Bermuda
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1-15259
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98-0214719
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(I.R.S. Employer
Identification No.)
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110 Pitts Bay Road
Pembroke HM 08
Bermuda
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P.O. Box HM 1282
Hamilton HM FX
Bermuda
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(Address, Including Zip Code,
of Principal Executive Offices)
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(Mailing Address)
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ITEM 2.02.
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RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
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ITEM 9.01.
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FINANCIAL STATEMENTS AND EXHIBITS.
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99.1
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Press Release issued by Argo Group International Holdings, Ltd. dated November 4, 2013.
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ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
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By:
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/s/ Jay S. Bullock | |
Dated: November 4, 2013
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Name: Jay S. Bullock | ||
Title: Executive Vice President and Chief Financial Officer |
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Gross written premiums were $495.1 million, an increase of $9.6 million or 2.0% over 2012.
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The combined ratio was 97.5% compared to 102.3% in 2012.
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Net favorable prior-year reserve development was $4.2 million (benefiting the combined ratio by 1.3 points), compared with $10.4 million (benefiting the combined ratio by 3.5 points) in 2012.
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Estimated pre-tax catastrophe losses were $11.3 million or 3.6 points on the combined ratio compared to $13.9 million or 4.6 points in the third quarter of 2012.
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The current accident year loss ratio, excluding catastrophes, was 56.3% compared to 61.5% in 2012.
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Net income was $31.0 million or $1.12 per diluted share compared to $13.4 million or $0.47 per diluted share in 2012.
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After-tax operating income was $22.1 million or $0.80 per diluted share compared to $15.3 million or $0.54 per diluted share in 2012.
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Book value per share increased 3% to $57.38 at Sept. 30, 2013 from $55.73 at June 30, 2013 and 4% from $55.22 at December 31, 2012.
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During the quarter the Company repurchased $8.6 million or 195,412 shares of its common stock at an average price of $44.22, which represents 0.7% of net shares outstanding at June 30, 2013.
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Gross written premiums were $1.5 billion, an increase of $119.5 million or 8.8% over 2012.
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The combined ratio was 98.3% compared to 102.7% in 2012.
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Net favorable prior-year reserve development was $21.5 million (benefiting the combined ratio by 2.3 points), compared with $17.8 million (benefiting the combined ratio by 2.1 points) in 2012.
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Estimated pre-tax catastrophe losses were $22.9 million or 2.5 points on the combined ratio compared to $21.9 million or 2.5 points in 2012.
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The current accident year loss ratio, excluding catastrophes, was 58.2% compared to 61.5% in 2012.
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Net income was $95.4 million or $3.41 per diluted share compared to $57.0 million or $1.98 per diluted share in 2012.
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After-tax operating income was $62.8 million or $2.24 per diluted share compared to $43.9 million or $1.53 per diluted share in 2012.
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In the first nine months of 2013, the Company repurchased $38.7 million or 948,988 shares of its common stock at an average share price of $40.80, which represents 3.8% of net shares outstanding at December 31, 2012.
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At September 30, 2013, cash and investments totaled $4.2 billion with a net pre-tax unrealized gain of approximately $252.6 million.
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All per share amounts, except share repurchase figures, are adjusted for the 10% stock dividend that was paid on June 17, 2013 to stockholders of record on June 3, 2013.
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All references to catastrophe losses are pre-tax and net of reinsurance and estimated reinstatement premiums. Point impacts on the combined ratio are calculated as the difference between the reported combined ratio and the combined ratio excluding incurred catastrophe losses and associated reinstatement premiums.
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Operating income is defined as net income at an assumed 20% effective tax rate excluding net realized investment gains/losses and foreign currency exchange gains/losses.
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ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
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CONSOLIDATED BALANCE SHEETS
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(in millions, except per share amounts)
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September 30,
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December 31,
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||||||||
2013
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2012
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(unaudited)
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Assets
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Total investments
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$ | 4,050.2 | $ | 4,200.7 | |||||
Cash and cash equivalents
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141.6 | 95.8 | |||||||
Accrued investment income
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25.3 | 30.3 | |||||||
Receivables
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1,683.6 | 1,681.9 | |||||||
Goodwill and intangible assets
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241.1 | 245.3 |
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Deferred acquisition costs
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115.3 | 99.4 | |||||||
Ceded unearned premiums
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231.0 | 193.6 | |||||||
Other assets
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162.5 | 141.9 | |||||||
Total assets
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$ | 6,650.6 | $ | 6,688.9 | |||||
Liabilities and Shareholders' Equity
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Reserves for losses and loss adjustment expenses
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$ | 3,222.9 | $ | 3,223.5 | |||||
Unearned premiums
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847.0 | 730.2 | |||||||
Ceded reinsurance payable
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412.2 | 612.1 | |||||||
Senior unsecured fixed rate notes
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143.8 | 143.8 | |||||||
Other indebtedness
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64.9 | 63.8 | |||||||
Junior subordinated debentures
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193.3 | 193.3 | |||||||
Other liabilities
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239.1 | 208.1 | |||||||
Total liabilities
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5,123.2 | 5,174.8 | |||||||
Total shareholders' equity
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1,527.4 | 1,514.1 | |||||||
Total liabilities and shareholders' equity
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$ | 6,650.6 | $ | 6,688.9 | |||||
Book Value per common share (unaudited)
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$ | 57.38 | $ | 55.22 |
(1)
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(1) Book Value per common share adjusted for 10% stock dividend.
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ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
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FINANCIAL HIGHLIGHTS
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ALL SEGMENTS
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(in millions, except per share amounts)
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(unaudited)
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Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
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2013
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2012
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2013
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2012
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Gross Written Premiums
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$ | 495.1 | $ | 485.5 | $ | 1,475.5 | $ | 1,356.0 | ||||||||
Net Written Premiums
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374.5 | 364.3 | 1,043.7 | 967.0 | ||||||||||||
Earned Premiums
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330.5 | 304.3 | 962.2 | 871.8 | ||||||||||||
Net Investment Income
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24.1 | 28.9 | 77.3 | 90.3 | ||||||||||||
Net Realized Investment Gains
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9.1 | 8.3 | 29.6 | 18.7 | ||||||||||||
Fee Income, net
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0.3 | 3.0 | 0.5 | 4.8 | ||||||||||||
Total Revenue
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364.0 | 344.5 | 1,069.6 | 985.6 | ||||||||||||
Losses and Loss Adjustment Expenses
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190.9 | 186.3 | 554.1 | 527.9 | ||||||||||||
Other Reinsurance-Related Expenses
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4.6 | 7.0 | 14.4 | 20.8 | ||||||||||||
Underwriting, Acquisition and Insurance Expenses
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126.7 | 118.0 | 378.0 | 346.3 | ||||||||||||
Interest Expense
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5.1 | 5.8 | 15.1 | 17.0 | ||||||||||||
Foreign Currency Exchange (Gain)/Loss
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3.8 | 9.7 | (5.2 | ) | 2.8 | |||||||||||
Total Expenses
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331.1 | 326.8 | 956.4 | 914.8 | ||||||||||||
Income Before Taxes
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32.9 | 17.7 | 113.2 | 70.8 | ||||||||||||
Income Tax Provision
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1.9 | 4.3 | 17.8 | 13.8 | ||||||||||||
Net Income
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$ | 31.0 | $ | 13.4 | $ | 95.4 | $ | 57.0 | ||||||||
Net Income per Common Share (Basic)
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$ | 1.16 | $ | 0.48 | $ | 3.54 | $ | 2.02 | ||||||||
Net Income per Common Share (Diluted)
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$ | 1.12 | $ | 0.47 | $ | 3.41 | $ | 1.98 | ||||||||
Weighted Average Common Shares:
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Basic
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26.7 | 27.8 | 27.0 | 28.3 | ||||||||||||
Diluted
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27.8 | 28.3 | 28.0 | 28.7 |
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
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SEGMENT DATA
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(in millions)
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(unaudited)
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Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
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2013
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2012
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2013
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2012
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Excess & Surplus Lines
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Gross Written Premiums
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$ | 139.4 | $ | 131.7 | $ | 442.8 | $ | 382.9 | ||||||||
Net Written Premiums
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112.6 | 106.9 | 351.4 | 313.5 | ||||||||||||
Earned Premiums
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120.6 | 100.8 | 334.4 | 295.5 | ||||||||||||
Underwriting Income
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$ | 21.2 | $ | 4.9 | $ | 33.1 | $ | 24.4 | ||||||||
Net Investment Income
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10.2 | 12.5 | 32.3 | 38.5 | ||||||||||||
Interest Expense
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(1.8 | ) | (2.3 | ) | (5.2 | ) | (6.6 | ) | ||||||||
Operating Income Before Taxes
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$ | 29.6 | $ | 15.1 | $ | 60.2 | $ | 56.3 | ||||||||
Loss Ratio
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49.7 | 59.5 | 54.6 | 55.7 | ||||||||||||
Expense Ratio
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32.5 | 35.5 | 35.4 | 36.0 | ||||||||||||
GAAP Combined Ratio
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82.2 | % | 95.0 | % | 90.0 | 91.7 | % | |||||||||
Commercial Specialty
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Gross Written Premiums
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$ | 138.6 | $ | 144.8 | $ | 330.3 | $ | 345.2 | ||||||||
Net Written Premiums
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100.9 | 107.1 | 227.6 | 248.1 | ||||||||||||
Earned Premiums
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74.6 | 78.6 | 225.1 | 241.8 | ||||||||||||
Underwriting Income (Loss)
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$ | 6.4 | $ | (10.4 | ) | $ | 4.6 | $ | (30.6 | ) | ||||||
Net Investment Income
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5.6 | 6.7 | 17.6 | 20.6 | ||||||||||||
Interest Expense
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(1.0 | ) | (1.4 | ) | (2.8 | ) | (4.2 | ) | ||||||||
Fee (Expense)Income, net
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(0.9 | ) | 2.4 | (2.1 | ) | 2.4 | ||||||||||
Operating Income (Loss) Before Taxes
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$ | 10.1 | $ | (2.7 | ) | $ | 17.3 | $ | (11.8 | ) | ||||||
Loss Ratio
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61.4 | 79.1 | 64.2 | 78.0 | ||||||||||||
Expense Ratio
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30.1 | 34.0 | 33.8 | 34.6 | ||||||||||||
GAAP Combined Ratio
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91.5 | % | 113.1 | % | 98.0 | % | 112.6 | % | ||||||||
International Specialty
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Gross Written Premiums
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$ | 68.8 | $ | 60.2 | $ | 243.1 | $ | 202.1 | ||||||||
Net Written Premiums
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41.6 | 36.9 | 135.3 | 118.6 | ||||||||||||
Earned Premiums
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37.5 | 33.4 | 106.6 | 90.8 | ||||||||||||
Underwriting Income (Loss)
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$ | (1.1 | ) | $ | 4.6 | $ | 4.1 | $ | 15.1 | |||||||
Net Investment Income
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2.4 | 3.1 | 6.4 | 10.0 | ||||||||||||
Interest Expense
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(0.8 | ) | (1.1 | ) | (2.4 | ) | (3.1 | ) | ||||||||
Operating Income Before Taxes
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$ | 0.5 | $ | 6.6 | $ | 8.1 | $ | 22.0 | ||||||||
Loss Ratio
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73.2 | 48.0 | 61.5 | 45.2 | ||||||||||||
Expense Ratio
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29.7 | 37.4 | 34.4 | 36.9 | ||||||||||||
GAAP Combined Ratio
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102.9 | % | 85.4 | % | 95.9 | % | 82.1 | % | ||||||||
Syndicate 1200
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Gross Written Premiums
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$ | 147.7 | $ | 148.2 | $ | 458.7 | $ | 424.5 | ||||||||
Net Written Premiums
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118.9 | 112.8 | 328.9 | 285.5 | ||||||||||||
Earned Premiums
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97.3 | 90.8 | 295.6 | 242.3 | ||||||||||||
Underwriting Income
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$ | 5.5 | $ | 8.3 | $ | 18.4 | $ | 6.8 | ||||||||
Net Investment Income
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2.5 | 3.8 | 8.1 | 11.4 | ||||||||||||
Interest Expense
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(0.7 | ) | (0.9 | ) | (2.4 | ) | (2.6 | ) | ||||||||
Fee Income, net
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1.2 | 0.6 | 2.6 | 2.4 | ||||||||||||
Operating Income Before Taxes
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$ | 8.5 | $ | 11.8 | $ | 26.7 | $ | 18.0 | ||||||||
Loss Ratio
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52.3 | 51.0 | 54.2 | 55.2 | ||||||||||||
Expense Ratio
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42.0 | 39.7 | 39.5 | 41.9 | ||||||||||||
GAAP Combined Ratio
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94.3 | % | 90.7 | % | 93.7 | % | 97.1 | % |
ARGO GROUP INTERNATIONAL HOLDINGS LTD
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(in millions)
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(unaudited)
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For the Quarter Ended
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For the Year Ended
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Net Prior Year Development
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9/30/2013
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9/30/2012
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9/30/2013
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9/30/2012
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(Favorable)/Unfavorable
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E&S
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$ | (12.4 | ) | $ | (11.8 | ) | $ | (26.8 | ) | $ | (33.5 | ) | ||||
Commercial Specialty
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0.3 | 0.6 | 0.4 | 18.6 | ||||||||||||
International Specialty
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(1.2 | ) | (0.9 | ) | (0.6 | ) | (4.5 | ) | ||||||||
Syndicate 1200
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(0.6 | ) | (2.1 | ) | (4.1 | ) | (4.4 | ) | ||||||||
Run-off
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9.7 | 3.8 | 9.6 | 6.0 | ||||||||||||
Total
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$ | (4.2 | ) | $ | (10.4 | ) | $ | (21.5 | ) | $ | (17.8 | ) |
For the Quarter Ended
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For the Year Ended
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9/30/2013
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9/30/2012
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9/30/2013
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9/30/2012
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Catastrophe Losses (1)
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E&S
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$ | 1.0 | $ | 7.8 | $ | 4.4 | $ | 10.0 | ||||||||
Commercial Specialty
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1.0 | 3.7 | 3.7 | 7.9 | ||||||||||||
International Specialty
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9.3 | (0.6 | ) | 14.8 | 1.0 | |||||||||||
Syndicate 1200
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- | 3.0 | - | 3.0 | ||||||||||||
Total
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$ | 11.3 | $ | 13.9 | $ | 22.9 | $ | 21.9 | ||||||||
(1) net of reinstatement premiums
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ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
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RECONCILIATION OF OPERATING INCOME (LOSS) TO NET INCOME (LOSS)
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(in millions, except per share amounts)
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(unaudited)
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Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
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2013
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2012
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2013
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2012
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Income Before Taxes:
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From Operations
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$ | 27.6 | $ | 19.1 | $ | 78.4 | $ | 54.9 | ||||||||
Foreign Currency Exchange Gain (Loss)
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(3.8 | ) | (9.7 | ) | 5.2 | (2.8 | ) | |||||||||
Net Realized Investment Gains
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9.1 | 8.3 | 29.6 | 18.7 | ||||||||||||
Income Before Taxes
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32.9 | 17.7 | 113.2 | 70.8 | ||||||||||||
Income Tax Provision
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1.9 | 4.3 | 17.8 | 13.8 | ||||||||||||
Net Income
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$ | 31.0 | $ | 13.4 | $ | 95.4 | $ | 57.0 | ||||||||
Net Income per Common Share (Diluted)
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$ | 1.12 | $ | 0.47 | $ | 3.41 | $ | 1.98 | ||||||||
Operating Income per Common Share (Diluted)
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At Assumed Tax Rate:
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Income (Loss) (a)
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0.95 | 0.50 | 3.24 | 1.97 | ||||||||||||
Foreign Currency Exchange (Gains) Loss (a)
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0.11 | 0.27 | (0.15 | ) | 0.08 | |||||||||||
Net Realized Investment Gains (a)
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(0.26 | ) | (0.23 | ) | (0.85 | ) | (0.52 | ) | ||||||||
Operating Income per Common Share (Diluted)
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0.80 | 0.54 | 2.24 | 1.53 | ||||||||||||
(a) Per diluted share at assumed tax rate of 20%.
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