Argo Group Reports Third Quarter Net Income of $31 Million, or $1.12 Per Diluted Share

  Argo Group Reports Third Quarter Net Income of $31 Million, or $1.12 Per
  Diluted Share

Business Wire

HAMILTON, Bermuda -- November 4, 2013

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

“Our third quarter results reflect another improved quarter for Argo showing
progress compared to a year ago,” said Argo Group CEO Mark E. Watson III. “Our
underwriting actions and investments in people and technology are producing
results across our business segments as we continue to see improvements in our
operating margins.”

HIGHLIGHTS FOR THE THIRD QUARTER ENDED SEPT. 30, 2013:

  *Gross written premiums were $495.1 million, an increase of $9.6 million or
    2.0% over 2012.
  *The combined ratio was 97.5% compared to 102.3% in 2012.
  *Net favorable prior-year reserve development was $4.2 million (benefiting
    the combined ratio by 1.3 points), compared with $10.4 million (benefiting
    the combined ratio by 3.5 points) in 2012.
  *Estimated pre-tax catastrophe losses were $11.3 million or 3.6 points on
    the combined ratio compared to $13.9 million or 4.6 points in the third
    quarter of 2012.
  *The current accident year loss ratio, excluding catastrophes, was 56.3%
    compared to 61.5% in 2012.
  *Net income was $31.0 million or $1.12 per diluted share compared to $13.4
    million or $0.47 per diluted share in 2012.
  *After-tax operating income ^ was $22.1 million or $0.80 per diluted share
    compared to $15.3 million or $0.54 per diluted share in 2012.
  *Book value per share increased 3% to $57.38 at Sept. 30, 2013 from $55.73
    at June 30, 2013 and 4% from $55.22 at December 31, 2012.
  *During the quarter the Company repurchased $8.6 million or 195,412 shares
    of its common stock at an average price of $44.22, which represents 0.7%
    of net shares outstanding at June 30, 2013.

HIGHLIGHTS FOR THE NINE MONTHS ENDED SEPT. 30, 2013:

  *Gross written premiums were $1.5 billion, an increase of $119.5 million or
    8.8% over 2012.
  *The combined ratio was 98.3% compared to 102.7% in 2012.
  *Net favorable prior-year reserve development was $21.5 million (benefiting
    the combined ratio by 2.3 points), compared with $17.8 million (benefiting
    the combined ratio by 2.1 points) in 2012.
  *Estimated pre-tax catastrophe losses were $22.9 million or 2.5 points on
    the combined ratio compared to $21.9 million or 2.5 points in 2012.
  *The current accident year loss ratio, excluding catastrophes, was 58.2%
    compared to 61.5% in 2012.
  *Net income was $95.4 million or $3.41 per diluted share compared to $57.0
    million or $1.98 per diluted share in 2012.
  *After-tax operating income ^ was $62.8 million or $2.24 per diluted share
    compared to $43.9 million or $1.53 per diluted share in 2012.
  *In the first nine months of 2013, the Company repurchased $38.7 million or
    948,988 shares of its common stock at an average share price of $40.80,
    which represents 3.8% of net shares outstanding at December 31, 2012.
  *At September 30, 2013, cash and investments totaled $4.2 billion with a
    net pre-tax unrealized gain of approximately $252.6 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 at an assumed 20% effective tax
    rate 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 written premiums of $139.4
million in the quarter, up $7.7 million or 5.8% from the third quarter of
2012. This quarter’s growth in certain casualty lines was offset by planned
reductions in our transportation lines. Net written premiums were up 5.3% to
$112.6 million, and earned premiums were up 19.6% to $120.6 million.
Underwriting income was $21.2 million for the quarter, compared to $4.9
million for the third quarter of 2012, reflecting a combined ratio of 82.2%
compared with 95.0% in the prior-year quarter. Net favorable prior-year
reserve development was $12.4 million in the third quarter of 2013 and
represented 10.4 points on the combined ratio compared to $11.8 million or
11.7 points in 2012. Losses from catastrophes and U.S. storms were $1.0
million or 0.8 points on the combined ratio compared to $7.8 million or 7.8
points in 2012.

For the nine-month period ending Sept. 30, 2013, gross written premiums were
up 15.6% to $442.8 million, net written premiums were up 12.1% to $351.4
million, and earned premiums rose to $334.4 million or 13.2% over the same
period in 2012. For the first nine months of 2013, underwriting income was
$33.1 million compared to $24.4 million in the same period of 2012. For the
nine months ended Sept. 30, 2013, net favorable prior-year reserve development
was $26.8 million compared to $33.5 million in the same period of 2012. The
nine-month 2013 combined ratio, excluding catastrophe losses and reserve
development, was 96.7% compared to 99.7% in the first nine months of 2012.

Commercial Specialty

Commercial Specialty for the third quarter reported gross written premiums
declined 4.3 % to $138.6 million from $144.8 million for the same period in
2012. The decline reflects our continuing re-underwriting efforts at Argo
Insurance and Trident to remove underperforming accounts. Net written premiums
for the quarter were down 5.8% to $100.9 million compared to $107.1 million in
the third quarter of 2012. Earned premiums for the quarter were down 5.1% to
$74.6 million compared to $78.6 million for the year-ago quarter. Underwriting
income for the third quarter of 2013 improved to $6.4 million compared to an
underwriting loss of $10.4 million in the third quarter of 2012. The combined
ratio was 91.5% compared to 113.1% in the year-ago quarter. The segment
reported net unfavorable prior-year reserve development in the quarter of $0.3
million or 0.4 points on the combined ratio, compared to unfavorable
prior-year reserve development of $0.6 million or 0.7 points in the third
quarter of 2012. Catastrophe losses were $1.0 million or 1.4 points on the
combined ratio compared to $3.7 million or 4.7 points in the prior-year
quarter.

For the nine-month period ending Sept. 30, 2013, gross written premiums were
$330.3 million compared to $345.2 million in the same period of 2012. Net
written premiums were $227.6 million in the first three quarters of 2013
compared to $248.1 million in the first three quarters of 2012, while earned
premiums were $225.1 million compared to $241.8 million in the first nine
months of 2012. The segment reported underwriting income of $4.6 million in
the first three quarters of 2013 compared to an underwriting loss of $30.6
million in the same period of 2012. The nine-month 2013 combined ratio,
excluding catastrophe losses and reserve development, was 96.1% compared to
101.6% in the first nine months of 2012.

International Specialty

International Specialty reported a 14.3% rise in gross written premiums to
$68.8 million in the quarter, up from $60.2 million in the same period of
2012. Growth was driven primarily by increases in our Brazilian unit as well
as in our Excess Casualty and Professional Lines units, somewhat offset by a
modest decline in the property catastrophe business written by Argo Re. Net
written premiums rose 12.7% to $41.6 million in the current quarter. Earned
premiums were $37.5 million, up 12.3% from the year-ago period. The segment
produced an underwriting loss of $1.1 million compared to an underwriting
profit of $4.6 million in 2012 reflecting higher catastrophe losses this year.
The current quarter’s underwriting results generated a combined ratio of
102.9%, compared with 85.4% in the third quarter of 2012. Net favorable
prior-year reserve development this quarter was $1.2 million or 3.4 points on
the combined ratio, compared to favorable prior-year reserve development of
$0.9 million or 2.9 points in the third quarter of 2012. Catastrophe losses
for the quarter were $9.3 million or 27.4 points on the combined ratio
stemming from German hailstorms and flood losses in Canada. For the third
quarter of 2012, the combined ratio was favorably impacted by a 2.0 point
reduction in the loss ratio due to a $0.6 million decrease in the Company’s
estimate of catastrophe events for the first half of 2012.

For the nine-month period ending Sept. 30, 2013, gross written premiums were
up 20.3% to $243.1 million, net written premiums were up 14.1% to $135.3
million, and earned premiums rose 17.4% to $106.6 million. For the first nine
months of 2013, underwriting profit was $4.1 million compared to $15.1 million
in the same period of 2012. The nine-month 2013 combined ratio, excluding
catastrophe losses and reserve development, was 81.0% compared to 86.2% in the
first nine months of 2012.

Syndicate 1200

Syndicate 1200 reported gross written premiums of $147.7 million in the
quarter, compared to $148.2 million in the same period of 2012. In the third
quarter, increases in the liability and specialty businesses were offset by
modest declines in property and aerospace. Net written premiums rose 5.4% to
$118.9 million in the current quarter. Earned premiums were $97.3 million, up
7.2% from $90.8 million in the year-ago period. The segment underwriting
profit was $5.5 million compared to $8.3 million in the third quarter of 2012.
The current quarter’s underwriting results reflect a combined ratio of 94.3%,
compared with 90.7% in the third quarter of 2012. Net favorable prior-year
reserve development was $0.6 million or 0.6 points on the combined ratio,
compared to favorable prior-year reserve development of $2.1 million or 2.3
points in the third quarter of 2012. There were no catastrophe losses in the
current quarter, compared to $3.0 million or 3.3 points on the combined ratio
in the third quarter of 2012.

For the nine-month period ending Sept. 30, 2013, gross written premiums were
up 8.1% to $458.7 million, net written premiums were up 15.2% to $328.9
million, and earned premiums rose 22.0% to $295.6 million. For the first nine
months of 2013, underwriting profit was $18.4 million compared to $6.8 million
in the same period of 2012. The nine-month 2013 combined ratio, excluding
catastrophe losses and reserve development, improved to 95.1% compared to
97.7% in the first nine months of 2012.

Run-off Segment – Argo Group’s Run-off segment includes financial results for
(a) asbestos and environmental liabilities; (b) the former Risk Management
segment; and (c) the legacy operations from the predecessor Bermuda operation.
For the third quarter of 2013, the Run-off segment produced a pre-tax
operating loss of $9.1 million compared to a pre-tax operating loss of $2.5
million for the third quarter of 2012. Run-off results for the third quarter
of 2013 include unfavorable prior-year loss development of $9.7 million
compared to unfavorable prior-year loss development of $3.8 million in the
third quarter of 2012. The unfavorable prior-year loss development in the
third quarter of 2013 included $5.7 million of unfavorable development in
asbestos driven by increased defense costs on policies written on a direct
basis, $2.0 million of unfavorable development from medical malpractice claims
due to the loss of funding from the New York Liquidation Bureau for structured
settlement annuity payments and $2.0 million in unfavorable development due to
the settlement of a late reported PXRE Hurricane Katrina claim. The
unfavorable prior-year loss development in the third quarter of 2012 included
$5.5 million of unfavorable development in asbestos and environmental which
was partially offset by favorable prior-year loss development in other Run-off
lines.

In the first nine months of 2013, the Run-off segment produced a pre-tax
operating loss of $5.8 million compared to a pre-tax operating loss of $1.5
million in the first nine months of 2012. Results for the first nine months of
2013 include unfavorable prior-year loss development of $9.6 million compared
to unfavorable prior-year loss development of $6.0 million in the first nine
months of 2012.

CONFERENCE CALL

Argo Group management will conduct an investor conference call tomorrow, Nov.
5, 2013, starting at 10 a.m. EST (11 a.m. AST).

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: 35939001). Callers dialing from outside the U.S. and
Canada can access the call by dialing (847) 619-6441 (pass code: 35939001).

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 Nov. 12,
2013, to callers from inside the U.S. and Canada by dialing (888) 843-7419
(pass code: 3593 9001#). Callers dialing from outside the U.S. and Canada can
access the telephone replay by dialing (630) 652-3042 (pass code: 3593 9001#).

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)
                                                        
                                           September 30,     December 31,
                                           2013              2012
                                           (unaudited)
Assets
Total investments                          $   4,050.2       $   4,200.7
Cash and cash equivalents                      141.6             95.8
Accrued investment income                      25.3              30.3
Receivables                                    1,683.6           1,681.9
Goodwill and intangible assets                 241.1             245.3
Deferred acquisition costs                     115.3             99.4
Ceded unearned premiums                        231.0             193.6
Other assets                                  162.5            141.9
Total assets                               $   6,650.6       $   6,688.9
                                                                          
Liabilities and Shareholders' Equity
Reserves for losses and loss               $   3,222.9       $   3,223.5
adjustment expenses
Unearned premiums                              847.0             730.2
Ceded reinsurance payable                      412.2             612.1
Senior unsecured fixed rate notes              143.8             143.8
Other indebtedness                             64.9              63.8
Junior subordinated debentures                 193.3             193.3
Other liabilities                             239.1            208.1
Total liabilities                              5,123.2           5,174.8
                                                                          
Total shareholders' equity                    1,527.4          1,514.1
Total liabilities and shareholders'        $   6,650.6       $   6,688.9
equity
                                                                          
Book Value per common share                $   57.38         $   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)
(unaudited)
                                                            
                             Three Months Ended      Nine Months Ended
                             September 30,           September 30,
                             2013        2012        2013            2012
                                                                     
Gross Written Premiums       $ 495.1     $ 485.5     $ 1,475.5       $ 1,356.0
Net Written Premiums           374.5       364.3       1,043.7         967.0
                                                                     
Earned Premiums                330.5       304.3       962.2           871.8
Net Investment Income          24.1        28.9        77.3            90.3
Net Realized Investment        9.1         8.3         29.6            18.7
Gains
Fee Income, net               0.3        3.0        0.5           4.8
Total Revenue                  364.0       344.5       1,069.6         985.6
                                                                     
Losses and Loss                190.9       186.3       554.1           527.9
Adjustment Expenses
Other
Reinsurance-Related            4.6         7.0         14.4            20.8
Expenses
Underwriting,
Acquisition and                126.7       118.0       378.0           346.3
Insurance Expenses
Interest Expense               5.1         5.8         15.1            17.0
Foreign Currency              3.8        9.7        (5.2    )      2.8
Exchange (Gain)/Loss
Total Expenses                 331.1       326.8       956.4           914.8
                                                                     
Income Before Taxes            32.9        17.7        113.2           70.8
Income Tax Provision          1.9        4.3        17.8          13.8
Net Income                   $ 31.0      $ 13.4      $ 95.4         $ 57.0
                                                                     
                                                                     
Net Income per Common        $ 1.16      $ 0.48      $ 3.54         $ 2.02
Share (Basic)
                                                                     
                                                                     
Net Income per Common        $ 1.12      $ 0.47      $ 3.41         $ 1.98
Share (Diluted)
                                                                     
Weighted Average Common
Shares:
Basic                         26.7       27.8       27.0          28.3
Diluted                       27.8       28.3       28.0          28.7



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

                         Three Months Ended        Nine Months Ended
                           September 30,               September 30,
                             2013        2012          2013        2012
                                                                     
Excess & Surplus Lines
Gross Written Premiums     $ 139.4       $ 131.7       $ 442.8       $ 382.9
Net Written Premiums         112.6         106.9         351.4         313.5
Earned Premiums              120.6         100.8         334.4         295.5
Underwriting Income        $ 21.2        $ 4.9         $ 33.1        $ 24.4
Net Investment Income        10.2          12.5          32.3          38.5
Interest Expense            (1.8  )      (2.3  )      (5.2  )      (6.6  )
Operating Income           $ 29.6       $ 15.1       $ 60.2       $ 56.3  
Before Taxes
Loss Ratio                   49.7          59.5          54.6          55.7
Expense Ratio               32.5        35.5        35.4        36.0  
GAAP Combined Ratio         82.2  %      95.0  %      90.0        91.7  %
Commercial Specialty
Gross Written Premiums     $ 138.6       $ 144.8       $ 330.3       $ 345.2
Net Written Premiums         100.9         107.1         227.6         248.1
Earned Premiums              74.6          78.6          225.1         241.8
Underwriting Income        $ 6.4         $ (10.4 )     $ 4.6         $ (30.6 )
(Loss)
Net Investment Income        5.6           6.7           17.6          20.6
Interest Expense             (1.0  )       (1.4  )       (2.8  )       (4.2  )
Fee (Expense)Income,        (0.9  )      2.4         (2.1  )      2.4   
net
Operating Income           $ 10.1       $ (2.7  )     $ 17.3       $ (11.8 )
(Loss) Before Taxes
Loss Ratio                   61.4          79.1          64.2          78.0
Expense Ratio               30.1        34.0        33.8        34.6  
GAAP Combined Ratio         91.5  %      113.1 %      98.0  %      112.6 %
International
Specialty
Gross Written Premiums     $ 68.8        $ 60.2        $ 243.1       $ 202.1
Net Written Premiums         41.6          36.9          135.3         118.6
Earned Premiums              37.5          33.4          106.6         90.8
Underwriting Income        $ (1.1  )     $ 4.6         $ 4.1         $ 15.1
(Loss)
Net Investment Income        2.4           3.1           6.4           10.0
Interest Expense            (0.8  )      (1.1  )      (2.4  )      (3.1  )
Operating Income           $ 0.5        $ 6.6        $ 8.1        $ 22.0  
Before Taxes
Loss Ratio                   73.2          48.0          61.5          45.2
Expense Ratio               29.7        37.4        34.4        36.9  
GAAP Combined Ratio         102.9 %      85.4  %      95.9  %      82.1  %
Syndicate 1200
Gross Written Premiums     $ 147.7       $ 148.2       $ 458.7       $ 424.5
Net Written Premiums         118.9         112.8         328.9         285.5
Earned Premiums              97.3          90.8          295.6         242.3
Underwriting Income        $ 5.5         $ 8.3         $ 18.4        $ 6.8
Net Investment Income        2.5           3.8           8.1           11.4
Interest Expense             (0.7  )       (0.9  )       (2.4  )       (2.6  )
Fee Income, net             1.2         0.6         2.6         2.4   
Operating Income           $ 8.5        $ 11.8       $ 26.7       $ 18.0  
Before Taxes
Loss Ratio                   52.3          51.0          54.2          55.2
Expense Ratio               42.0        39.7        39.5        41.9  
GAAP Combined Ratio         94.3  %      90.7  %      93.7  %      97.1  %



ARGO GROUP INTERNATIONAL HOLDINGS LTD
(in millions)
(unaudited)
                                                                         
                            For the Quarter Ended               For the Year Ended
Net Prior Year               9/30/2013       9/30/2012       9/30/2013       9/30/2012 
Development
(Favorable)/Unfavorable
E&S                         $ (12.4     )     $ (11.8     )     $ (26.8     )     $ (33.5     )
Commercial Specialty          0.3               0.6               0.4               18.6
International Specialty       (1.2      )       (0.9      )       (0.6      )       (4.5      )
Syndicate 1200                (0.6      )       (2.1      )       (4.1      )       (4.4      )
Run-off                      9.7             3.8             9.6             6.0       
Total                       $ (4.2      )     $ (10.4     )     $ (21.5     )     $ (17.8     )
                                                                                  
                                                                                  
                                                                                  
                            For the Quarter Ended               For the Year Ended
                             9/30/2013       9/30/2012       9/30/2013       9/30/2012 
Catastrophe Losses ^
(1)
E&S                         $ 1.0             $ 7.8             $ 4.4             $ 10.0
Commercial Specialty          1.0               3.7               3.7               7.9
International Specialty       9.3               (0.6      )       14.8              1.0
Syndicate 1200               -               3.0             -               3.0       
Total                       $ 11.3           $ 13.9           $ 22.9           $ 21.9      
                                                                                  
^(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)
(unaudited)

                         Three Months Ended        Nine Months Ended
                           September 30,               September 30,
                             2013        2012          2013        2012
                                                                     
Income Before Taxes:
From Operations            $ 27.6        $ 19.1        $ 78.4        $ 54.9
Foreign Currency             (3.8  )       (9.7  )       5.2           (2.8  )
Exchange Gain (Loss)
Net Realized                9.1         8.3         29.6        18.7  
Investment Gains
Income Before Taxes          32.9          17.7          113.2         70.8
Income Tax Provision        1.9         4.3         17.8        13.8  
Net Income                 $ 31.0       $ 13.4       $ 95.4       $ 57.0  
                                                                     
                                                                     
Net Income per Common      $ 1.12       $ 0.47       $ 3.41       $ 1.98  
Share (Diluted)
                                                                     
Operating Income per
Common Share (Diluted)
At Assumed Tax Rate:
Income (Loss) (a)            0.95          0.50          3.24          1.97
Foreign Currency
Exchange (Gains) Loss        0.11          0.27          (0.15 )       0.08
(a)
Net Realized                (0.26 )      (0.23 )      (0.85 )      (0.52 )
Investment Gains (a)
                                                                     
Operating Income per        0.80        0.54        2.24        1.53  
Common Share (Diluted)
                                                                     
(a) Per diluted share at assumed tax rate of 20%.

Contact:

Argo Group International Holdings, Ltd.
Susan Spivak Bernstein, 212-607-8835
Senior Vice President, Investor Relations
 
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