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| 8-K - FORM 8-K - Argo Group International Holdings, Ltd. | d8k.htm |
 Investor Presentation
Raymond James 32 Annual Institutional Investors Conference
March 8, 2011
nd
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.
The Argo Group Story
The Company
Argo Group is an international specialty underwriter of
property/casualty insurance and reinsurance focused in niche
markets.
The Objective
To maintain our profitable growth record while maximizing on the
opportunities afforded us through our international platform.
The Strategy
Apply our proven business model to deploy capital in attractive
niche markets that offer opportunities for maximum return.
|
 4.
Argo Group Today
Major business segment locations
Bermuda Headquarters
Multinational specialty P&C underwriter of insurance and reinsurance
Headquarters: Bermuda
–
Operate internationally in all 50 states
–
1,300+ employees across six countries
Total capitalization of $2.0 billion
Operations conducted through four business segments
–
Excess
&
Surplus
Lines
–
U.S.
wholesale
distribution
–
Commercial
Specialty
–
U.S.
niche
retail
distribution
–
International
Specialty
–
Lloyd’s
syndicate
–
Reinsurance –
Event-driven businesses
A.M. Best Rating of A XII (excellent)
Brussels
London
Paris
Zurich |
 5.
Our Strategy
Deploy capital in the international specialty market for maximum
return
Provide our clients with insurance solutions by continuously
focusing on new business development and organic growth
Strategically grow our platform and gain access to new markets
through acquisitions
Dedicated to attracting top tier talent to leverage our platform
Manage balance sheet risk by maintaining relatively low financial
leverage and a prudent investment portfolio
Maximize shareholder value through growth in book value per share
|
 6.
A Recap of Our Successful Strategic Business Plan
1.
Target attractive
niche markets
2.
Develop leading,
differentiated
positions
3.
Expand position
–
organically
–
geographically
–
selective acquisitions
4.
Results: growth
in
premiums, earnings
and book value |
 7.
ATTRACTIVE NICHE MARKETS
A Different Type of Approach
Key Criteria In Selecting Niche Markets
Higher margin and return
Market leadership in a reasonable time frame
Disciplined underwriting
Sustained, profitable organic growth |
 We
have successfully diversified our portfolio and become a global specialty
insurance underwriter 2004
2010
NEP Split
2000
2001 –
Acquires Colony and Rockwood.
Founds Trident
2007 –
Completes merger with PXRE;
Forms Argo Re
2008 –
Rebranded Argo Group; Acquired
Heritage and its Lloyd’s syndicate
2009 –
Introduces Casualty and
Professional Risks Division
Timeline
Notes
1 Book value per share share includes impact of the Series A Mandatory Convertible Preferred Stock on
an as if converted basis. Financial Highlights ($mm, except per share data)
2000
2004
(1)
2010
Book Value per Share
23.03
30.36
58.41
Total Capital
501.1
716.8
2,002.6
Excess and
Surplus Lines,
40.4%
Commercial
Specialty,
27.4%
Reinsurance,
8.3%
International
Specialty,
23.9%
8.
Excess & Suprlus
Lines, 48.1%
Risk Management,
18.3%
Specialty
Commercial, 23.8%
Public Entity, 9.7%
Specialty
Commercial,
23.9%
Specialty
Workers'
Compensation
, 75.9%
Public Entity,
0.2% |
 9.
Earned Premiums
Gross Written Premiums
11.9%
CAGR
15.7%
CAGR
RESULTS: GROWTH
An Impressive Growth Record… |
 10.
12.3%
CAGR
Net Income
Net Investment Income
51.3%
CAGR
RESULTS: GROWTH
Improved Bottom Line Results… |
 11.
Growth of Book Value
BVPS Growth Since 2002
12.1%
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. |
 12.
Excess & Surplus
Lines
International
Specialty
•
2010 GWP $390M
•
Lloyd’s platform
•
2010 GWP $523M
Excess & Surplus
Lines
Reinsurance
•
2010 GWP $189M
•
Bermuda platform
•
Includes Casualty
& Professional
Risks Unit
Commercial
Specialty
•
2010 GWP $428M
Four Growth Platforms |
 13.
EXCESS & SURPLUS LINES:
Largest and Most Profitable Segment
Status
Standard market expanding risk appetite
New entrants building market share
Argo maintaining underwriting discipline
Competitive advantages
Colony Specialty & Argo Pro
Excellent infrastructure –
broad
geography
Underwriting expertise
Broad product portfolio for small acct
U/Ws (restaurants, day care, contractors)
Controlled distribution
–
Wholesale agents
Benefits from a category XII ‘A’
(Excellent) rating by A.M. Best
Pre-Tax Operating Income
($M)
Combined ratio
* Includes $12.7M of losses from 2008 hurricanes.
88.9%
89.3%
93.3%
$102
$113
$98
$65
99.6%
$63
97.8%
2006
2007
2008*
2009
2010 |
 14.
COMMERCIAL SPECIALITY:
Specialty Niche Segment
Status
Historical combined ratio in low 90%
range
Performing well given competition
Primarily admitted, retail-driven
Competitive advantages
Expertise in niche markets
–
grocery stores
–
mining operations
–
laundry & dry cleaners
–
small/medium-size public entities
Benefits from a category XII ‘A’
(Excellent) rating by A.M. Best
Pre-Tax Operating Income
($M)
Combined ratio
* Includes $2.8M of losses from 2008 hurricanes.
89.4%
88.7%
96.5%
$50
$61
$43
$46
95.6%
$29
99.0%
2006
2007
2008*
2009
2010 |
 15.
$24
$50
Status
Underwriting on $1.2
billion of capital
Has achieved desired diversification
Event-driven businesses
Added Casualty and Professional Risks
business in 2009
Competitive advantages
Utilizes established infrastructure
Built diversified book of business
Proven record of leadership
Benefits from a category XII ‘A’
(Excellent) rating by A.M. Best
REINSURANCE:
Argo Re –
Well Established
Pre-Tax Operating Income
($M)
77.9%
52.3%
2008
2009
Combined ratio
*Includes $30.1M of catastrophe
losses (net of reinstatement premium).
2010*
$32
72.8% |
 16.
Status
Acquired Heritage in 2008;
rebranded to Argo International
Carrier named head of U/W Jan 2011
Worldwide property
–
Direct and Facultative
–
North American and International
Binding Authority
Non-U.S. liability
–
Professional indemnity
–
General liability
Competitive advantages
Specialist knowledge
Carries the Lloyd’s market ratings of
‘A’
(Excellent) rating by A.M. Best, and
‘A+’
by S&P
INTERNATIONAL SPECIALTY:
Argo International (Lloyd’s)
Gross Written Premiums
($M)
$424
$706
$390
2008
2009
2010
Pre-tax Operating Income
2010: ($31.2M)*
2009: $24.1M
*Includes $24.8M of 2010
catastrophe losses. |
 Combined Business Mix –
Established platform to write business worldwide and penetrate niche markets
Reinsurance
Quota share reinsurance
of business partners
Property reinsurance
62%
9%
29%
Based on 2010 gross written premiums
Worldwide property insurance
Non-US Liability
Excess casualty and professional liability
insurance
Excess & Surplus Lines
Commercial Specialty
Specialty
Insurance
17. |
 18.
Diversified Business Model
Reinsurance
Insurance
91%
14%
As of Dec. 31, 2010
Note: Based on gross written premiums (GWP)
Casualty
~70%
~30%
Property
9% |
 19.
Argo Group 2010 Results
2009
2010
Change
Gross Written Premium
23%
Net Earned Premium
14%
Total Revenue
11%
Net Operating Income Per Share
53%
Net Income Per Share
28%
** Impacted by $54.9M of losses (net of reinstatement premiums) from catastrophes
in 2010. Net Investment Income
8%
YTD Growth in Book Value Per Share
$ 2.0B
$ 1.4B
$ 1.5B
$
4.28
$
3.81
$ 146M
18.5%
$ 1.5B
$ 1.2B
$ 1.4B
$
2.00**
$
2.76
$ 134M
12.5% |
 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
$3,995
429
$44.18
Strong Balance Sheet and Capital Base
Reserves
Total Leverage*
Total Capital
Shareholders’
Equity
Total Assets
Investment Portfolio
Indebtedness*
Book Value Per Share
In millions except for book value and leverage data
*Includes $311mm of Junior Subordinated Debentures
Dec 31, 2010
3,152
1,626
6,482
$4,215
$58.41
377
2,003
18.8%
20. |
 Conservative Investment Portfolio
Fixed income (92%)
Equities (8%)
Total: $3.7bn
Total: $0.3bn
•
Internally and externally managed
•
Conservative focus on large cap
•
Average Rating of AA
•
Duration of 3.0 years
28%
18%
18%
27%
10%
Governments
State / Muni
Corporate
Structured
Short Term
Financials
Industrial & Other
6%
94%
Invested Assets
($mm)
$1,181
$1,553
$1,784
$2,173
$2,514
$3,556
$3,995
$4,334
$4,215
2002
2003
2004
2005
2006
2007
2008
2009
2010
21. |
 22.
Capital Deployment Strategy
Support balance sheet, mainly loss reserves
Growth of core business
–
Deploy capital opportunistically across all four segments
–
Reduce reliance on third-party reinsurance
Pursue attractive market opportunities
–
Selective acquisitions that complement existing business lines
–
Books of business and companies
Repatriate capital depending on capital position and stock price
–
New $150M authorized stock repurchase program announced Feb. 2011
–
Repurchased $106.5M or 3.2M shares of common stock in 2010
–
Paid 48 cents per share in cash dividends in 2010 |
 23.
Key Areas of Focus Today
Improve expense structure
–
Implementing shared services model for our back office, non-core
functions –
Evaluating outsourcing opportunities
Capital management
–
Constantly evaluating capital structure
–
Ensure we are adequately and efficiently capitalized
Investment portfolio
–
Analyzing risk-return threshold
–
Allocating investments accordingly to increase yield
New business development
–
Prudently evaluating new specialty products and new geographies that will be
accretive to ROE over time |
 24.
I
N S
U
M
M
A
R
Y
Argo Group:
A Strong and Well-Positioned Specialty Underwriter
Powerful competitive force in specialty lines market
–
International platform with U.S., Bermuda and London advantages
–
Broadly diversified insurance and reinsurance businesses
–
Deep expertise in small-
to mid-size niche markets
–
Growth though geographic and product diversification
Proven and successful strategic business plan
–
Track record of growth and profitability through insurance cycle
–
Prudent risk management and controls
–
Strong, expanded and proven leadership team
Focus on profitable growth
–
Effective capital deployment + high-margin emphasis = ROE-driven
focus –
Achieved 12.1% CAGR since 2002 in book value per share
|
 Thank you |