Business Wire | Feb 17, 2021 04:25PM EST

Argo Group Reports 2020 Fourth Quarter Results

Feb. 17, 2021

HAMILTON, Bermuda--(BUSINESS WIRE)--Feb. 17, 2021--Argo Group International Holdings, Ltd. (NYSE: ARGO) ("Argo" or the "Company") today announced financial results for the three months and year ended December 31, 2020. Argo reported a fourth quarter 2020 net loss attributable to common shareholders of $19.7 million or $(0.57) per diluted common share, compared to a net loss attributable to common shareholders of $103.3 million or $(3.01) per diluted common share for the 2019 fourth quarter. Operating loss in the fourth quarter of 2020 was $18.2 million or $(0.52) per diluted common share, compared to an operating loss of $73.9 million or $(2.15) per diluted common share for the 2019 fourth quarter.

"We are encouraged by the improved underlying margins of our business during the quarter, as well as the actions taken to create a more focused and efficient company," said Argo Chief Executive Officer Kevin J. Rehnberg.

"While heightened 2020 catastrophe and COVID-19 losses resulted in a disappointing financial outcome, we made significant progress on our strategic objectives and achieved meaningful growth in most of our top-performing businesses - including Argo Pro, Construction and Inland Marine. We expect a sustained positive growth trajectory and continued benefits from market conditions throughout 2021, with the capital to meet those opportunities."

2020 Fourth Quarter and Full Year Consolidated Operating Highlights

$ in millions Three Months Ended Q/Q Year Ended Y/Y December 31, December 31,

Consolidated 2020 2019 Change 2020 2019 Change

Gross written $ 717.6 $ 712.8 0.7% $ 3,233.3 $ 3,129.2 3.3%premiums

Net written 438.8 399.4 9.9% 1,809.3 1,754.4 3.1%premiums

Earned 465.8 425.8 9.4% 1,779.7 1,729.5 2.9%premiums



Underwriting $ (46.8) $ (113.6) NM $ (109.6) $ (157.0) NMloss

Net investment 33.7 34.2 -1.5% 112.7 151.1 -25.4%income



Net lossattributable $ (19.7) $ (103.3) NM $ (76.5) $ (8.4) NMto commonshareholders



Operating loss $ (18.2) $ (73.9) NM $ (22.3) $ (30.8) NM



Loss ratio 69.9% 84.4% -14.5 67.9% 70.6% -2.7 pts pts

Expense ratio 40.1% 42.3% -2.2 38.3% 38.5% -0.2 pts pts

Combined ratio 110.0% 126.7% -16.7 106.2% 109.1% -2.9 pts pts

CAY ex-CAT 58.5% 65.7% -7.2 57.2% 60.6% -3.4loss ratio pts pts

* Gross written premium grew 0.7% to $717.6 million during the fourth quarter of 2020. Premium growth in U.S. Operations of 6.6% was due to growth in Professional and Property lines driven primarily by rate increases. This was partially offset by a 10.4% decline in International Operations where recent underwriting actions have resulted in decreases in both Specialty and Property lines. Pricing increases remained in the low double digits on average across Argo, with a wide range varying by business line. * The current accident year (CAY), ex-catastrophe (ex-CAT) loss ratio for the 2020 fourth quarter of 58.5% compares to 65.7% in the prior year quarter, which reflects improvement in both U.S. and International Operations and is the result of recent re-underwriting actions and achieved rate increases earning through results. * Net unfavorable reserve development, which for the fourth consecutive quarter was modest for the 2020 fourth quarter at $1.6 million, or 0.3 points compared with $76.5 million or 17.9 points in the prior year quarter. * Total catastrophe losses were $51.0 million, of which $38.3 million was related to natural catastrophes and $12.7 million was related to the COVID-19 pandemic. Approximately half of the reported natural catastrophe losses were due to events that happened late in the third quarter. * The expense ratio of 40.1% improved 2.2 points compared to the prior year quarter. Included in the fourth quarter of 2020 are approximately 3 points related to certain strategic initiatives that generated non-recurring expenses related to personnel costs, legal and professional fees associated with certain transactions, the cost of early exit from certain office facilities and severance costs primarily in our International Operations. These actions are part of our previously announced expense initiatives and are expected to create savings toward our expense objectives. * The CAY ex-CAT combined ratio was 98.5% compared to 107.9% in the prior year quarter. The improvement in the CAY ex-CAT combined ratio was due to a lower CAY ex-CAT loss ratio that was driven by stronger pricing and lower loss activity in International Operations, while the expense ratio also improved. * The combined ratio was 110.0% compared to 126.7% for the 2019 fourth quarter. The lower combined ratio was primarily driven by a better loss ratio and improving expense ratio. * Net investment income of $33.7 million decreased 1.5% compared to the 2019 fourth quarter. Net investment income excluding alternatives decreased 30.3% to $23.5 million due primarily to lower interest rates and continuing portfolio de-risking actions, while alternative investments contributed a gain of $10.2 million in the fourth quarter of 2020. The strong performance from alternative investments included gains from both private equity and hedge fund investments. * Net loss attributable to common shareholders was $19.7 million or $(0.57) per diluted common share, compared to a net loss attributable to common shareholders of $103.3 million or $(3.01) per diluted common share for the 2019 fourth quarter. The 2020 fourth quarter result included foreign currency exchange losses of $9.2 million and minimal other corporate expenses, while the prior year quarter included other corporate expenses of $25.9 million and a goodwill impairment charge of $15.6 million. * Operating loss was $18.2 million or $(0.52) per diluted common share, compared to an operating loss of $73.9 million or $(2.15) per diluted common share for the 2019 fourth quarter. The primary driver of the reduced operating loss was a lower level of underwriting losses in the fourth quarter of 2020.

U.S. Operations:

$ in millions Three Months Ended Q/Q Year Ended Y/Y December 31, December 31,

U.S. Operations 2020 2019 Change 2020 2019 Change

Gross written $ 495.7 $ 465.1 6.6% $ 1,994.8 $ 1,859.3 7.3%premiums

Net written 300.8 262.1 14.8% 1,223.0 1,166.1 4.9%premiums

Earned premiums 304.8 271.1 12.4% 1,207.6 1,119.7 7.9%



Losses and lossadjustment 202.4 194.1 4.3% 768.7 690.4 11.3%expenses

Underwriting 100.3 90.0 11.4% 391.1 368.7 6.1%expenses

Underwriting $ 2.1 $ (13.0) NM $ 47.8 $ 60.6 -21.1%income (loss)



Loss ratio 66.4% 71.6% -5.2 63.6% 61.7% 1.9 pts pts

Expense ratio 32.9% 33.2% -0.3 32.4% 32.9% -0.5 pts pts

Combined ratio 99.3% 104.8% -5.5 96.0% 94.6% 1.4 pts pts

CAY ex-CAT loss 60.3% 62.2% -1.9 58.5% 59.0% -0.5ratio pts pts

* In our U.S. Operations, gross written premiums increased 6.6% compared to the 2019 fourth quarter due to growth in Professional and Property lines, while premiums in Liability and Specialty lines were down modestly. Growth in the period reflected rate increases across most lines of business, which continued to be strong at approximately 10% on average. This was partially offset by certain business units being impacted by economic headwinds as a result of COVID-19, as well as re-underwriting actions in certain business units. Certain strategic growth areas that are benefiting from strong market conditions, such as Casualty and Professional lines, experienced premium growth above 20% during the 2020 fourth quarter. * Net written premiums increased 14.8% and earned premiums were up 12.4% compared to the 2019 fourth quarter due to growth in gross written premiums in prior quarters and an adjustment to ceded premiums in the prior year quarter. Net written and earned premium growth was primarily attributed to Professional and Specialty lines. * The loss ratio for the fourth quarter of 2020 was 66.4%, an improvement of 5.2 points compared to the prior year quarter. The lower loss ratio was driven by a 1.9 point improvement in the CAY ex-CAT loss ratio and an 8.5 point reduction in unfavorable prior accident year reserve development. Although the CAY ex-CAT loss ratio improved compared to the prior year quarter, the result in the fourth quarter of 2020 was impacted by a large loss from a property account that has been non-renewed and a large liability claim that added 3.0 points to the loss ratio. * Net unfavorable prior-year reserve development in the current quarter declined to $2.9 million from $25.5 million in the prior year quarter. These were partially offset by a higher level of catastrophe losses which totaled 5.2 points compared to an immaterial amount in the prior year quarter. Catastrophe losses in the quarter were primarily related to U.S. windstorms that occurred during the third and fourth quarters, as well as U.S. wildfires. * The expense ratio for the fourth quarter of 2020 was 32.9%, a 0.3 point improvement compared to the 2019 fourth quarter. The lower expense ratio reflects premium growth in excess of expense growth, partially offset by slightly higher acquisition expenses.

International Operations:

$ in millions Three Months Ended Q/Q Year Ended Y/Y December 31, December 31,

International 2020 2019 Change 2020 2019 ChangeOperations

Gross written $ 221.8 $ 247.6 -10.4% $ 1,238.0 $ 1,269.7 -2.5%premiums

Net written 137.9 137.2 0.5% 585.8 588.1 -0.4%premiums

Earned premiums 160.9 154.6 4.1% 571.7 609.6 -6.2%



Losses and lossadjustment 123.0 155.0 -20.6% 428.6 518.3 -17.3%expenses

Underwriting 73.4 75.5 -2.8% 248.4 250.2 -0.7%expenses

Underwriting $ (35.5) $ (75.9) NM $ (105.3) $ (158.9) NMloss



Loss ratio 76.5% 100.3% -23.8 75.0% 85.0% -10 pts pts

Expense ratio 45.6% 48.8% -3.2 43.4% 41.0% 2.4 pts pts

Combined ratio 122.1% 149.1% -27 118.4% 126.0% -7.6 pts pts

CAY ex-CAT loss 55.0% 72.0% -17 54.4% 63.7% -9.3ratio pts pts

* In our International Operations, gross written premiums declined 10.4% in the fourth quarter of 2020, as growth in Liability lines was more than offset by a decrease in Specialty and Property lines. Rates increased across all lines of business with particular strength in Liability lines, with average rate increases above 15% during the quarter. Rate increases across International were partially offset by re-underwriting and reducing line sizes in certain business lines, as well as the economic impact of COVID-19 on some businesses. * Net earned premium in the fourth quarter of 2020 increased 4.1% from the 2019 fourth quarter. The increase was primarily related to growth in Liability lines. * The loss ratio for the fourth quarter of 2020 was 76.5%, an improvement of 23.8 points compared to the prior year quarter. The lower loss ratio was primarily due to a 17.0 point year-over-year improvement in the CAY ex-CAT loss ratio and 1.1 points of favorable reserve development compared to 26.3 points of unfavorable reserve development in the prior year quarter. Catastrophe losses totaled 22.6 points in the fourth quarter of 2020, attributed to natural catastrophes and losses related to COVID-19 related losses. The CAY ex-CAT loss ratio was 55.0% in the fourth quarter of 2020 compared to 72.0% in the prior year period. The improvement during the fourth quarter and full year 2020 was primarily due to the impact of recent re-underwriting actions and achieved rate increases earning through results. The result in the fourth quarter of 2019 was also impacted by a recalibration of the CAY ex-CAT loss ratio based on prior year reserve adjustments. * The expense ratio for the fourth quarter of 2020 was 45.6%, which improved 3.2 points compared to the prior year quarter. The fourth quarter 2020 result included approximately 4 points related to severance and certain one-time expenses that are not expected to recur.

Balance Sheet:

* Book value per common share was $49.39 at December 31, 2020, compared to $49.63 at September 30, 2020. Including dividends paid, book value per common share was approximately unchanged relative to September 30, 2020.

CONFERENCE CALLArgo management will conduct an investor conference call starting at 10 a.m. EST on Thursday, February 18, 2021. Participants in the U.S. can access the call by dialing (877) 291-5203. Callers dialing from outside the U.S. can access the call by dialing (412) 902-6610. Please ask the operator for the Argo earnings call. A live webcast of the conference call can be accessed at https://services.choruscall.com/links/argo210218.html

A webcast replay will be available shortly after the live conference call and can be accessed at https://services.choruscall.com/links/argo210218.html. A telephone replay of the conference call will be available through February 25, 2021, to callers in the U.S. by dialing (877) 344-7529 (conference #10151484). Callers dialing from outside the U.S. can access the replay by dialing (412) 317-0088 (conference #10151484).

ABOUT ARGO GROUP INTERNATIONAL HOLDINGS, LTD.Argo Group International Holdings Ltd. (NYSE: ARGO) is an underwriter of specialty insurance products in the property and casualty market. Argo offers a full line of products and services designed to meet the unique coverage and claims-handling needs of businesses in two primary segments: U.S. Operations and International Operations. Argo and its insurance subsidiaries are rated ?A-' by Standard and Poor's. Argo's insurance subsidiaries are rated ?A-' by A.M. Best. More information on Argo and its subsidiaries is available at www.argogroup.com.

FORWARD-LOOKING STATEMENTSThis press release includes forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can be identified by the use of words such as "expect," "intend," "plan," "believe," "do not believe," "aim," "project," "anticipate," "seek," "will," "likely," "assume," "estimate," "may," "continue," "guidance," "objective," "remain optimistic," "improve," "progress," "path toward," "outlook," "trends," "future," "could," "would," "should," "target," "on track" and similar expressions of a future or forward-looking nature.

Such statements are subject to certain risks and uncertainties that could cause actual events or results to differ materially. For a more detailed discussion of such risks and uncertainties, see Item 1A, "Risk Factors" in Argo's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as supplemented in Part II, Item 1A, "Risk Factors" of Argo's subsequent Quarterly Reports on Form 10-Q and in other filings with the Securities and Exchange Commission ("SEC"). The inclusion of a forward-looking statement herein should not be regarded as a representation by Argo that Argo's objectives will be achieved. Argo undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on any such statements.

NON-GAAP FINANCIAL MEASURESIn presenting the Company's results, management has included and discussed in this press release certain non-generally accepted accounting principles ("non-GAAP") financial measures within the meaning of Regulation G as promulgated by the SEC. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain the Company's results of operations in a manner that allows for a more complete understanding of the underlying trends in the Company's business. However, these measures should not be viewed as a substitute for those determined in accordance with generally accepted accounting principles ("U.S. GAAP").

"Underwriting income" is an internal performance measure used in the management of the Company's operations and represents net amount earned from underwriting activities (net premium earned less underwriting expenses and claims incurred). Although this measure of profit (loss) does not replace net income (loss) computed in accordance with U.S. GAAP as a measure of profitability, management uses this measure of profit (loss) to focus our reporting segments on generating underwriting income. The Company presents Underwriting income as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information.

"Current accident year (CAY) ex-CAT combined ratio" and the "Current accident year (CAY) ex-CAT loss ratio" are internal measures used by the management of the Company to evaluate the performance of its' underwriting activity and represents the net amount of underwriting income excluding catastrophe related charges (impacts to both premium and losses), the impact of changes to prior year loss reserves and other one-time items that would impact expenses or net earned premium. Although this measure does not replace the GAAP combined ratio it provides management with a view of the quality of earnings generated by underwriting activity for the current accident year.

"Operating income" is an internal performance measure used in the management of the Company's operations and represents after-tax (at an assumed effective tax rate of 15%) operating results excluding, as applicable, net realized investment gains or losses, net foreign exchange gain or loss, and other similar non-recurring items, as well as preferred share dividends. The Company excludes net realized investment gains or losses, net foreign exchange gain or loss, and other similar non-recurring items from the calculation of operating income because these amounts are influenced by and fluctuate in part, by market conditions that are outside of management's control. In addition to presenting net income determined in accordance with U.S. GAAP, the Company believes that showing operating income enables investors, analysts, rating agencies and other users of the Company's financial information to more easily analyze our results of operations and underlying business performance. Operating income should not be viewed as a substitute for U.S. GAAP net income.

"Annualized return on average common shareholders' equity" ("ROACE") is calculated using average common shareholders' equity. In calculating ROACE, the net income available to common shareholders for the period is multiplied by the number of periods in a calendar year to arrive at annualized net income available to common shareholders. The Company presents ROACE as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information. "Annualized operating return on average common shareholders' equity" is calculated using operating income (as defined above and annualized in the manner described for net income (loss) available to common shareholders under ROACE above) and average common shareholders' equity.

The "percentage change in book value per common share" includes (by adding) the effects of cash dividends paid per common share to the calculated book value per common share for the current period. This adjusted amount is then compared to the prior period's book value per common share to determine the period over period change. The Company believes that including the dividends paid per common share allows users of its financial statements to more easily identify the impact of the changes in book value per common share from the perspective of investors.

Reconciliations of non-GAAP financial measures to their most directly comparable U.S. GAAP measures are included in the attached tables and footnotes.

(financial tables follow)

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)

December 31, December 31,

2020 2019

(unaudited)

Assets

Total investments $ 5,237.7 $ 5,099.4

Cash 138.0 137.8

Accrued investment income 21.8 25.7

Receivables 3,687.0 3,792.8

Goodwill and intangible assets 207.8 253.2

Deferred acquisition costs, net 162.8 160.2

Ceded unearned premiums 572.1 545.0

Other assets 439.3 500.4

Total assets $ 10,466.5 $ 10,514.5



Liabilities and Shareholders' Equity

Reserves for losses and loss adjustment expenses $ 5,406.0 $ 5,157.6

Unearned premiums 1,459.0 1,410.9

Ceded reinsurance payable, net 950.0 1,203.1

Senior unsecured fixed rate notes 140.2 140.0

Other indebtedness 60.7 181.3

Junior subordinated debentures 257.8 257.4

Other liabilities 335.4 383.1

Total liabilities 8,609.1 8,733.4



Preferred shares 144.0 -

Common shareholders' equity 1,713.4 1,781.1

Total shareholders' equity 1,857.4 1,781.1

Total liabilities and shareholders' equity $ 10,466.5 $ 10,514.5



Book value per common share $ 49.39 $ 51.80

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

CONSOLIDATED FINANCIAL HIGHLIGHTS

(in millions, except per share amounts)

(unaudited)



Three Months Ended Year Ended

December 31, December 31,

2020 2019 2020 2019

Gross written premiums $ 717.6 $ 712.8 $ 3,233.3 $ 3,129.2

Net written premiums 438.8 399.4 1,809.3 1,754.4



Earned premiums 465.8 425.8 1,779.7 1,729.5

Net investment income 33.7 34.2 112.7 151.1

Fee and other income 2.1 2.8 7.9 9.1

Net realized investment gains 16.3 21.7 (5.4) 80.0(losses)

Total revenue 517.9 484.5 1,894.9 1,969.7



Losses and loss adjustment 325.8 359.2 1,208.8 1,220.7expenses

Underwriting, acquisition and 186.8 180.2 680.5 665.8insurance expenses

Other corporate expenses (0.4) 25.9 5.8 37.6

Interest expense 6.5 8.3 27.8 33.6

Fee and other expense 0.9 2.0 4.0 5.8

Foreign currency exchange losses 9.2 (3.4) 24.2 (9.6)(gains)

Impairment of goodwill - 15.6 - 15.6

Total expenses 528.8 587.8 1,951.1 1,969.5



(Loss) income before income (10.9) (103.3) (56.2) 0.2taxes

Income tax provision 6.2 - 15.7 8.6

Net loss $ (17.1) $ (103.3) $ (71.9) $ (8.4)

Dividends on preferred shares 2.6 - 4.6 $ -

Net loss attributable to common $ (19.7) $ (103.3) $ (76.5) $ (8.4)shareholders



Loss per common share (basic) $ (0.57) $ (3.01) $ (2.21) $ (0.25)

Loss per common share (diluted) $ (0.57) $ (3.01) $ (2.21) $ (0.25)



Weighted average common shares:

Basic 34.7 34.3 34.6 34.2

Diluted 34.7 34.3 34.6 34.2



Loss ratio 69.9% 84.4% 67.9% 70.6%

Expense ratio ^(1) 40.1% 42.3% 38.3% 38.5%

GAAP combined ratio 110.0% 126.7% 106.2% 109.1%

CAY ex-CAT combined ratio^ (2) 98.5% 107.9% 95.3% 99.1%

(1)

The expense ratio is calculated as "Underwriting, acquisition and insurance expense" divided by "Earned premiums."

(2)

For purposes of calculating these ratios, net earned premiums were adjusted to exclude outward reinstatement premium adjustments of $1.6 million and $7.6 million for the three months and year ended December 31, 2020, respectively, and outward reinstatement premium adjustments of $0.9 million and $0.8 million for the three months and year ended December 31, 2019, respectively.

^ The expense ratio is calculated as "Underwriting, acquisition and(1) insurance expense" divided by "Earned premiums."

For purposes of calculating these ratios, net earned premiums were adjusted to exclude outward reinstatement premium adjustments of $1.6^ million and $7.6 million for the three months and year ended December 31,(2) 2020, respectively, and outward reinstatement premium adjustments of $0.9 million and $0.8 million for the three months and year ended December 31, 2019, respectively.

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

SEGMENT DATA

(in millions)

(unaudited)



Three Months Ended Year ended

December 31, December 31,

2020 2019 2020 2019

U.S. Operations

Gross written premiums $ 495.7 $ 465.1 $ 1,994.8 $ 1,859.3

Net written premiums 300.8 262.1 1,223.0 1,166.1

Earned premiums 304.8 271.1 1,207.6 1,119.7



Underwriting income (loss) 2.1 (13.0) 47.8 60.6

Net investment income 24.2 19.9 80.3 100.0

Interest expense (3.1) (5.0) (16.2) (20.5)

Fee income (expense), net 0.3 (1.1) (0.2) (1.0)

Net income before taxes $ 23.5 $ 0.8 $ 111.7 $ 139.1



Loss ratio 66.4% 71.6% 63.6% 61.7%

Expense ratio ^(1) 32.9% 33.2% 32.4% 32.9%

GAAP combined ratio 99.3% 104.8% 96.0% 94.6%

CAY ex-CAT combined ratio ^(2) 92.9% 95.4% 90.7% 91.9%



International Operations

Gross written premiums $ 221.8 $ 247.6 $ 1,238.0 $ 1,269.7

Net written premiums 137.9 137.2 585.8 588.1

Earned premiums 160.9 154.6 571.7 609.6



Underwriting loss (35.5) (75.9) (105.3) (158.9)

Net investment income 7.7 12.9 26.7 44.2

Interest expense (1.5) (2.6) (7.7) (11.0)

Fee income, net 0.9 1.9 3.4 4.3

Impairment of goodwill - (15.6) - (15.6)

Net loss before taxes $ (28.4) $ (79.3) $ (82.9) $ (137.0)



Loss ratio 76.5% 100.3% 75.0% 85.0%

Expense ratio ^(1) 45.6% 48.8% 43.4% 41.0%

GAAP combined ratio 122.1% 149.1% 118.4% 126.0%

CAY ex-CAT combined ratio^ (3) 101.1% 120.6% 97.8% 104.7%

(1)

The expense ratio is calculated as "Underwriting, acquisition and insurance expense" divided by "Earned premiums."

(2)

For purposes of calculating these ratios, net earned premiums were adjusted to exclude outward reinstatement premium adjustments of $3.2 million and $6.4 million for the three months and year ended December 31, 2020, respectively. There were no such adjustments for the three months and year ended December 31, 2019.

(3)

For purposes of calculating these ratios, net earned premiums were adjusted to exclude inward reinstatement premium adjustments of $1.6 million for the three months ended December 31, 2020 and outward reinstatement premium adjustments of $1.2 million for the year ended December 31, 2020, and outward reinstatement premium adjustments of $0.9 million and $0.8 million for the three months and year ended December 31, 2019, respectively.

^ The expense ratio is calculated as "Underwriting, acquisition and(1) insurance expense" divided by "Earned premiums."

For purposes of calculating these ratios, net earned premiums were^ adjusted to exclude outward reinstatement premium adjustments of $3.2(2) million and $6.4 million for the three months and year ended December 31, 2020, respectively. There were no such adjustments for the three months and year ended December 31, 2019.

For purposes of calculating these ratios, net earned premiums were adjusted to exclude inward reinstatement premium adjustments of $1.6^ million for the three months ended December 31, 2020 and outward(3) reinstatement premium adjustments of $1.2 million for the year ended December 31, 2020, and outward reinstatement premium adjustments of $0.9 million and $0.8 million for the three months and year ended December 31, 2019, respectively.

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

RECONCILIATION OF LOSS RATIOS

(unaudited)



Three Months Ended Year Ended

December 31, December 31,

2020 2019 2020 2019

U.S. Operations

Loss ratio 66.4 % 71.6 % 63.6 % 61.7 %

Prior accident year loss reserve (0.9) % (9.4) % (0.2) % (1.4) %development

Catastrophe losses (5.2) % - % (4.9) % (1.3) %

CAY ex-CAT loss ratio^ (1) 60.3 % 62.2 % 58.5 % 59.0 %



International Operations

Loss ratio 76.5 % 100.3 % 75.0 % 85.0 %

Prior accident year loss reserve 1.1 % (26.3) % 1.1 % (18.1) %development

Catastrophe losses (22.6) % (2.0) % (21.7) % (3.2) %

CAY ex-CAT loss ratio^ (2) 55.0 % 72.0 % 54.4 % 63.7 %



Consolidated

Loss ratio 69.9 % 84.4 % 67.9 % 70.6 %

Prior accident year loss reserve (0.3) % (17.9) % (0.4) % (8.0) %development

Catastrophe losses (11.1) % (0.8) % (10.3) % (2.0) %

CAY ex-CAT loss ratio^ (3) 58.5 % 65.7 % 57.2 % 60.6 %

(1)

For purposes of calculating these ratios, net earned premiums were adjusted to exclude outward reinstatement premium adjustments of $3.2 million and $6.4 million for the three months and year ended December 31, 2020, respectively. There were no such adjustments for the three months and year ended December 31, 2019.

(2)

For purposes of calculating these ratios, net earned premiums were adjusted to exclude inward reinstatement premium adjustments of $1.6 million for the three months ended December 31, 2020 and outward reinstatement premium adjustments of $1.2 million for the year ended December 31, 2020, and outward reinstatement premium adjustments of $0.9 million and $0.8 million for the three months and year ended December 31, 2019, respectively.

(3)

For purposes of calculating these ratios, net earned premiums were adjusted to exclude outward reinstatement premium adjustments of $1.6 million and $7.6 million for the three months and year ended December 31, 2020, respectively, and outward reinstatement premium adjustments of $0.9 million and $0.8 million for the three months and year ended December 31, 2019, respectively.

For purposes of calculating these ratios, net earned premiums were^ adjusted to exclude outward reinstatement premium adjustments of $3.2(1) million and $6.4 million for the three months and year ended December 31, 2020, respectively. There were no such adjustments for the three months and year ended December 31, 2019.

For purposes of calculating these ratios, net earned premiums were adjusted to exclude inward reinstatement premium adjustments of $1.6^ million for the three months ended December 31, 2020 and outward(2) reinstatement premium adjustments of $1.2 million for the year ended December 31, 2020, and outward reinstatement premium adjustments of $0.9 million and $0.8 million for the three months and year ended December 31, 2019, respectively.

For purposes of calculating these ratios, net earned premiums were adjusted to exclude outward reinstatement premium adjustments of $1.6^ million and $7.6 million for the three months and year ended December 31,(3) 2020, respectively, and outward reinstatement premium adjustments of $0.9 million and $0.8 million for the three months and year ended December 31, 2019, respectively.

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

NET PRIOR-YEAR RESERVE DEVELOPMENT & CATASTROPHE LOSSES BY SEGMENT

(in millions)

(unaudited)



Three Months Ended Year Ended

December 31, December 31,

2020 2019 2020 2019

Net Prior-Year Reserve Development

(Favorable)/Unfavorable

U.S. Operations $ 2.9 $ 25.5 $ 2.4 $ 15.7

International Operations (1.7) 40.9 (6.2) 110.4

Run-off Lines 0.4 10.1 11.5 12.0

Total net prior-year reserve $ 1.6 $ 76.5 $ 7.7 $ 138.1 development

Three Months Ended

Year Ended

December 31,

December 31,

2020

2019

2020

2019

Catastrophe & COVID-19 Losses

Catastrophe losses

U.S. Operations

$

13.9

$

0.1

$

49.7

$

14.4

International Operations

24.4

2.2

56.3

19.2

Total catastrophe losses

38.3

2.3

106.0

33.6

COVID-19 losses

U.S. Operations

-

-

6.5

-

International Operations

12.7

-

66.7

-

Total COVID-19 losses

12.7

-

73.2

-

Catastrophe & COVID-19 losses

U.S. Operations

13.9

0.1

56.2

14.4

International Operations

37.1

2.2

123.0

19.2

Total catastrophe & COVID-19 losses

$

51.0

$

2.3

$

179.2

$

33.6

Three Months Ended Year Ended

December 31, December 31,

2020 2019 2020 2019

Catastrophe & COVID-19 Losses

Catastrophe losses

U.S. Operations $ 13.9 $ 0.1 $ 49.7 $ 14.4

International Operations 24.4 2.2 56.3 19.2

Total catastrophe losses 38.3 2.3 106.0 33.6



COVID-19 losses

U.S. Operations - - 6.5 -

International Operations 12.7 - 66.7 -

Total COVID-19 losses 12.7 - 73.2 -



Catastrophe & COVID-19 losses

U.S. Operations 13.9 0.1 56.2 14.4

International Operations 37.1 2.2 123.0 19.2

Total catastrophe & COVID-19 losses $ 51.0 $ 2.3 $ 179.2 $ 33.6

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

RECONCILIATION OF UNDERWRITING (LOSS) INCOME TO NET (LOSS) INCOME

CONSOLIDATED

(in millions)

(unaudited)



Three Months Ended Year Ended

December 31, December 31,

2020 2019 2020 2019

Net loss $ (17.1) $ (103.3) $ (71.9) $ (8.4)

Add (deduct):

Income tax provision 6.2 - 15.7 8.6

Net investment income (33.7) (34.2) (112.7) (151.1)

Net realized investment (16.3) (21.7) 5.4 (80.0) (gains) losses

Fee and other income (2.1) (2.8) (7.9) (9.1)

Interest expense 6.5 8.3 27.8 33.6

Fee and other expense 0.9 2.0 4.0 5.8

Foreign currency exchange 9.2 (3.4) 24.2 (9.6) losses (gains)

Other corporate expenses (0.4) 25.9 5.8 37.6

Impairment of goodwill - 15.6 - 15.6

Underwriting loss $ (46.8) $ (113.6) $ (109.6) $ (157.0)

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

RECONCILIATION OF OPERATING INCOME TO NET (LOSS) INCOME

CONSOLIDATED

(in millions, except per share amounts)

(unaudited)



Three Months Ended Year Ended

December 31, December 31,

2020 2019 2020 2019

Net loss, as reported $ (17.1) $ (103.3) $ (71.9) $ (8.4)

Income tax provision 6.2 - 15.7 8.6

Net (loss) income, before (10.9) (103.3) (56.2) 0.2 taxes

Add (deduct):

Net realized investment (16.3) (21.7) 5.4 (80.0) (gains) losses

Foreign currency exchange 9.2 (3.4) 24.2 (9.6) losses (gains)

Other corporate expenses (0.4) 25.9 5.8 37.6

Impairment of goodwill - 15.6 - 15.6

Operating loss beforetaxes and preferred share (18.4) (86.9) (20.8) (36.2) dividends

Income tax (benefit)provision, at assumed rate (2.8) (13.0) (3.1) (5.4) ^(1)

Preferred share dividends 2.6 - 4.6 -

Operating loss $ (18.2) $ (73.9) $ (22.3) $ (30.8)



Operating loss per common $ (0.52) $ (2.15) $ (0.64) $ (0.90) share (diluted)



Weighted average common 34.7 34.3 34.6 34.2 shares, diluted

(1)

For the purpose of calculating Operating Income, an assumed tax rate of 15% was used for all periods presented.

^ For the purpose of calculating Operating Income, an assumed tax rate of(1) 15% was used for all periods presented.

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

RECONCILIATION OF SEGMENT INCOME TO NET (LOSS) INCOME

(in millions)

(unaudited)



Three Months Ended Year Ended

December 31, December 31,

2020 2019 2020 2019

Segment income (loss) before income taxes:

U.S. Operations $ 23.5 $ 0.8 $ 111.7 $ 139.1

International Operations (28.4) (79.3) (82.9) (137.0)

Run-off Lines (1.9) (10.0) (12.9) (9.8)

Corporate and Other (11.6) (14.0) (36.7) (44.1)

Net realized investment gains 16.3 21.7 (5.4) 80.0 (losses)

Foreign currency exchange (9.2) 3.4 (24.2) 9.6 (losses) gains

Other corporate expenses 0.4 (25.9) (5.8) (37.6)

(Loss) income before income (10.9) (103.3) (56.2) 0.2 taxes

Income tax provision 6.2 - 15.7 8.6

Net loss $ (17.1) $ (103.3) $ (71.9) $ (8.4)

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

PREMIUMS BY SEGMENT AND LINE OF BUSINESS

(in millions)

(unaudited)

U.S. Three months ended December 31, Three months ended December 31,Operations 2020 2019

Gross Net Net Gross Net Net Written Written Earned Written Written Earned

Property $ 62.5 $ 35.5 $ 38.2 $ 57.6 $ 33.9 $ 37.4

Liability 256.2 151.2 166.8 259.7 144.2 166.3

Professional 125.6 78.7 67.5 95.8 54.8 39.3

Specialty 51.4 35.4 32.3 52.0 29.2 28.1

Total $ 495.7 $ 300.8 $ 304.8 $ 465.1 $ 262.1 $ 271.1

Year ended December 31, 2020

Year ended December 31, 2019

Gross Written

NetWritten

NetEarned

Gross Written

NetWritten

NetEarned

Property

$

300.0

$

160.0

$

155.5

$

284.9

$

146.5

$

137.5

Liability

1,060.6

657.0

674.2

1,072.6

701.3

700.1

Professional

438.3

272.5

244.9

315.9

190.9

158.9

Specialty

195.9

133.5

133.0

185.9

127.4

123.2

Total

$

1,994.8

$

1,223.0

$

1,207.6

$

1,859.3

$

1,166.1

$

1,119.7

Year ended December 31, 2020 Year ended December 31, 2019

Gross Net Net Gross Net Net Written Written Earned Written Written Earned

Property $ 300.0 $ 160.0 $ 155.5 $ 284.9 $ 146.5 $ 137.5

Liability 1,060.6 657.0 674.2 1,072.6 701.3 700.1

Professional 438.3 272.5 244.9 315.9 190.9 158.9

Specialty 195.9 133.5 133.0 185.9 127.4 123.2

Total $ 1,994.8 $ 1,223.0 $ 1,207.6 $ 1,859.3 $ 1,166.1 $ 1,119.7

International Operations

Three months ended December 31, 2020

Three months ended December 31, 2019

Gross Written

NetWritten

NetEarned

Gross Written

NetWritten

NetEarned

Property

$

48.6

$

29.4

$

41.2

$

59.5

$

32.3

$

43.8

Liability

55.4

26.2

28.5

47.4

22.8

21.3

Professional

53.3

42.3

32.5

57.2

34.5

32.6

Specialty

64.5

40.0

58.7

83.5

47.6

56.9

Total

$

221.8

$

137.9

$

160.9

$

247.6

$

137.2

$

154.6

International Three months ended December 31, Three months ended December 31,Operations 2020 2019

Gross Net Net Gross Net Net Written Written Earned Written Written Earned

Property $ 48.6 $ 29.4 $ 41.2 $ 59.5 $ 32.3 $ 43.8

Liability 55.4 26.2 28.5 47.4 22.8 21.3

Professional 53.3 42.3 32.5 57.2 34.5 32.6

Specialty 64.5 40.0 58.7 83.5 47.6 56.9

Total $ 221.8 $ 137.9 $ 160.9 $ 247.6 $ 137.2 $ 154.6

Year ended December 31, 2020

Year ended December 31, 2019

Gross Written

NetWritten

NetEarned

Gross Written

NetWritten

NetEarned

Property

$

465.1

$

158.3

$

156.8

$

504.7

$

153.0

$

162.9

Liability

241.2

107.9

101.5

198.0

97.0

105.2

Professional

210.0

130.3

120.5

208.4

120.1

115.3

Specialty

321.7

189.3

192.9

358.6

218.0

226.2

Total

$

1,238.0

$

585.8

$

571.7

$

1,269.7

$

588.1

$

609.6

Year ended December 31, 2020 Year ended December 31, 2019

Gross Net Net Gross Net Net Written Written Earned Written Written Earned

Property $ 465.1 $ 158.3 $ 156.8 $ 504.7 $ 153.0 $ 162.9

Liability 241.2 107.9 101.5 198.0 97.0 105.2

Professional 210.0 130.3 120.5 208.4 120.1 115.3

Specialty 321.7 189.3 192.9 358.6 218.0 226.2

Total $ 1,238.0 $ 585.8 $ 571.7 $ 1,269.7 $ 588.1 $ 609.6

Consolidated

Three months ended December 31, 2020

Three months ended December 31, 2019

Gross Written

NetWritten

NetEarned

Gross Written

NetWritten

NetEarned

Property

$

111.1

$

64.9

$

79.4

$

117.1

$

66.2

$

81.2

Liability

311.7

177.5

195.4

307.2

167.1

187.7

Professional

178.9

121.0

100.0

153.0

89.3

71.9

Specialty

115.9

75.4

91.0

135.5

76.8

85.0

Total

$

717.6

$

438.8

$

465.8

$

712.8

$

399.4

$

425.8

Consolidated Three months ended December 31, Three months ended December 31, 2020 2019

Gross Net Net Gross Net Net Written Written Earned Written Written Earned

Property $ 111.1 $ 64.9 $ 79.4 $ 117.1 $ 66.2 $ 81.2

Liability 311.7 177.5 195.4 307.2 167.1 187.7

Professional 178.9 121.0 100.0 153.0 89.3 71.9

Specialty 115.9 75.4 91.0 135.5 76.8 85.0

Total $ 717.6 $ 438.8 $ 465.8 $ 712.8 $ 399.4 $ 425.8

Year ended December 31, 2020

Year ended December 31, 2019

Gross Written

NetWritten

NetEarned

Gross Written

NetWritten

NetEarned

Property

$

765.1

$

318.3

$

312.3

$

789.6

$

299.5

$

300.4

Liability

1,302.3

765.4

776.1

1,270.8

798.5

805.5

Professional

648.3

402.8

365.4

524.3

311.0

274.2

Specialty

517.6

322.8

325.9

544.5

345.4

349.4

Total

$

3,233.3

$

1,809.3

$

1,779.7

$

3,129.2

$

1,754.4

$

1,729.5

Year ended December 31, 2020 Year ended December 31, 2019

Gross Net Net Gross Net Net Written Written Earned Written Written Earned

Property $ 765.1 $ 318.3 $ 312.3 $ 789.6 $ 299.5 $ 300.4

Liability 1,302.3 765.4 776.1 1,270.8 798.5 805.5

Professional 648.3 402.8 365.4 524.3 311.0 274.2

Specialty 517.6 322.8 325.9 544.5 345.4 349.4

Total $ 3,233.3 $ 1,809.3 $ 1,779.7 $ 3,129.2 $ 1,754.4 $ 1,729.5

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

COMPONENTS OF NET INVESTMENT INCOME & NET REALIZED INVESTMENT GAINS (LOSSES)

CONSOLIDATED

(in millions)

(unaudited)



Three Months Ended Year Ended

December 31, December 31,

2020 2019 2020 2019

Net Investment Income

Net investment income, excluding $ 23.5 $ 33.7 $ 104.1 $ 131.2 alternative investments

Alternative investments 10.2 0.5 8.6 19.9

Total net investment income $ 33.7 $ 34.2 $ 112.7 $ 151.1

Three Months Ended

Year Ended

December 31,

December 31,

2020

2019

2020

2019

Net Realized Investment Gains (Losses)

Net realized investment (losses) gains

$

(1.4)

$

120.5

$

(0.4)

$

120.8

Change in fair value of equity securities

24.0

(98.8)

12.0

(40.8)

Credit losses on fixed maturity securities

3.1

-

(39.9)

-

Loss on disposal of Reinsurance business

(9.4)

-

(9.4)

-

Gain on sale of Trident assets

-

-

32.3

-

Total net realized investments gains (losses)

$

16.3

$

21.7

$

(5.4)

$

80.0

Three Months Ended Year Ended

December 31, December 31,

2020 2019 2020 2019

Net Realized Investment Gains (Losses)

Net realized investment (losses) $ (1.4) $ 120.5 $ (0.4) $ 120.8 gains

Change in fair value of equity 24.0 (98.8) 12.0 (40.8) securities

Credit losses on fixed maturity 3.1 - (39.9) - securities

Loss on disposal of Reinsurance (9.4) - (9.4) - business

Gain on sale of Trident assets - - 32.3 -

Total net realized investments $ 16.3 $ 21.7 $ (5.4) $ 80.0 gains (losses)

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

COMPONENTS OF INVESTMENT PORTFOLIO

CONSOLIDATED

(in millions)

(unaudited)



December 31, December 31,

2020 2019

U.S. Governments and government agencies $ 399.8 $ 354.6

States and political subdivisions 170.4 152.6

Foreign governments 294.8 248.7

Corporate - Financial 917.8 783.8

Corporate - Industrial 826.6 789.5

Corporate - Utilities 237.4 207.1

Asset-backed securities 122.8 165.5

Collateralized loan obligations 289.6 225.8

Mortgage-backed securities - Agency 453.4 373.8

Mortgage-backed securities - Commercial 339.7 217.0

Mortgage-backed securities - Residential 54.8 115.1

Total fixed maturities 4,107.1 3,633.5

Common stocks 175.1 116.5

Preferred stocks 1.6 7.9

Total equity securities available for sale 176.7 124.4

Private equity 211.4 268.1

Hedge fund 111.2 109.5

Overseas deposits 102.1 114.6

Other 4.7 4.3

Total other investments 429.4 496.5

Short term investments and cash equivalents 524.5 845.0

Cash 138.0 137.8

Total cash and invested assets $ 5,375.7 $ 5,237.2

December 31,

December 31,

2020

2019

U.S. Governments and government agencies

$

853.2

$

728.4

AAA

899.1

797.5

AA

382.0

347.0

A

869.9

750.9

BBB

739.4

585.3

BB

209.5

160.0

B

77.9

131.7

Lower than B

24.8

61.7

Not rated

51.3

71.0

Total fixed maturities

$

4,107.1

$

3,633.5

December 31, December 31,

2020 2019

U.S. Governments and government agencies $ 853.2 $ 728.4

AAA 899.1 797.5

AA 382.0 347.0

A 869.9 750.9

BBB 739.4 585.3

BB 209.5 160.0

B 77.9 131.7

Lower than B 24.8 61.7

Not rated 51.3 71.0

Total fixed maturities $ 4,107.1 $ 3,633.5

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

SHAREHOLDER RETURN ANALYSIS

(in millions, except per share data)

(unaudited)



Three Months Ended Year Ended

December 31, December 31,

2020 2019 2020 2019

Net loss attributable to $ (19.7) $ (103.3) $ (76.5) $ (8.4)common shareholders

Operating loss ^(1) (18.2) (73.9) (22.3) (30.8)



Common Shareholders' Equity - $ 1,720.5 $ 1,893.4 $ 1,781.1 $ 1,746.7Beginning of period

Common Shareholders' Equity - 1,713.4 1,781.1 1,713.4 1,781.1End of period

Average Common Shareholders' $ 1,717.0 $ 1,837.3 $ 1,747.3 $ 1,763.9Equity



Common shares outstanding - 34.694 34.382 34.694 34.382End of period



Book value per common share $ 49.39 $ 51.80 $ 49.39 $ 51.80

Cash dividends paid per common 0.31 1.24 share during 2020

Book value per common share,December 31, 2020 - including $ 49.70 $ 50.63 cash dividends paid



Book value per common share, $ 49.63 $ 51.80 prior period ^(2)

Change in book value per (0.5) % (4.7) % common share during 2020

Change in book value percommon share including cash 0.1 % (2.3) % dividends paid, during 2020 ^(2)



Annualized return on average (4.6) % (22.5) % (4.4) % (0.5) %common shareholders' equity

Annualized operating return onaverage common shareholders' (4.2) % (16.1) % (1.3) % (1.7) %equity

(1)

For the purpose of calculating Operating Income, an assumed tax rate of 15% was used for all periods presented.

(2)

The percentage change in book value per common share is calculated by including cash dividends of $0.31 per common share and $1.24 per common share paid to shareholders during the three months and year ended December 31, 2020, respectively. This adjusted amount (Book value per common share, including dividends) is then compared to the book value per common share as of September 30, 2020 and December 31, 2019, respectively, to determine the change for the three months and year ended December 31, 2020.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210217005995/en/

CONTACT: Brett Shirreffs Head of Investor Relations 212.607.8830 brett.shirreffs@argogroupus.com

CONTACT: David Snowden Senior Vice President, Communications 210.321.2104 david.snowden@argogroupus.com