 30, 2013, from $55.22 at
    December 31, 2012.

HIGHLIGHTS FOR THE SIX MONTHS ENDED JUNE 30, 2013:

  *Gross written premiums were $980.4 million, an increase of $109.9 million
    or 12.6% over 2012.
  *The combined ratio was 98.8% compared to 102.9% in 2012.
  *Net favorable prior-year reserve development was $17.3 million (benefiting
    the combined ratio by 2.8 points), compared with $7.4 million (benefiting
    the combined ratio by 1.4 points) in 2012.
  *Estimated pre-tax catastrophe losses were $11.6 million or 1.9 points on
    the combined ratio compared to $8.0 million or 1.5 points in 2012.
  *The current accident year loss ratio, excluding catastrophes, was 59.3%
    compared to 61.6% in 2012.
  *After-tax operating income ^ was $40.7 million or $1.45 per diluted share.
  *Net income was $64.4 million or $2.29 per diluted share.

OTHER HIGHLIGHTS:

  *During the quarter, the Company repurchased $17.8 million or 427,751
    shares of its common stock at an average share price of $41.58, which
    represents 1.7% of net shares outstanding at March 31, 2013. In the first
    six months of 2013, the Company repurchased $30.1 million or 753,576
    shares of its common stock at an average share price of $39.91, which
    represents 3.0% of net shares outstanding at December 31, 2012.
  *At June 30, 2013, cash and investments totaled $4.1 billion with a net
    pre-tax unrealized gain of approximately $225.0 million.

Notes:

  *All per share amounts, except share repurchase figures, are adjusted for
    the 10% stock dividend that was paid on June 17, 2013 to stockholders of
    record on June 3, 2013.
  *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.
  *Operating income is defined as net income excluding net realized
    investment gains/losses and foreign currency exchange gains/losses.

FINANCIAL HIGHLIGHTS BY SEGMENT

Excess and Surplus Lines Segment

The Excess & Surplus Lines segment reported gross premiums written of $175.8
million in the quarter, up $31.9 million, or 22.2%, from the second quarter of
2012. Growth in the quarter reflects higher premiums across virtually all
units as we saw increased submission flow and modest rate increases. Net
premiums written were up 17.2% from the second quarter of 2012 to $138.0
million. Underwriting income was $7.3 million for the quarter, compared to
$11.3 million for the second quarter of 2012, reflecting a combined ratio of
93.2%, compared with 88.6% in the prior year quarter. The higher combined
ratio primarily reflects a lower level of prior accident year reserve
releases. Net favorable prior-year reserve development was $9.2 million in the
second quarter of 2013 and represented 8.5 points on the combined ratio
compared to $12.4 million or 12.5 points in 2012. Losses from catastrophes and
U.S. storms were $2.6 million or 2.4 points on the combined ratio compared to
$2.1 million or 2.1 points in 2012.

For the six-month period ending June 30, 2013, gross premiums written were up
20.8% to $303.4 million, net premiums written were up 15.6% to $238.8 million,
and net premiums earned rose 9.8% to $213.8 million over the same period in
2012. For the first six months of 2013, underwriting income was $11.9 million
compared to $19.5 million in the same period of 2012. Lower underwriting
income in the 2013 period reflects a higher level of favorable reserve
development in the 2012 period of $21.7 million compared to $14.4 million in
the same period of 2013. The six-month 2013 combined ratio, excluding
catastrophe losses and reserve development, was 99.6% compared to 100.1% in
the first six months of 2012.

Commercial Specialty

Commercial Specialty reported gross premiums written of $85.6 million in the
quarter, down from $92.7 million in the same period of 2012. The decline
primarily reflects initiatives to remove underperforming accounts at Argo
Insurance and Trident, partially offset by rate increases and modest growth in
other business units. Net premiums written declined 11.7% to $55.0 million.
Net premiums earned were $75.3 million, down 7.3% from the year ago period.
Commercial Specialty reported a $2.8 million underwriting loss, an improvement
from the $14.2 million loss in the second quarter of 2012.The second quarter
2013 combined ratio of 103.8% includes 6.5 points attributable to two large
losses in our public entity and commercial programs books and compares with a
combined ratio of 117.4% in the second quarter of 2012. Net favorable
prior-year reserve development was $1.0 million, or 1.2 points, this quarter
compared to reserve strengthening of $13.4 million, or 16.5 points, in the
second quarter of 2012. Losses from catastrophes and U.S. storms were $1.6
million or 2.1 points on the combined ratio compared to $1.8 million or 2.3
points in 2012.

For the six-month period ending June 30, 2013 gross premiums written were
$191.7 million compared to $200.4 million in 2012. Net premiums written were
$126.7 million compared to $141.0 million in 2012. Net premiums earned were
$150.5 million compared to $163.2 million in 2012. For the first six months of
2013 the segment recorded an underwriting loss of $1.8 million compared to a
loss of $20.2 million in the same period of 2012. The six-month 2013 combined
ratio, excluding catastrophe losses and reserve development, was 99.4%
compared to 98.8% in the first six months of 2012.

International Specialty

International Specialty reported a 14.0% rise in gross premiums written to
$96.1 million in the quarter, up from $84.3 million in the same period of 2012
due to the build out of our Brazilian operations and modestly higher premiums
at Argo Re, our short-tail reinsurance operation. Net premiums written rose
16.5% to $61.5 million in the current quarter. Net premiums earned were $36.4
million, up 23.8% from the year ago period. The segment underwriting profit
was $1.9 million compared to $7.8 million in 2012. The current quarter’s
underwriting results reflects a combined ratio of 94.3%, compared with 71.1%
in the second quarter of 2012. Net favorable prior-year reserve development
was $0.3 million, or 0.9 points, this quarter compared with $3.4 million, or
12.6 points, in the second quarter of 2012. Losses from catastrophe and U.S.
storms were $5.5 million or 17.1 points on the combined ratio in the current
quarter due to the European floods and U.S. storms. There was no impact from
catastrophes in the second quarter of 2012.

For the six-month period ending June 30, 2013, gross premiums written were up
22.8% to $174.3 million, net premiums written were up 14.7% to $93.7 million,
and net premiums earned rose 20.4% to $69.1 million. For the first six months
of 2013, the underwriting profit was $5.2 million compared to $10.5 million in
the same period of 2012. The six-month 2013 combined ratio, excluding
catastrophe losses and reserve development, was 82.2% compared to 83.8% in the
first six months of 2012.

Syndicate 1200

Syndicate 1200 reported a 20.7% increase in gross premiums written of $184.9
million in the quarter, up from $153.2 million in the same period of 2012.
Growth was driven by higher premium in Property and Liability business units.
Net premiums written rose 5.7% to $135.9 million in the current quarter. Net
premiums earned were $107.4 million, up 33.6% from $80.4 million in the year
ago period. The segment underwriting profit was $6.9 million compared to $0.9
million in the second quarter of 2012. The current quarter’s underwriting
results reflect an improvement in the combined ratio to 93.4%, compared with
98.9% in the second quarter of 2012. Net favorable prior-year reserve
development was $1.3 million, or 1.2 points, this quarter compared with $1.9
million, or 2.4 points, in the second quarter of 2012. There was no impact
from catastrophes in the current quarter or in the second quarter of 2012.

For the six-month period ending June 30, 2013, gross premiums written were up
12.6% to $311.0 million, net premiums written were up 21.6% to $210.0 million,
and net premiums earned rose 30.9% to $198.3 million. For the first six months
of 2013 the underwriting profit was $12.9 million compared to a loss of $1.5
million in the same period of 2012. The six-month 2013 combined ratio,
excluding catastrophe losses and reserve development, was 95.2% compared to
102.5% in the first six months of 2012.

CONFERENCE CALL

Argo Group management will conduct an investor conference call tomorrow,
August 7, 2013, starting at 11 a.m. EDT (Noon ADT).

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 (877)
261-8990 (pass code: 35329504). Callers dialing from outside the U.S. and
Canada can access the call by dialing (847) 619-6441 (pass code: 35329504).

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 August
14, 2013, to callers from inside the U.S. and Canada by dialing (888) 843-7419
(pass code: 3532 9504#). Callers dialing from outside the U.S. and Canada can
access the telephone replay by dialing (630) 652-3042 (pass code: 3532 9504#).

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 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), and Argo's U.S. insurance subsidiaries are
Standard and Poor's-rated 'A-' (Strong). 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)
                                                                          
                                             June 30,        December 31,
                                             2013            2012
                                             (unaudited)
Assets
Total investments                            $  3,985.4      $   4,200.7
Cash and cash equivalents                       102.0            95.8
Accrued investment income                       27.4             30.3
Receivables                                     1,698.3          1,681.9
Goodwill and intangible assets                  242.5            245.3
Deferred acquisition costs                      111.9            99.4
Ceded unearned premiums                         239.7            193.6
Other assets                                   168.1           141.9
Total assets                                 $  6,575.3      $   6,688.9
                                                                          
Liabilities and Shareholders' Equity
Reserves for losses and loss                 $  3,233.9      $   3,223.5
adjustment expenses
Unearned premiums                               809.7            730.2
Ceded reinsurance payable                       420.7            612.1
Senior unsecured fixed rate notes               143.8            143.8
Other indebtedness                              64.0             63.8
Junior subordinated debentures                  193.3            193.3
Other liabilities                              218.8           208.1
Total liabilities                               5,084.2          5,174.8
                                                                          
Total shareholders' equity                     1,491.1         1,514.1
Total liabilities and shareholders'          $  6,575.3      $   6,688.9
equity
                                                                          
Book Value per common share                  $  55.73        $   55.22    ^(1)
(unaudited)
                                                                          
(1) Book Value per common share adjusted for 10% stock
dividend.
                                                                          

                                                              
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
FINANCIAL HIGHLIGHTS
ALL SEGMENTS
(in millions, except per share amounts)
                       
                           Three Months Ended            Six Months Ended
                           June 30,                      June 30,
                           2013        2012              2013        2012
                           (unaudited)                   (unaudited)
                                                                     
Gross Written              $ 542.2     $ 474.2           $ 980.4     $ 870.5
Premiums
Net Written Premiums         390.2       361.5             669.2       602.7
                                                                     
Earned Premiums              327.5       290.2             631.7       567.5
Net Investment               25.3        30.0              53.2        61.4
Income
Net Realized
Investment                   11.0        (2.7  )           20.5        10.4
Gains/(Losses)
Fee Income, net             0.2       0.5             0.2       1.8   
Total Revenue                364.0       318.0             705.6       641.1
                                                                     
Losses and Loss              192.7       175.8             363.2       341.6
Adjustment Expenses
Other
Reinsurance-Related          4.7         6.9               9.8         13.8
Expenses
Underwriting,
Acquisition and              124.6       114.6             251.3       228.3
Insurance Expenses
Interest Expense             5.1         5.5               10.0        11.2
Foreign Currency            (5.9  )    (9.8  )          (9.0  )    (6.9  )
Exchange (Gain)/Loss
Total Expenses               321.2       293.0             625.3       588.0
                                                                     
Income Before Taxes          42.8        25.0              80.3        53.1
Income Tax Provision        11.1      1.0             15.9      9.5   
Net Income                 $ 31.7     $ 24.0           $ 64.4     $ 43.6  
                                                                     
                                                                     
Net Income per             $ 1.18     $ 0.85           $ 2.37     $ 1.53  
Common Share (Basic)
                                                                     
                                                                     
Net Income per
Common Share               $ 1.13     $ 0.84           $ 2.29     $ 1.51  
(Diluted)
                                                                     
Weighted Average
Common Shares:
Basic                       27.0      28.3            27.1      28.5  
Diluted                     28.0      28.7            28.1      28.9  
                                                                     

                                                                    
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
SEGMENT DATA
(in millions)
                                                          
                     Three Months Ended                Six months ended
                          June 30,                          June 30,
                          2013            2012              2013            2012
                          (unaudited)                       (unaudited)
Excess & Surplus
Lines
  Gross Written           $ 175.8         $ 143.9           $ 303.4         $ 251.2
  Premiums
  Net Written               138.0           117.7             238.8           206.6
  Premiums
  Earned Premiums           108.7           98.5              213.8           194.7
  Underwriting            $ 7.3           $ 11.3            $ 11.9          $ 19.5
  Income
  Net Investment            11.2            13.0              22.1            26.0
  Income
  Interest                 (1.8  )       (2.0  )         (3.4  )       (4.3  ) 
  Expense
  Operating
  Income Before           $ 16.7        $ 22.3          $ 30.6        $ 41.2   
  Taxes
  Loss Ratio                58.1            53.4              57.3            53.8
  Expense Ratio            35.1         35.2           37.1         36.2   
  GAAP Combined            93.2   %      88.6   %        94.4   %      90.0   %
  Ratio
Commercial
Specialty
  Gross Written           $ 85.6          $ 92.7            $ 191.7         $ 200.4
  Premiums
  Net Written               55.0            62.3              126.7           141.0
  Premiums
  Earned Premiums           75.3            81.2              150.5           163.2
  Underwriting            $ (2.8  )       $ (14.2 )         $ (1.8  )       $ (20.2 )
  Loss
  Net Investment            6.1             7.0               12.0            13.9
  Income
  Interest                  (0.9  )         (1.4  )           (1.8  )         (2.8  )
  Expense
  Fee
  (Expense)Income          (0.9  )       (0.2  )         (1.2  )       -      
  , net
  Operating
  Income (Loss)           $ 1.5         $ (8.8  )        $ 7.2         $ (9.1  ) 
  Before Taxes
  Loss Ratio                67.6            82.6              65.5            77.5
  Expense Ratio            36.2         34.8           35.7         34.9   
  GAAP Combined            103.8  %      117.4  %        101.2  %      112.4  %
  Ratio
International
Specialty
  Gross Written           $ 96.1          $ 84.3            $ 174.3         $ 141.9
  Premiums
  Net Written               61.5            52.8              93.7            81.7
  Premiums
  Earned Premiums           36.4            29.4              69.1            57.4
  Underwriting            $ 1.9           $ 7.8             $ 5.2           $ 10.5
  Income
  Net Investment            1.7             2.8               4.0             6.9
  Income
  Interest                 (0.8  )       (1.0  )         (1.6  )       (2.0  ) 
  Expense
  Operating
  Income Before           $ 2.8         $ 9.6           $ 7.6         $ 15.4   
  Taxes
  Loss Ratio                59.7            36.0              55.2            43.5
  Expense Ratio            34.6         35.1           36.9         36.6   
  GAAP Combined            94.3   %      71.1   %        92.1   %      80.1   %
  Ratio
Syndicate 1200
  Gross Written           $ 184.9         $ 153.2           $ 311.0         $ 276.3
  Premiums
  Net Written               135.9           128.6             210.0           172.7
  Premiums
  Earned Premiums           107.4           80.4              198.3           151.5
  Underwriting            $ 6.9           $ 0.9             $ 12.9          $ (1.5  )
  Income (Loss)
  Net Investment            2.8             3.7               5.6             7.6
  Income
  Interest                  (1.0  )         (0.8  )           (1.7  )         (1.7  )
  Expense
  Fee Income, net          1.1          0.7            1.4          1.8    
  Operating
  Income Before           $ 9.8         $ 4.5           $ 18.2        $ 6.2    
  Taxes
  Loss Ratio                56.4            58.7              55.1            57.7
  Expense Ratio            37.0         40.2           38.3         43.3   
  GAAP Combined            93.4   %      98.9   %        93.4   %      101.0  %
  Ratio
                                                                                      

                                                             
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
(in millions)
                                                                      
                                Three months ended        Six months ended June
                                June 30,                  30,
Net Prior Year                  2013        2012          2013        2012
Development
(Favorable)/Unfavorable
E&S                             $ (9.2  )   $ (12.4 )     $ (14.4 )   $ (21.7 )
Commercial Specialty              (1.0  )     13.4          0.1         18.0
International Specialty           (0.3  )     (3.4  )       0.6         (3.6  )
Syndicate 1200                    (1.3  )     (1.9  )       (3.5  )     (2.3  )
Run-off                          (1.0  )    0.2         (0.1  )    2.2   
Combined                        $ (12.8 )   $ (4.1  )     $ (17.3 )   $ (7.4  )
                                                                      
                                                                      
                                Three months ended        Six months ended June
                                June 30,                  30,
                                2013        2012          2013        2012
Catastrophe Losses ^
(1)
E&S                             $ 2.6       $ 2.1         $ 3.4       $ 2.2
Commercial Specialty              1.6         1.8           2.7         4.2
International Specialty           5.5         -             5.5         1.6
Syndicate 1200                   -         -           -         -     
Combined                        $ 9.7      $ 3.9        $ 11.6     $ 8.0   
                                                                      
^(1) net of reinsurance and 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          Six Months Ended
                           June 30,                    June 30,
                           2013          2012          2013          2012
                           (unaudited)                 (unaudited)
                                                                     
Income Before Taxes:
From Operations            $ 25.9        $ 17.9        $ 50.8        $ 35.8
Foreign Currency             5.9           9.8           9.0           6.9
Exchange Gain (Loss)
Net Realized                11.0        (2.7  )      20.5        10.4  
Investment Gains
Income Before Taxes          42.8          25.0          80.3          53.1
Income Tax Provision        11.1        1.0         15.9        9.5   
Net Income                 $ 31.7       $ 24.0       $ 64.4       $ 43.6  
                                                                     
                                                                     
Net Income per
Common Share               $ 1.13       $ 0.84       $ 2.29       $ 1.51  
(Diluted)
                                                                     
Operating Income per
Common Share
(Diluted)
    At Assumed Tax
    Rate:
    Income (Loss)            1.22          0.70          2.29          1.47
    (a)
    Foreign Currency
    Exchange (Gains)         (0.17 )       (0.27 )       (0.26 )       (0.19 )
    Loss (a)
    Net Realized
    Investment Gains        (0.31 )      0.08        (0.58 )      (0.29 )
    (a)
                                                                     
Operating Income per
Common Share                0.74        0.50        1.45        0.99  
(Diluted)
                                                                     
(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
Susan Spivak Bernstein, 212-607-8835
Senior Vice President, Investor Relations
 
Press spacebar to pause and continue. Press esc to stop.