 Investor Presentation
Jay S. Bullock, CFO
September 7, 2011
Exhibit 99.1 |
 2.
Forward-Looking Statements
This
presentation
contains
“forward-looking
statements”
which
are
made
pursuant
to
the
safe
harbor
provisions of the Private Securities Litigation Reform Act of 1995. The
forward-looking statements are based on the Company's current
expectations and beliefs concerning future developments and their
potential
effects
on
the
Company.
There
can
be
no
assurance
that
actual
developments
will
be
those
anticipated
by
the
Company.
Actual
results
may
differ
materially
from
those
projected
as
a
result
of
significant risks and uncertainties, including non-receipt of the expected
payments, changes in interest rates, effect of the performance of financial
markets on investment income and fair values of investments, development of
claims and the effect on loss reserves, accuracy in projecting loss
reserves, the impact of competition and pricing environments, changes in the demand
for the Company's products, the effect of general economic conditions,
adverse state and federal legislation, regulations and regulatory
investigations into industry practices, developments relating to existing
agreements, heightened competition, changes in pricing environments, and
changes in asset valuations. The Company undertakes no obligation to
publicly update any forward-looking statements as a result of events or
developments subsequent to the presentation. |
 Argo
Group – About Us
International Specialty Underwriter of P&C Insurance
and Reinsurance Risks
•
Business
platform
is
comprised
of
four
distinct
businesses;
Each
fully
accountable
•
Core U.S. businesses are profitable
•
International platform supports corporate objectives of growth, profitability
and diversification.
First and Foremost an Underwriting Company
•
Underwriting results ex. CATS in the 1H of 2011 were good in spite of
competition •
Five-year (2006-10) average combined ratio was 98.7% vs. 99.4%
(industry) Solid Financial Strength (Balance Sheet)
•
Rated
‘A’
(Excellent)
by
A.M.
Best
(Class
Size
XII)
1
•
Conservatively capitalized/modest use of financial leverage
1
Argo P/C Insurance & reinsurance operations
3. |
 Our
Strategy •
Become a recognized worldwide leader of custom insurance and
reinsurance solutions for our clients
•
Create a competitive advantage through superior customer service,
product innovation and underwriting knowledge
•
Achieve profitable growth organically and/or through opportunistic
acquisitions throughout the cycle
•
Manage capital and risk appropriately / maintain strong ratings
•
Hire top tier talent to support our strategy
4.
Maximize shareholder value through growth in book value per share
|
 BVPS Growth Since 2002
*2011-Q2 impacted primarily by tornado activity in Missouri and Alabama
totaling $31.9M (net of reinstatement premiums). **Book
value
per
common
share
-
outstanding,
includes
the
impact
of
the
Series
A
Mandatory
Convertible
Preferred
Stock
on
an
as
if
converted
basis. Preferred stock had fully converted into common shares as of Dec. 31,
2007. Our Track Record:
Maximizing Shareholder Value
5.
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011-Q2
$23,40
$27.22
$30.36
$33.52
$39.08
$45.15
$44.18
$52.36
$58.41
$56.65* |
 Commercial Specialty Segment
Pre-Tax
Operating
Income
(Data
in
Millions)
and
Combined
Ratio
6.
About Us
•
Designs customized commercial insurance
programs for grocers, fabricare, restaurants
and other specialty retail clients
•
2
largest provider of commercial insurance
to small and midsize U.S. public entities
•
2
largest provider of commercial insurance
to the coal mine industry
•
Distributes products direct, through
wholesalers and independent agents
NWP by Business Unit
nd
nd |
 Q2
NWP By Business Unit About Us
Excess & Surplus Lines Segment
7.
Pre-Tax
Operating
Income
(Data
in
Millions)
and
Combined
Ratio
•
Ranked among the top 10 E&S carriers
in the U.S. based on 2010 DWP
•
Strong relationships with national,
local and regional wholesale brokers
•
Target market is non-standard
(hard-to-place) risks
•
U/W expertise is a competitive advantage |
 Syndicate 1200
About Us
8.
Gross
Written
Premiums
(Millions)
Q2 NWP by Line of Business
Primary Classes of Business
•
Property (D&F)
•
Professional Lines
•
Aviation
•
Energy & Marine
Mix of Business:
•
Worldwide property (67% of GPW)
•
Non-U.S. liability (33% of GPW)
Lloyd’s Rated:
•
‘A’
(Excellent) by A.M. Best
•
‘A+’
(Strong) by S&P |
 International Specialty
About Us
Gross Written Premium
9.
Q2 NWP by Line of Business
Operating Income (Data in Millions)
and Combined Ratio
•
Underwrites excess casualty & professional
lines insurance, property CAT, property per
risk and proportional property treaty
reinsurance worldwide
•
Established regional office in Dubai
•
Establishing operations in Brazil
•
History of strong U/W profits
•
Distributes through brokers |
 Argo Group Q2 2011 Financial Highlights
CONSOLIDATED GAAP VIEW
Net written premium decreased 14.5% in the quarter.
•
Marketplace still undisciplined
•
Will continue to exit or walk away from unattractively priced risks
The combined ratio before CATS and PY reserve development
97.2%
vs.
100.9%
in
Q2
2010.
•
Underlying results remain strong despite the competitive market
•
Pre-tax losses from Q2 CATS were $31.9 million (net of estimated
reinstatement premiums), compared to pre-tax losses in Q2 2010
of $15.1 million (net of estimated reinstatement
premiums) •
Previous actions to de-risk the portfolio not yet reflected in results
10.
Book
value
per
share
(BVPS)
was
$56.65
at
June
30,
2011,
an increase from 54.76 at June 30, 2010.
$ |
 Q2’2011 Financial Highlights
CONSOLIDATED GAAP VIEW
11.
($ in millions)
Operating Income
For the Quarter Ended
6/30/2011
6/30/2010
Pre-tax
operating
income
(before
CATs
&
PY
development)
1
35.2
24.4
CATs, net of estimated reinstatement premium
(31.9)
(15.1)
Prior year reserve (increase) / decrease
1.1
9.3
Pre-tax operating income
4.4
18.6
Combined Ratio
For the Quarter Ended
6/30/2011
6/30/2010
Loss Ratio (before CATs & PY development)
59.1%
64.6%
Expense Ratio
38.1%
36.3%
Combined Ratio (before CATs & PY development)
97.2%
100.9%
CATs, net of estimated reinstatement premium
11.7%
4.8%
Prior year reserve increase / (decrease)
-0.3%
-3.0%
Total Combined Ratio
108.6%
102.7%
1
Also excludes realized capital gains / (losses) and foreign exchange gains /
(losses). Note: All CATS and all associated calculations in the table are
adjusted for reinstatement premium. |
 H1’2011 Financial Highlights
CONSOLIDATED GAAP VIEW
12.
($ in millions)
Operating Income
For the Six Months Ended
6/30/2011
6/30/2010
Pre-tax
operating
income
(before
CATs
&
PY
development)
1
$62.6
$54.4
CATs, net of estimated reinstatement premium
(144.9)
(43.9)
Prior year reserve (increase) / decrease
(3.6)
20.3
Pre-tax operating income
($85.9)
$30.8
Combined Ratio
For the Six Months Ended
6/30/2011
6/30/2010
Loss Ratio (before CATs & PY development)
59.4%
62.3%
Expense Ratio
39.3%
37.9%
Combined Ratio (before CATs & PY development)
98.7%
100.2%
CATs, net of estimated reinstatement premium
27.1%
6.9%
Prior year reserve increase / (decrease)
0.8%
-3.3%
Total Combined Ratio
126.6%
103.8%
1
Also excludes realized capital gains / (losses) and foreign exchange gains /
(losses). Note: All CATS and all associated calculations in the table are
adjusted for reinstatement premium. |
  Balance Sheet
CONSOLIDATED GAAP VIEW
13.
($ in millions)
June 30,
December 31,
%
2011
2010
Variance
(unaudited)
Total investments
4,298.9
$
4,215.4
$
2.0%
Cash and cash equivalents
49.0
83.5
(41.3%)
Accrued investment income
32.7
33.5
(2.4%)
Receivables
1,433.6
1,505.7
(4.8%)
Goodwill and intangible assets
247.1
249.1
(0.8%)
Deferred acquisition costs
135.4
139.7
(3.1%)
Ceded unearned
premiums
195.9
164.0
19.5%
Other assets
121.1
97.6
24.1%
6,513.7
$
6,488.5
$
0.4%
Reserves for losses and loss adjustment expenses
3,356.1
$
3,152.2
$
6.5%
Unearned premiums
664.7
654.1
1.6%
Ceded reinsurance payable
397.3
524.3
(24.2%)
Debt
68.2
65.0
4.9%
Junior subordinated
debentures
311.5
311.5
0.0%
Other liabilities
167.3
155.3
7.7%
4,965.1
4,862.4
2.1%
Total shareholders' equity
1,548.6
1,626.1
(4.8%)
6,513.7
$
6,488.5
$
0.4%
Book value per common share
56.65
$
58.41
$
(3.0%)
Assets
Total assets
Liabilities and Shareholders' Equity
Total liabilities
Total liabilities and shareholders' equity |
 Investment Portfolio
CONSOLIDATED GAAP VIEW
14.
($ millions)
Jun. 30, 2011
Mar. 31, 2011
Total cash and investments
Fair Value
% of Total
Fair Value
% of Total
USD DENOMINATED:
Fixed maturities
U.S. Governments
$440.7
10.1%
$413.2
9.6%
Non-U.S. Governments
35.9
0.8%
3.9
0.1%
Obligations of states and political subdivisions
617.4
14.2%
614.7
14.3%
Corporate securities
1,031.8
23.7%
1,007.6
23.5%
Structured securities
CMO/MBS-agency
562.4
12.9%
614.0
14.3%
CMO/MBS-non agency
34.7
0.8%
37.0
0.9%
CMBS
184.1
4.2%
195.6
4.6%
ABS-residential
15.5
0.4%
16.5
0.4%
ABS-non residential
81.7
1.9%
99.1
2.3%
FOREIGN DENOMINATED:
Governments
208.0
4.8%
200.1
4.7%
Credit
100.7
2.3%
90.3
2.1%
Total Fixed maturities
$3,312.9
76.2%
$3,292.0
76.7%
Equity securities
$375.9
8.6%
$336.5
7.8%
Other investments
226.1
5.2%
164.3
3.8%
Short-term investments
384.0
8.8%
391.3
9.1%
Total investments
$4,298.9
98.9%
$4,184.1
97.5%
Cash and cash equivalents
49.0
1.1%
105.4
2.5%
Total cash and investments
$4,347.9
100.0%
$4,289.5
100.0% |
 Argo Group -
Recap of Major Highlights
Argo is an established carrier in the international specialty
insurance and reinsurance markets.
•
Core U.S. operations continue to perform well
•
International platform supports diversification & future growth strategy
•
Underwriting focus & talent are key competitive advantages
•
Businesses well-positioned to take advantage of a hardening market
Management committed to maximizing shareholder value
•
Achieved book value per share CAGR of 11% since 2002
•
Quality of capital and balance sheet is excellent
•
Will continue to repatriate capital as appropriate
15. |
 |