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| 8-K - FORM 8-K - Argo Group International Holdings, Ltd. | d552341d8k.htm |
 1Q
2013 Investor Presentation June 2013
Exhibit 99.1 |
 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. 2.
|
 3.
Argo Group at a Glance
Exchange / Ticker:
NASDAQ / “AGII”
Share Price:
$40.26
Market Capitalization:
$1.1 billion
Annual Dividend / Yield:
$0.60 per share / 1.5%
Gross Written Premium:
$1.8 billion
Capital:
$1.9 billion
Analyst Coverage:
Macquarie
(Outperform) -
Amit Kumar
Raymond James
(Outperform) -
Greg Peters
William Blair
(Outperform) -
Adam Klauber
Dowling & Partners
(Neutral) -
Kyle LaBarre
Compass Point
(Neutral) -
Ken Billingsley
Atlanta
Barcelona
Bermuda
Boston
Brussels
Chicago
Dallas
Denver
Dubai
Houston
London
Los Angeles
Malta
New York
Paris
Portland
Richmond
Rio de Janeiro
Rockwood
San Antonio
San Francisco
Sao Paulo
Scottsdale
Seattle
Zurich
Note: Market information as of June 07, 2013 and annual performance figures as of
TTM March 31, 2013. |
 4.
Strong & Focused Specialty Franchise
Global underwriter of specialty P&C insurance
and reinsurance through four segments
Broad footprint strategically located in major
insurance centers
U.S., Bermuda, London and Brazil
Focused on specialty insurance & casualty lines
Leader in U.S. Excess & Surplus Lines
Top quartile Lloyd’s Syndicate by stamp
Deep relationships with retailers, wholesalers
and Lloyd’s brokers
A.M. Best rating of “A”
(excellent financial
strength)
Proven track record of active capital
management
1Q 2013 TTM GWP |
 Strategy Aligned Toward Shareholder Value
Sustain competitive advantage through superior customer
service, product innovation and underwriting knowledge
Opportunistically grow organically and/or through strategic
acquisitions throughout the underwriting cycle
Manage capital and risk appropriately / maintain strong ratings
Proven ability to attract talent
5. |
 6.
Evolution of Growth and Diversification
6.
*Excludes GWP recorded in runoff and corporate & other.
|
 7.
Argo Group Business Mix ($1.8B in GWP)
7.
GWP by Segment
Excess &
Surplus Lines
Commercial
Specialty
Syndicate
1200
International
Specialty
GWP by Product
GWP by Business Type
Primary
Insurance
Reinsurance
GWP by Geography
United
States
London
Bermuda
*Data is based on TTM as of March 31, 2013. Excludes GWP recorded in runoff and
corporate & other. Excess &
Surplus Lines
Other
Commercial
Specialty
Property
Public Entity
7%
Marine &
Aerospace
Surety 2%
Alteris 5%
Mining 4%
Emerging Mkts 7%
Emerging Markets 7% |
 8.
Multi-Channel Distribution Strategy |
 Maximizing Shareholder Value –
BVPS Growth
* Book value per common share –
outstanding. Adjusted for June 2013 stock dividend. Also includes the
impact of the Series A Mandatory Convertible Preferred Stock as if on a
converted basis. Preferred stock had fully converted into common shares as of Dec. 31, 2007.
1
Price / book calculated at 52-week high and most recent book value per share.
Stock price and book value adjusted for PXRE merger for 2006 and prior years.
Note the book value amounts for 2011 and 2010 reflect the effect of the
Company’s adoption of new guidance related to accounting for costs associated with
acquiring or renewing insurance contracts. 2009 and prior periods have not
been restated. 9. |
 10.
Substantial Growth and Financial Strength
Scale
2000
2006
TTM 1Q'13
'00-1Q'13 Factor
Gross Written Premiums
$186.1
$1,155.6
$1,787.6
9.6x
Net Written Premiums
163.9
847.0
1,282.3
7.8x
Net Earned Premiums
124.6
813.0
1,213.4
9.7x
Financial Strength
2000
2006
TTM 1Q'13
'00-1Q'13 Factor
Total Assets
$1,565.8
$3,721.5
$6,602.5
4.2x
Total Investments
1,085.6
2,514.1
4,133.2
3.8x
Shareholder's Equity
501.1
847.7
1,546.6
3.1x
Total Capital
501.1
992.0
1,948.1
3.9x
Debt / Total Capital
0.0%
14.5%
20.6%
A.M. Best Rating
A
A
A |
 11.
Consolidated GWP up 10.6% in 1Q 2013 vs. 1Q 2012
1Q YoY Premium Growth in 3 out of 4 Segments
Reflects impact of strategic initiatives taken, rate increases and improved
retention 11. |
 12.
About Us
•
Leader in U.S. Excess & Surplus Lines
•
Strong relationships with national,
local and regional wholesale brokers
•
Seasoned U/W expertise is a competitive
advantage
•
Target all sizes of non-standard (hard-to-place)
risks, with focus on small/medium accounts
•
Underwrites on both admitted & non-admitted
basis and across all business enterprises via
two brands:
•
Colony Specialty
•
Argo Pro
GWP by Business Unit (TTM 3/31/13)
Casualty 32%
Transportation 16%
Environmental 4%
Allied Medical 5%
Management Liability 3%
Property 10%
Contract 23%
Errors & Omissions 7%
Excess & Surplus Lines Segment (30% of TTM GWP)
12.
Gross Written Premium
Pre-Tax Operating Income & Combined Ratio
*Data is based on TTM as of March 31, 2013.
*Data is based on YTD as of March 31, 2013. |
 13.
Outperformed E&S Peers in 2012
Peers include: WR Berkley Specialty Segment, Alterra US Segment,
American Safety E&S Segment, Aspen Insurance Segment, Axis Insurance Segment,
Endurance Insurance Segment, HCC US P&C Segment, Markel E&S Segment,
Navigators Insurance Segment, RLI P&C Segments, Arch Insurance Segment, United National Insurance
Segment. Top quartile peers include the above mentioned segments
from WR Berkley, RLI, and HCC. |
 14.
Commercial Specialty (24% of GWP)
About
Us
•
Business primarily placed through
retail
distribution partners
•
Argo Insurance –
Designs customized
commercial insurance programs for grocers, dry
cleaners, restaurants and other specialty retail
clients
•
Trident –
2 largest provider of insurance to
small and midsize U.S. public entities
•
Rockwood –
2 largest provider of commercial
insurance to coal mining industry
•
Alteris
–
fee based business where Argo or
others accept the risk
Gross
Written
Premium
Pre-Tax
Operating
Income
&
Combined
Ratio
*Data is based on TTM as of March 31, 2013.
*Data is based on YTD as of March 31, 2013.
GWP
by
Business
Unit
(TTM
3/31/13)
U.S. Retail (Argo Insurance) 21%
Restaurants 5%
Grocery 9%
Dry Cleaners 5%
Other Industries 2%
Public Entity
(Trident) 28%
Surety 9%
Mining
(Rockwood) 18%
Other 3%
Alteris Managed Premium 22%
Other 1%
Transportation 3%
State Workers’
Comp Funds 14%
Self Insured Public Entity 4%
nd
nd |
 15.
General Liability 14%
Prof. Indemnity 13%
Directors & Officers 2%
Int’l Casualty Treaty 2%
Other 2%
Syndicate 1200 (30% of GWP)
About Us
•
Well-established multi-class
platform at Lloyd’s of London
•
Ranks among the largest
Syndicates at Lloyd’s by Stamp
Capacity
•
Lloyd’s market ratings:
•
‘A’
(Excellent) by A.M. Best
•
‘A+’
(Strong) by S&P
GWP by Business Unit (TTM 3/31/13)
Property 46%
Liability 33%
Specialty 16%
Aerospace 5%
Property Fac 18%
N. Am. & Int’l Binders 10%
Personal Accident 10%
Int’l Property Treaty 2%
Other 6%
15.
Gross Written Premium
Pre-Tax Operating Income & Combined Ratio
‘12
‘10
‘09
‘08
‘11
’13/1Q*
*Data is based on TTM as of March 31, 2013.
*Data is based on YTD as of March 31, 2013.
Cargo 2%
Offshore Energy 7%
Onshore Energy 4%
Yachts & Hulls 2% |
 16.
International Specialty (16% of GWP)
About Us
•
Bermuda team underwrites
•
Property cat, short tail per risk and
proportional treaty reinsurance worldwide
•
Excess casualty and professional liability
for Fortune 1000 accounts
•
Building diversity through international
expansion:
•
Established primary operations in Brazil
•
Established operations in Euro zone
•
Established regional office in Dubai
•
Distributes through brokers
16.
Gross Written Premium
Pre-Tax Operating Income & Combined Ratio
GWP by Business Unit (TTM 3/31/13)
Excess Casualty 20%
Professional Liability 10%
Brazil 20%
Marine Cargo 6%
Property & Engineering 5%
Motor 5%
Financial Lines 4%
*Data is based on TTM as of March 31, 2013.
*Data is based on YTD as of March 31, 2013.
Reinsurance 50%
Other Assumed Re 6%
Property Risk XS 3%
Property Pro Rata 6%
Property CAT 35% |
 17.
1Q Operating Results
17.
1Q 2013
1Q 2012
Gross Written Premiums
$438.2
$396.3
Net Written Premiums
279.0
241.2
Earned Premiums
304.2
277.3
Losses and LAE
170.5
165.8
Other Reinsurance-Related Expenses
5.1
6.9
Underwriting, Acquisition and Insurance Expenses
126.7
113.7
Underwriting Income / (Loss)
$1.9
($9.1)
Net Investment Income
27.9
31.4
Fee Income, net
0.0
1.3
Interest Expense
4.9
5.7
Operating Income / (Loss)
$24.9
$17.9
Foreign Currency Exchange Gain / (Loss)
3.1
(2.9)
Net Realized Investment Gains
9.5
13.1
Pre-Tax Income / (Loss)
$37.5
$28.1
Income Tax Provision
4.8
8.5
Net Income / (Loss)
$32.7
$19.6
Operating Income (Loss) per Common Share (Diluted)
1
$0.78
$0.54
Net Income (Loss) per Common Share (Diluted)
$1.28
$0.74
Loss Ratio²
57.0%
61.3%
Expense Ratio³
42.4%
42.1%
Combined Ratio
99.4%
103.4%
All data in millions except for per share data and ratio calculations.
(1) At an assumed tax rate of 20%.
(2) Defined as Losses & LAE / (Earned Premiums less Other
Reinsurance-Related Expenses). (3) Defined as Underwriting, Acquisition
and Insurance Expenses / (Earned Premiums less Other Reinsurance-Related Expenses). |
 18.
17%
18.
As of March 31, 2013
•
Duration of 3.3 years
•
Average rating of ‘AA-’
•
Book yield of 3.4%
•
Very liquid
•
Conservatively managed
Portfolio Characteristics
Equity Investments by Sector
10% Healthcare
Energy
23%
4% Industrials
14% Funds
5% Financials
11% Info Tech
3% Materials
6% Consumer
Discretionary
Consumer Staples
24%
Asset Allocation
8% Other
Fixed
72%
Maturities.
6% Short Term
14% Equities
Fixed Maturities by Type
7% Short Term
Corporate
35%.
19% Gov.
18% Structured
State/Muni
21%.
*$2.97b in fixed maturities, $0.23b in short term
Conservative Investment Strategy |
 19.
Active Capital Management
Through share repurchases and dividends, we have returned >$250 million of
capital and repurchased 22% of shares outstanding from 2009 through Q1
2013 Note: Not adjusted for June 2013 stock dividend
2009
2010
2011
2012
Q1 13
2009-Q1 13
Total Shares O/S
30,982,839
31,206,796
31,285,469
31,384,271
31,463,460
Less: Treasury Shares
145,999
3,363,560
4,971,305
6,459,613
6,785,438
Net Shares
30,836,840
27,843,236
26,314,164
24,924,658
24,678,022
Shares Repurchased
145,999
3,217,561
1,607,745
1,488,308
325,825
6,785,438
As % of Beg. Net Shares
0%
10%
6%
6%
1%
22%
Avg. Repurchase Price/sh
$35.23
$33.08
$30.72
$29.92
$37.71
Total Repurchased ($mm)
$5.1
$106.4
$49.4
$44.5
$12.3
$217.8
Dividends/sh
$0.48
$0.48
$0.48
$0.15
Dividend Payments ($mm)
$14.3
$13.1
$12.3
$3.7
$43.4
Repurchases + Dividends ($mm)
$5.1
$120.7
$62.5
$56.8
$16.0
$261.1 |
 20.
Stock Price Performance –
Last 12 Months
Source: Thomson
Peer Group consists of: Allied World, American Financial, AmTrust, Arch Capital,
Aspen, AXIS Capital, Endurance, Global Indemnity, HCC, Markel, Navigators,
OneBeacon, RLI Corp, Selective Group, Tower Group, W.R. Berkley
|
 21.
Price/Book
Jan-00
May-13
Argo
0.70x
0.69x
Peer Avg.
1.17x
1.15x
Difference
0.47x
0.46x
-
0.2x
0.4x
0.6x
0.8x
1.0x
1.2x
1.4x
1.6x
1.8x
2.0x
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Argo
Peer Group
Compelling Valuation vs. Peer Group
Source: Thomson, SNL, internal analysis.
Note: Price to book is average price/book across all peer companies. Peers include:
Allied World , American Financial, AmTrust, Arch, Aspen, AXIS, Endurance, Global
Indemnity, HCC, Markel, Navigators, OneBeacon, RLI, Selective, Tower, W.R.
Berkeley. 0.69x
1.15x
0.46x
Difference |
 22.
Well Positioned for Value Creation in 2013 and Beyond
•
Compelling investment case
•
Stock trading at a discount to book value and below peers
•
Upside potential as past and ongoing efforts continue
We
believe
that
Argo
Group
has
potential
to
generate
substantial
value
for
new
and
existing
investors.
•
Significant changes to premium composition completed
•
Results of re-underwriting and efficiency efforts are emerging in
financials •
Modest
pricing
increases
expected
to
favorably
impact
growth
and
loss
ratios
•
Continue to employ and attract some of the best talent in the industry
•
Brazil has traction and is beginning to scale
•
Building more revenue from non-risk bearing MGA strategy
•
Incremental yield improvements can have a favorable impact on ROE
•
Moderate financial leverage
•
Strong balance sheet with adequate reserves and excellent asset quality
|