Argo Reports 2015 Q2 Net Income of $27.9M, Compared to $38.6M in 2014

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Argo Group International Holdings Ltd. reports net income of $27.9 million or $0.98 per diluted share, compared to $38.6 million or $1.32 per diluted share for the second quarter of 2014.

“Argo Group’s second quarter results demonstrate continued momentum in the first half of 2015,” said CEO Mark E. Watson III. “The improvement in our underwriting income is a direct result of the ongoing focus on underwriting as well as a disciplined approach to profitable growth in our niche markets.”

Highlights for Argo Group’s second quarter and first half results include

Gross written premiums were up 7.2 percent to $557.8 million from $520.1 million in the second quarter of 2014. Gross written premiums during the first half were up 5.2 percent to $1.035 billion from $983.2 million in the first half of 2014.
After-tax operating income was $25.9 million or $0.91 per diluted share, compared to $23.7 million or $0.81 per diluted share for the second quarter of 2014. After-tax operating income for the first half was $55.4 million or $1.94 per diluted share, compared to $48.7 million or $1.65 per diluted share for the first half of 2014.
Net income was $27.9 million or $0.98 per diluted share, compared to $38.6 million or $1.32 per diluted share for the second quarter of 2014. Net income was $86.7 million or $3.03 per diluted share during the first half, compared to $78.8 million or $2.67 per diluted share for the first half of 2014.
Pre-tax underwriting income increased 12.0 percent to $15.9 million in the second quarter of 2015 from $14.2 million in 2014. Pre-tax underwriting income increased 29.6 percent to $37.2 million in the first half of 2015 from $28.7 million in 2014.
The combined ratio was 95.4 percent compared to 95.8 percent for the second quarter of 2014. The loss and expense ratios for the second quarter were 55.1 percent and 40.3 percent, respectively, compared to 55.1 percent and 40.7 percent for the second quarter of 2014. For the first half, the combined ratio was 94.5 percent, compared to 95.7 percent for the first half of 2014. The loss and expense ratios for the first half of 2015 were 55.0 percent and 39.5 percent, respectively, compared to 55.6 percent and 40.1 percent for the first half of 2014.
Included in underwriting expenses was a non-cash, equity-based compensation charge of $10.4 million (representing 3.0 combined ratio points), compared to $6.8 million (representing 2.0 combined ratio points) in the second quarter of 2014, resulting from the increase in the Company’s stock price during the quarter of each year. For the first half, underwriting expenses included a non-cash, equity-based compensation charge of $15.3 million, (representing 2.2 combined ratio points), compared to $11.1 million (representing 1.6 combined ratio points), resulting from the increase in the company’s stock price during the first six months of each year.
Net favorable prior-year reserve development was $5.0 million (benefiting the combined ratio by 1.4 points) during the second quarter, compared with $14.4 million (benefiting the combined ratio by 4.3 points) for the same period in 2014. For the first half of this year, net favorable prior-year reserve development was $8.7 million (benefiting the combined ratio by 1.3 points), compared with $23.3 million (benefiting the combined ratio by 3.5 points) for the first half of 2014.
Estimated pre-tax catastrophe losses were $2.3 million or 0.6 points on the combined ratio during the second quarter, compared to $4.2 million or 1.3 points on the combined ratio for the second quarter of 2014. Estimated pre-tax catastrophe losses were $5.3 million or 0.8 points on the combined ratio, compared to $8.4 million or 1.3 points on the combined ratio for the first half of 2014.
The loss ratio excluding catastrophes and reserve development was 55.9 percent for the second quarter of 2015, compared to 58.1 percent for the second quarter of 2014. During the first half, the current accident year loss ratio excluding catastrophes was 55.5 percent, compared to 57.8 percent for the first half of 2014.
During the quarter, the company repurchased $6.8 million or 136,042 shares of its common stock at an average price of $49.80 per share. In the first half of 2015, the company repurchased $24.9 million or 489,096 shares of its common stock at an average share price of $50.93, which represents 1.7 percent of net shares outstanding at December 31, 2014.
At June 30, 2015, cash and investments totaled $4.2 billion with a net pre-tax unrealized gain of approximately $166.5 million.