Condensed Financial Information of Registrant

12 Months Ended

Dec. 31, 2012

Condensed Financial Information of Registrant

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

SCHEDULE II

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

(in millions)

BALANCE SHEETS

	December 31,
	2012			2011
Assets
Other investments, unrealized loss on foreign currency exchange forward contracts	$	(1.9	)	$	(1.0	)
Short-term investments		1.0			0.2
Investment in subsidiaries		1,621.1			1,530.6
Due from subsidiaries		5.0			0.0
Other assets		4.3			6.8
Total assets	$	1,629.5		$	1,536.6
Liabilities and Shareholders’ Equity
Junior subordinated debentures	$	49.0		$	64.4
Intercompany note payable		55.1			0.0
Due to subsidiaries		0.0			0.3
Accrued underwriting expense		10.8			8.4
Other liabilities		0.5			0.5
Total liabilities		115.4			73.6
Shareholders’ equity		1,514.1			1,463.0
Total liabilities and shareholders’ equity	$	1,629.5		$	1,536.6

STATEMENTS OF INCOME (LOSS)

	For the Years Ended December 31,
	2012			2011			2010
Revenue:
Net investment income (1)	$	0.1		$	100.1		$	17.7
Net realized investment losses		(0.8	)		0.0			0.0
Total revenue		(0.7	)		100.1			17.7
Expenses:
Interest expense		3.9			5.4			4.8
Debt extinguishment costs		0.1			0.0			0.0
Other expenses		27.1			22.6			27.4
Total operating expenses		31.1			28.0			32.2
Net (loss) income before equity in earnings (losses) of subsidiaries (2)		(31.8	)		72.1			(14.5	)
Equity in undistributed earnings (losses) of subsidiaries		84.1			(154.0	)		101.2
Net income (loss)	$	52.3		$	(81.9	)	$	86.7

⁽¹⁾ For the years ended December 31, 2011 and 2010, net investment income includes intercompany dividend activity of $100.0 million and $17.5 million, respectively.

⁽²⁾ Argo Group International Holdings, Ltd. is not subject to taxation.

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

SCHEDULE II

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

(in millions)

STATEMENTS OF CASH FLOWS

	For the Years Ended December 31,
	2012			2011			2010
Cash flows from operating activities:
Net income (loss)	$	52.3		$	(81.9	)	$	86.7
Adjustments to reconcile net income (loss) to net cash (used) provided by operating activities:
Amortization and depreciation		0.9			0.8			0.9
Share-based payments expense		4.8			2.6			4.1
Debt extinguishment costs		0.1			0.0			0.0
Undistributed (earnings) losses in subsidiaries		(84.1	)		154.0			(101.2	)
Change in:
Prepaid assets		0.9			(0.8	)		(0.5	)
Accrued underwriting expense		0.9			(1.6	)		1.8
Due to subsidiaries		(7.0	)		(3.2	)		(3.4	)
Interest on intercompany note payable		0.3			1.7			1.2
Other assets and liabilities, net		0.7			0.0			(0.8	)
Cash (used) provided by operating activities		(30.2	)		71.6			(11.2	)
Cash flows from investing activities:
Change in short-term investments		(0.9	)		0.0			1.8
Settlements of foreign currency exchange forward contracts		2.3			1.3			0.0
Purchases of fixed assets		0.0			(0.3	)		(0.0	)
Cash provided by investing activities		1.4			1.0			1.8
Cash flows from financing activities:
Borrowings under intercompany note payable, net		55.0			(60.6	)		36.8
Activity under stock incentive plans		1.2			1.1			4.3
Repurchase of Company’s common shares		0.0			0.0			(17.5	)
Redemption of trust preferred securities, net		(15.1	)		0.0			0.0
Payment of cash dividend to common shareholders		(12.3	)		(13.1	)		(14.2	)
Cash provided (used) by financing activities		28.8			(72.6	)		9.4
Change in cash		0.0			0.0			0.0
Cash, beginning of period		0.0			0.0			0.0
Cash, end of period	$	0.0		$	0.0		$	0.0