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| 8-K - FORM 8-K - Argo Group International Holdings, Ltd. | d8k.htm |
 Macquarie Small-
& Mid-
Cap Conference
June 2010
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. |
 3.
An international specialty underwriter of property/casualty
insurance and reinsurance products
Headquartered in Bermuda
Operations in 50 states and worldwide
Total capitalization of $2.0 billion
Operations conducted through four business segments
Our Strategy
Deploy
capital
in
the
international
specialty
market
for
maximum
return
Continuous focus on new business development and organic growth
Grow strategically through acquisitions
Prudent management of our balance sheet and investment portfolio
Maximize shareholder value through our focus on Return on Capital
Argo Group Today
Major business segment locations
Bermuda Headquarters
Brussels
London |
 4.
Argo
in
Perspective:
Building
a
Specialty
Platform
2002
-
2009
Commercial
Specialty
$162.3 26.1%
Risk
Management
$201.9 32.5%
Excess &
Surplus
$257.9 41.5%
GWP
2002
2006
2009
Excess &
Surplus
$642.3 32.3%
Commercial
Specialty
$475.7 23.9%
Argo
International
$706.0 35.5%
Excess &
Surplus
$761.5 36.8%
Commercial
Specialty
$391.8 34.0%
(1) Includes what was the Public Entity segment and the Specialty Commercial
segment. (2) Includes Public Entity segment and Select Markets segment and
excludes $2.2 million previously written under Risk Management segment. (3)
Book value per common share - outstanding, includes the impact of the Series A Mandatory Convertible Preferred Stock on an as if converted basis.
(4) Net Run-Off Reserves include Risk Management. 2002 Net Reserves for Risk
Management are an appoximation based on statutory filings. (5) Total Segment
Pre-tax Operating Income calculated as the sum of the above segments' pre-tax operating incomes: excludes certain holding company expenses.
(6) Includes $0.3mm of operating income from the public entity segment.
(7) Includes $6 million of losses from the Risk Management Segment and $67.8 million
of losses from runoff lines. (8) Includes $9.9 million of losses from runoff
lines and $25.5 million of pre-tax operating income from Risk Management segment.
Reinsurance
$162.9 8.2%
Financial Highlights ($ in mm, except per share data)
2002
2006
2009
Book Value per Share
$23.40
(3)
$39.08
(3)
$52.36
Pre-tax Operating Income
(47.7)
141.8
164.8
Total Capital
327.7
992.0
1,995.5
Net Run-Off Reserves as a % of Equity
163.1%
(4)
66.0%
(4)
26.2%
Net Run-Off Reserves as a % of Total Net Reserves
63.8%
(4)
36.5%
(4)
19.1%
Segment
Contribution
to
Total
Segment
Pre-tax
Operating
Income
(5)
Excess & Surplus
41.6%
60.3%
33.8%
Commercial Specialty
24.3%
(6)
30.0%
23.9%
Runoff / Risk Management
(165.8%)
(7)
9.3%
(8)
3.3%
Reinsurance
0.0%
0.5%
26.3%
Argo International
0.0%
0.0%
12.6% |
 5.
Argo Today –
A Diversified Business Model
US International
YTD as of March 31, 2010
Note: Based on gross written premiums (GWP)
Insurance Reinsurance
Property Casualty
~70%
~30%
14%
86%
24%
76% |
 6.
What We Do
Combined
Ratio*
Insureds
Segment Profile
Excess and
Surplus Lines
•
Commercial Property and
Casualty on a non-admitted
basis
•
Distribution through wholesale
agents and brokers
Commercial
Specialty
Argo
International
•
Argo Managing Agency plc
•
Short-tail risks with an
emphasis on commercial
specialty, and non-US
professional indemnity
insurance
99%
74%
Reinsurance
•
Insureds include US regional
carriers and international multi-
line carriers
•
Casualty clients are
predominately US Fortune
1000 companies written on a
primary basis
•
Argo Re (class 4 specialty
reinsurance platform)
•
Provides property CAT
reinsurance, excess casualty
116%
*
GWP and Combined Ratio for YTD 2010
%
GWP*
31%
24%
14%
30%
100%
•
Representative insureds
include restaurants,
contractors, day care centers,
apartment complexes, and
others
•
Commercial Property and
Casualty on an admitted basis
•
Distribution through select
independent agents, brokers,
wholesalers and program
managers
•
Food and hospitality, specialty
retail, grocery stores, mining
industry and public entities
•
Insureds include US and
international small/medium
commercial businesses,
transportation, fine arts and
specie, financial institutions and
others |
 Status
Combined ratio in low 90% range
Colony, Argonaut Specialty & Argo Pro
Competitive advantages
Excellent
infrastructure
–
broad
geography
Underwriting expertise
Broad product portfolio for small account
underwriters
Controlled distribution
Wholesale agents
Benefits from a category XII ‘A’
(Excellent) rating by A.M. Best
7.
Pre-Tax Operating Income
($mm)
Excess & Surplus Lines
Largest and Most Profitable Segment
100%
Combined Ratio
89%
93%
100%
$113
$98
$65
$13
2007
2008
2009
YTD 2010 |
 8.
Pre-Tax Operating Income
($mm)
Commercial Specialty
Specialty
Niche Segment
Status
Historical combined ratio in low 90% range
Primarily admitted, retail-driven
Competitive advantages
Expertise in niche markets
–
grocery stores
–
mining operations
–
laundry & dry cleaners
–
small/medium-size public entities
Benefits from a category XII ‘A’
(Excellent)
rating by A.M. Best
89%
97%
96%
Combined Ratio
99%
$61
$43
$46
$8
2007
2008
2009
YTD 2010 |
 9.
Status
•
Underwriting on $1.2 billion of capital today
•
Achieved desired diversification in second
year
•
Appointed Andrew Carrier as Argo Re
President and Nigel Mortimer as head of
Excess Casualty
•
New casualty underwriting team in place
Competitive advantages
•
Utilize established infrastructure
•
Built diversified book of business
•
Proven record of leadership
•
Benefits from a category XII ‘A’
(Excellent)
rating by A.M. Best
Reinsurance
Argo Re –
Well Established
74%
78%
Pre-Tax Operating Income
($mm)
Combined Ratio
52%
$25
$50
$8
2008
2009
YTD 2010 |
 10.
Status
•
Acquired Heritage in May 2008
•
Appointed Julian Enoizi as CEO
in June 2009
•
Worldwide property
•
Direct and Facultative
•
North American and International
Binding Authority
•
Non-U.S. liability
•
Professional indemnity
•
General liability
Competitive advantages
•
Specialist knowledge
•
Access to decision makers
•
Carries the Lloyd’s market ratings
of ‘A’
(Excellent) rating by A.M.
Best, and ‘A+’
by S&P
Argo International
Lloyd’s Underwriting Agency
116%²
102%
Pre-Tax Operating Income
($mm)
Note:
1
Data is for the full year ending Dec. 31, 2008
2
Includes 22.1 points of catastrophe losses
Combined Ratio
96%
$11
$24
($11)
2008¹
2009
YTD 2010 |
 11.
Combined Business Mix
Established platform to write business
worldwide and penetrate niche markets
Specialty Insurance
Excess & Surplus Lines
Commercial Specialty
Reinsurance/Insurance
Quota share reinsurance
of business partners
Property reinsurance
Excess casualty and
professional liability insurance
Argo International (Lloyd’s)
Worldwide property insurance
Non-U.S. liability
56%
14%
30%
As of March 31, 2010 |
 12.
Growth in Key Profit Drivers
Net Premium Earned
Gross Written Premium
Investment Income
$622
$1,989
2002
2009
18%
CAGR
$378
$1,415
2002
2009
21%
CAGR
$53
$146
2002
2009
16%
CAGR
($mm) |
 13.
$53.81
$39.08
$33.52
$30.36
$27.22
$23.40
$45.15
$44.18
$52.36
2002
2003
2004
2005
2006
2007
2008
2009
2010-Q1
Growth of Book Value
BVPS Growth Since 2002
12.2%
CAGR
*
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. |
 14.
Argo Group 2009 Financial Highlights
2008
2009
Change
Gross Written Premium
24%
Net Earned Premium
25%
Total Revenue
24%
Net Operating Income Per Share
35%
Net Income Per Share
86%
** Impacted by $17.4M of pre-tax losses from U.S. storms in Q2 and $74M from
hurricanes Gustav and Ike in Q3. Net Investment Income
3%
YTD Growth in Book Value Per Share
$ 1.6B
$ 1.1B
$ 1.2B
$ 3.17
$ 2.05**
$ 150M
(2.1%)
$ 2.0B
$ 1.4B
$ 1.5B
$ 4.28
$ 3.81
$ 146M
18.5% |
 15.
2009
Three
Months
2010
Three
Months
Change
Gross Written Premium
$
496M
18%
Net Earned Premium
$
343M
6%
Total Revenue
$
370M
1%
Net Operating Income Per Share
$
1.13
72%
Net Income Per Share
$ 0.88
24%
Net Investment Income
$
39M
14%
YTD Growth in Book Value Per Share
(2.2%)
Argo Group 2010 First Quarter Results
$
405M
$
324M
$
372M
$
0.32
$ 0.67
$
34M
2.7% |
 16.
Strong Balance Sheet and Capital Base
In millions except for book value and leverage data
*Includes $311.4 mm of Junior Subordinated Debentures
Dec 31, 2009
3,203
19.1%
1,996
1,615
6,897
$4,334
381
$52.36
Dec 31, 2008
2,997
24.1%
1,782
1,353
6,382
$4,001
429
$44.18
Reserves
Total Leverage*
Total Capital
Shareholders’
Equity
Total Assets
Investment Portfolio
Indebtedness*
Book Value Per Share
Mar 31, 2010
3,232
1,609
6,632
$4,289
$53.81
377
1,987
19.0% |
 Run-Off Reserves
Net Run-Off Reserve Summary 2003-
Q1 2010
(b)
17.
$505mm
$476mm
$463mm
$402mm
$357mm
$306mm
$280mm
$273mm
$180mm
$162mm
$154mm
$157mm
$141mm
$125mm
$93mm
$82mm
$302mm
(a)
$98mm
$50mm
$42mm
$0.0
$100.0
$200.0
$300.0
$400.0
$500.0
$600.0
$700.0
$800.0
$900.0
2003
2004
2005
2006
2007
2008
2009
Q1 2010
PXRE Runoff
A&E
WC
$685mm
$617mm
$638mm
$529mm
$801mm
$559mm
$423mm
$397mm
Note: WC represents Risk Management and A&E represents IROC; 12/31/2002 net runoff reserves
were internally approximated to be $450mm for Risk Management and
$245mm for IROC. (a) Includes $104.2mm of net reserves related to PXRE Reinsurance Company
sold in 2008. (b) Risk Management Reserves include reserves for other run-off lines
|
 Net
Reserves Run-off as a % of total equity declined from 127% to 22%;
Run-off
as
a
%
of
net
reserves¹
declined
from
71%
to
16%
Note:
1 Excludes PXRE reserves
18.
$685mm
$638mm
$632mm
$564mm
$499mm
$432mm
$373mm
$355mm
$539mm
$603mm
$716mm
$848mm
$1,385mm
$1,353mm
$1,615mm
$1,609mm
$966mm
$1,061mm
$1,395mm
$1,531mm
$1,561mm
$2,018mm
$2,163mm
$2,229mm
0%
20%
40%
60%
80%
100%
120%
140%
$0mm
$600mm
$1,200mm
$1,800mm
$2,400mm
2003
2004
2005
2006
2007
2008
2009
Q1-2010
Net-Run-Off Reserves¹
Total Equity
Net Reserves¹
Net-Run-Off Reserves¹ as a % Equity
Net-Run-Off Reserves¹ as a % of Net Reserves¹ |
 19.
Conservative Investment Portfolio
Fixed income (94%)
Equities (6%)
Total: $3.9bn
Total: $0.3bn
•
Average Rating of AA
•
Duration of 3.2 years
•
Internally and externally managed
•
Conservative focus on large cap
34%
15%
17%
17%
7%
U.S. Government
State / Muni
Corporate
Structured
Short Term
Other
10%
Financials
Industrial & Other
14%
86% |
 20.
Focus Areas for the Coming Year
•
Investments in people
•
Investment in IT
•
Expense savings
•
Controlled expansion in the US and London
•
Focus on clients
•
Focus on distribution partners
•
Focus on the competitive environment
Internal
External
Premiums / Risk Selection
Levers to Drive a Profitable Organization
Investment Leverage / Yields
Financial Leverage / Capital Structure
Infrastructure Cost |
 21.
Why Argo?
•
Broadly diversified insurance and reinsurance platform
•
Deep product expertise in niche focus areas
•
Proven track record of growth and profitability
•
Proven ability to manage through insurance cycle
•
Prudent risk management and controls
•
Strong leadership
•
Significant room for future growth
•
ROE driven focus |
 Thank you
Q&A |