Argo Group nets highest profit in two years
Specialty insurer Argo Group International Holdings Ltd., which has its U.S. headquarters in San Antonio, this week posted its largest quarterly profit in two years.
Bermuda-based Argo earned $29.8 million, or 78 cents a share, on $523.6 million in revenue for the three months ended March 31. That compares with a loss of $24.7 million, or 72 cents a share, on $434.4 million in revenue in the same period last year.
The latest quarterly earnings are the highest since Argo generated $91.2 million in net income in the first quarter of 2019.
It reversed last year’s quarterly loss and increased revenue even though gross written premiums fell to $756.4 million, or about 8.4 percent, from $825.9 million in the same period last year.
Argo attributed the drop in premiums to its exit from various nonstrategic and unprofitable business segments. It sold its reinsurance business Ariel Re, a European underwriting operation, and its U.S. grocery and retail business. It also is planning to exit businesses in Italy and Malta.
Excluding those businesses, Argo reported premiums rose 6.5
percent in the quarter.
The company said it has been refining its operations to focus on becoming a “highperforming” U.s.-focused specialty insurer. It has identified professional liability, casualty, construction, environmental, inland marine and surety bonds as the business segments with the best potential for growth.
“There are signs that parts of the economy are turning,” Chief Executive Kevin J. Rehnberg said Tuesday on a conference call with analysts. “This environment should allow us to grow in a disciplined manner while improving our (underwriting and profit) margins.”
Argo registered total catastrophe losses of $47.5 million in the first quarter. Of that, natural catastrophes accounted for $43.1 million of the losses. COVID-19 losses, which included claims related to business interruption insurance, were $4.4 million. The worst of COVID-19 may be behind Argo, however.
“Bear in mind that there may be some expenses at different times as we go into the future that show up just based on all the litigation that’s out there and the fact that some of this stuff may take three or four years to settle,” Rehnberg said. “But I think the majority of our exposure was seen last year.”
Argo has moved to reduce its catastrophe risk.
Its loss ratio, which assesses losses on claims to premiums earned, rose 1.4 percentage points to 66 percent at the end of the first quarter from a year ago. Ar go Chief Financial Officer Scott Kirt attributed the increase to higher catastrophe related losses.
The insurer’s combined ratio — which measures losses plus expenses to premiums earned — was 103.8 percent at the end of the first quarter versus a year ago when it was 103.2 percent. The figure is considered an easy way to measure an insurance company’s performance. Anything at or above 100 percent is considered bad, while anything below is considered good.
Last month, credit rating agency AM Best revised the outlook for Argo and its subsidiaries to “stable” from “negative.”
AM Best attributed the change to “all of the positive actions taken by management to address and resolve” a Securities and Exchange Commission investigation into Argo’s nondisclosure of compensation-related perks paid to its former CEO.
AM Best also cited Argo’s improved balance sheet and underwriting margin. The agency also took into account the material weaknesses in internal controls related to financial reporting that Argo disclosed in a regulatory filing last month.
Argo employs about 200 people in San Antonio. Its shares gained $2.05 to close at $54.95 Tuesday, the highest in 14 months. The shares have risen 25.7 percent this year.