Argo Group Reports Q4 Net Income of $47.8 Million, FY $143.2 Million

February 13, 2014

Bermuda-based Argo Group International Holdings, Ltd. announced its financial results for the fourth quarter of 2013 and for the full year.

Highlights for the fourth quarter ended December 31, 2013 were listed as follows:

– Gross written premiums were $412.9 million, an increase of $23.2 million or 6.0 percent over the fourth quarter of 2012.

– The combined ratio was 95.2 percent compared to 109.6 percent in the fourth quarter of 2012.

– Net favorable prior-year reserve development was $12.1 million (benefiting the combined ratio by 3.6 points), compared with $9.6 million (benefiting the combined ratio by 3.2 points) in the fourth quarter of 2012.

– Estimated pre-tax catastrophe losses were negligible compared to $47.9 million or 16.3 points in the fourth quarter of 2012.

– The current accident year loss ratio, excluding catastrophes, was 59.4 percent compared to 58.1 percent in the fourth quarter of 2012.

– Net income was $47.8 million or $1.74 per diluted share compared to a net loss of $4.7 million or $0.17 per diluted share in the fourth quarter of 2012.

– After-tax operating income was $22.6 million or $0.82 per diluted share compared to an operating loss of $5.9 million or $0.21 per diluted share in the fourth quarter of 2012.

– Book value per share increased 3 percent to $58.96 from $57.38 at Sept. 30, 2013, and 7 percent from $55.22 at Dec. 31, 2012.

– During the quarter the Company repurchased $6.4 million or 149,744 shares of its common stock at an average price of $42.62, which represents 0.6 percent of net shares outstanding at Sept. 30, 2013.

Highlights for the full year 2013 were detailed as follows:

– Gross written premiums were $1.9 billion, an increase of $142.7 million or 8.2 percent over 2012.

– The combined ratio was 97.5 percent compared to 104.6 percent in 2012.

– Net favorable prior-year reserve development was $33.6 million (benefiting the combined ratio by 2.6 points), compared with $27.4 million (benefiting the combined ratio by 2.3 points) in 2012.

– Estimated pre-tax catastrophe losses were $22.7 million or 1.9 points on the combined ratio compared to $69.8 million or 6.2 points in 2012.

– The current accident year loss ratio, excluding catastrophes, was 58.6 percent compared to 60.6 percent in 2012.

– Net income was $143.2 million or $5.14 per diluted share compared to $52.3 million or $1.83 per diluted share in 2012.

– After-tax operating income was $85.4 million or $3.06 per diluted share compared to $38.0 million or $1.33 per diluted share in 2012.

– In 2013, the Company repurchased $45.1 million or 1.1 million shares of its common stock at an average share price of $41.04, which represents 4.4 percent of net shares outstanding at Dec. 31, 2012.

– At Dec. 31, 2013, cash and investments totaled $4.2 billion with a net pre-tax unrealized gain of approximately $243.2 million.

Argo’s earnings report also explained the several references. The report said: “All per share amounts, except share repurchase figures, are adjusted for the 10 percent 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 percent effective tax rate excluding net realized investment gains/losses and foreign currency exchange gains/losses.

“Prior year development for 2012 excludes $5.5 million of favorable development in the E&S segment related to unallocated loss adjustment expenses (ULAE).”

Group CEO Mark E. Watson III commented: “Strong fourth quarter results capped off a year of solid progress. Over the year, we achieved profitable top line growth and generated improved underwriting margins in all our businesses. We find ourselves well positioned to benefit from these themes as we enter the new year.”

Source: Argo Group International

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