Argonaut Group Sees Increased Revenue and Profits in Q1

May 2, 2006

Argonaut Group Inc., based in San Antonio, Texas, announced financial results for the three months ended March 31, 2006, and reported that its pre-tax operating income increased 35 percent to a record $31.2 million.

Other highlights for the 2006 first quarter include: Gross written premiums were $269.2 million, a 30 percent increase versus $206.7 million in last year’s first quarter; earned premiums were up 23 percent for the first quarter; investment income rose to $24.7 million, a 25 percent increase over the first quarter of 2005; and cash flow from operations was $48.8 million, compared to $53.6 million in the first quarter a year ago.

Argonaut Group President and CEO Mark E. Watson III said, “Broader market penetration in selected niche business areas and a continued focus on strong underwriting fundamentals produced excellent first quarter financial results, particularly in our two largest segments, Excess & Surplus Lines and Select Markets.”

For the first quarter of 2006, Argonaut Group reported net income of $20.5 million; this compares to 2005 first quarter net income of $26.0 million.

Total revenue, which includes gains and losses on sales of investments, was $224.6 million during the first quarter of 2006, compared to $183.8 million for the same period in 2005, or a 22.2 percent increase.

Earned premiums for the three months ended March 31, 2006 were $199.9 million compared to $162.1 million for the same quarter in 2005, a 23.3 percent increase.

Total revenue includes realized gains and losses on the sales of investments, which were zero, and $1.9 million respectively for the first quarters of 2006 and 2005.

The Group combined ratio for the first quarter of 2006 was 95.2 percent, versus 95.6 percent for the same three-month period in 2005. Included in the combined ratio for the first quarter of 2006 are losses of $4.3 million associated with catastrophes in March 2006. The combined ratios for Excess and Surplus Lines, Select Markets and Public Entity for the quarter were 93.4 percent, 93.9 percent, and 92.2 percent, respectively.

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