Argo Group Reports Q2 Net Income of $38.6 Million; $78.8 Million Half Year

August 5, 2014

The Bermuda-based Argo Group International Holdings, Ltd. reported net income for the second quarter of 2014 of $38.6 million or $1.45 per diluted share, compared to $31.7 million or $1.13 per diluted share for the second quarter of 2013. Net income for the first half of 2014 was $78.8 million or $2.94 per diluted share, compared to $64.4 million or $2.29 per diluted share for the first half of 2013.

Highlights for the second quarter were listed as follows:
– After-tax operating income was $23.8 million or $0.89 per diluted share, compared to $20.7 million or $0.74 per diluted share for the second quarter of 2013.
– Gross written premiums were $520.1 million compared to $542.2 million for the second quarter of 2013.
– The combined ratio was 95.8 percent compared to 98.3 percent for the second quarter of 2013.
– Net favorable prior-year reserve development was $14.4 million (benefiting the combined ratio by 4.3 points), compared with $12.8 million (benefiting the combined ratio by 4.0 points) for the second quarter of 2013.
– Estimated pre-tax catastrophe losses were $4.2 million or 1.3 points on the combined ratio, compared to $9.7 million or 3.1 points for the second quarter of 2013.
– The current accident year loss ratio excluding catastrophes was 58.1 percent, compared to 60.6 percent for the second quarter of 2013.
– Book value per share increased 4.2 percent to $62.80 from $60.29 at March 31, 2014, and 6.5 percent from $58.96 at Dec. 31, 2013.
– During the quarter the Company repurchased $23.9 million or 510,116 shares of its common stock at an average price of $46.84, which represents 1.9 percent of net shares outstanding at March 31, 2014.

Highlights for the six months ended June 30 were as follows:
– After-tax operating income was $48.9 million or $1.83 per diluted share, compared to $40.7 million or $1.45 per diluted share for the first half of 2013.
– Gross written premiums were $983.2 million, compared to $980.4 million for the first half of 2013.
– The combined ratio was 95.7 percent, compared to 98.8 percent for the first half of 2013.
– Net favorable prior-year reserve development was $23.3 million (benefiting the combined ratio by 3.5 points), compared to $17.3 million (benefiting the combined ratio by 2.8 points) for the first half of 2013.
– Estimated pre-tax catastrophe losses were $8.4 million or 1.3 points on the combined ratio, compared to $11.6 million or 1.9 points for the first half of 2013.
– The current accident year loss ratio excluding catastrophes was 57.8 percent, compared to 59.3 percent for the first half of 2013.
In the first half of 2014, the Company repurchased $31.4 million or 675,300 shares of its common stock at an average share price of $46.48, which represents 2.5 percent of net shares outstanding at Dec. 31, 2013.
– At June 30, 2014, cash and investments totaled $4.2 billion with a net pre-tax unrealized gain of approximately $284.8 million.

The earnings report also noted that “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. After-tax 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.”

Group CEO Mark E. Watson III commented: “Argo Group delivered another quarter of solid results despite the challenges of an increasingly competitive market environment. We remain focused on disciplined, profitable underwriting while growing our better performing books of business.”

Source: Argo Group

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