Attached files
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| 8-K - FORM 8-K - Argo Group International Holdings, Ltd. | d454146d8k.htm |
 3Q
2012 Investor Presentation December 2012
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 –
Niche Specialist With International Platform
•
Underwriter
of
specialty
P&C
insurance
and
reinsurance
worldwide
through
four distinct business segments
•
Global footprint with operations strategically located in major insurance
centers –
U.S., Bermuda, London, Brazil, Dubai and Continental Europe
•
A leader in the U.S. Excess & Surplus lines market
•
Among the largest Syndicates at Lloyds by stamp capacity
•
One of only a few international insurance groups authorized to
operate locally in Brazil
•
Broad and deep relationships with retailers, wholesalers and Lloyds brokers
•
Focused on underwriting excellence and well positioned for growth
•
Conservatively capitalized by any measure
•
Financial
strength
is
excellent
as
indicated
by
A.M.
Best
rating
1
of
‘A’
1
Argo P/C insurance & reinsurance operations (Class Size XII)
|
 4.
Evolution to an International & Diversified Specialty U/W
2001
•
Acquired Colony
and Rockwood
•
Founded Trident
(Public Entity)
2005
•
Sold Risk
Management
business
2007
•
Rebranded Argo Group
•
Completed merger
with PXRE
•
Formed Argo Re
2008
•
Acquired Lloyds
Syndicate 1200
2011
•
Established local
presence in
Europe,
Brazil & Dubai
(part of Int’l Specialty)
4.
1
Excludes GWP recorded in runoff and corporate & other.
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
3Q/12
TTM
BVPS
$23.39
$27.22
$30.36
$33.50
$39.08
$45.15
$44.18
$52.36
$57.82
$55.60
$61.41
Total Capital (Millions)
$328
$567
$717
$860
$992
$1,754
$1,782
$1,996
$1,986
$1,840
$2,062
$186
$272
$622
$788
$903
$1,056
$1,153
$1,182
$1,605
$1,987
$1,530
$1,544
$1,697
0
400
800
1,200
1,600
2,000
Total
Risk Management (sold in 2005)
International Specialty
Syndicate 1200
Commercial Specialty (includes Trident)
Excess & Surplus Lines
13%
31%
30%
26% |
 UNITED
STATES
BRAZIL
EUROPE
MENA
Dubai
Rio de Janeiro
Sao Paulo
Bermuda
Barcelona
Brussels
London
Malta
Paris
Zurich
Key offices:
Atlanta
Boston
Chicago
Denver
Houston
Los
Angeles
New York
Portland
Richmond
Rockwood
San Antonio
Scottsdale
Argo Group International Footprint
5. |
 6.
Argo Group Business Mix
6.
GWP by Segment
Excess &
Surplus Lines
Commercial
Specialty
Syndicate
1200
International
Specialty
13%
26%
GWP by Product
Property
Casualty
GWP by Business Type
Primary
Insurance
Reinsurance
GWP by Geography
North
America
Europe
*Data is based on TTM as of Sept. 30, 2012.
31%
30%
60%
40%
15%
85%
15%
5%
80%
Rest
of
World |
 Maximize shareholder value through growth in book value per share
Our Strategy
•
Become a recognized worldwide leader of custom insurance and
reinsurance solutions for our clients
•
Create a competitive advantage through superior customer service,
product innovation and underwriting knowledge
•
Achieve profitable growth organically and/or through opportunistic
acquisitions throughout the underwriting cycle
•
Manage capital and risk appropriately / maintain strong ratings
•
Hire top tier talent to support our strategy
7. |
 Maximizing
Shareholder
Value
–
BVPS
Growth
* Book
value
per
common
share
-
outstanding,
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. 2008
2009
2010
2011
2006
2007
2005
2004
2003
2002
8.
3Q 12
$45.15
$44.18
$52.36
$57.82
$61.41
$39.08
$23.39
$27.22
$30.36
$33.50
1.1x
1.1x
1.2x
1.6x
1.7x
1.2x
0.9x
0.8x
0.7x
0.6x
0.7x
$55.60
=
Price/Book
1
-
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00 |
 9.
YTD Consolidated GWP up 12.7% in 3Q12 vs. 3Q11
Year To Date Premium Growth Up Across All Segments
Reflects impact of strategic initiatives taken, rate increases and improved
retention 9.
Excess & Surplus Lines
Commercial Specialty
International Specialty
Syndicate 1200
$357.3
$382.9
$335.1
$345.2
$174.5
$202.1
$335.7
$424.5 |
 10.
About Us
•
A leader in the U.S. Excess & Surplus
lines market
•
Strong relationships with national,
local and regional wholesale brokers
•
Seasoned U/W expertise is a competitive
advantage
•
Target market is small, medium and
large non-standard (hard-to-place) risks
underwritten on both an admitted and
non-admitted basis
GWP
by
Business
Unit
–
TTM
9/30/12
Casualty
31%
Transportation
18%
Environmental
4%
Allied
Medical
5%
Property
9%
Contract
24%
Errors
&
Omissions
8%
Excess & Surplus Lines Segment
10.
*YTD as of Sept. 30, 2012.
Combined
Ratio
Total
PTOI
NII
AY U/W
Results
PYD
CATS
‘08
‘09
‘10
‘11
‘06
‘07
‘05
‘04
‘03
‘02
94.7%
91.1%
94.8%
92.6%
88.9%
89.3%
93.3%
99.6%
97.8%
95.7%
’3Q/12*
91.7%
110%
100%
90%
80%
Pre-Tax Operating Income and Combined Ratio
Management Liability 1% |
 Commercial Specialty
Pre-Tax Operating Income and Combined Ratio
About Us
•
Designs customized commercial insurance
programs for grocers, dry cleaners
restaurants and other specialty retail clients
•
2
nd
largest
provider
of
commercial
insurance
to small and midsize U.S. public entities
•
2
nd
largest
provider
of
commercial
insurance
to the coal mining industry
•
Distributes products directly through
wholesalers and independent agents
$19.3
‘08
‘09
‘10
‘06
‘07
‘05
‘04
‘03
‘02
‘11
$38.0
$50.4
$61.3
$43.0
$45.8
100.0%
98.5%
97.2%
92.5%
89.4%
88.7%
96.5%
96.5%
99.0%
108.2%
$12.7
$10.8
’3Q/12*
112.6%
($7.6)
$1.8
$33.1
*YTD as of Sept. 30, 2012.
GWP
by
Business
Unit
–
TTM
9/30/12
Argo
Insurance
U.S.
Retail
23%
Restaurants 5%
Grocery 10%
Dry Cleaners 5%
Other Industries 3%
Mining
19%
Public Entity 29%
Commercial
2%
Programs...…
Argo
Surety
8%
Alteris
48%
Corp.
Accts/Other
19%
.
11.
Combined
Ratio
Total
PTOI
NII
AY U/W
Results
PYD
CATS
FEE |
 12.
Syndicate 1200
Pre-Tax Operating Income and Combined Ratio
About Us
•
Established multi-class
platform at Lloyds of London
•
Ranked among the largest
Syndicates at Lloyds by Stamp
Capacity
•
Lloyd’s market ratings:
•
‘A’
(Excellent) by A.M. Best
•
‘A+’
(Strong) by S&P
GWP
by
Business
Unit
–
TTM
9/30/12
Property
50%
Liability
31%
Specialty
15%
Aerospace
4%
Prof. Indemnity 13%
General Liability 12%
Directors & Officers 2%
Other 4%
Int’l Property Treaty 3%
NA & Int’l Binders 11%
Personal Accident 12%
Property FAC 18%
Other 6%
Gross Written Premium
12.
140%
90%
60%
130%
‘11
‘10
‘09
‘08
‘11
‘10
‘09
‘08
$282.9
$706.0
$389.9
$438.5
120%
110%
100%
80%
70%
112.3%
95.8%
115.3%
131.4%
’3Q/12*
$527.3
’3Q/12*
97.1%
*Data is based on TTM as of Sept. 30, 2012.
*YTD as of Sept. 30, 2012.
(100.0)
(80.0)
(60.0)
(40.0)
(20.0)
-
20.0
40.0
60.0
0
100
200
300
400
500
600
700
800
Combined
Ratio
Total PTOI
NII
AY U/W
Results
PYD
CATS
FEE
($5.2)
$30.0
($28.1)
($63.0)
$20.6 |
 13.
International Specialty
About Us
•
Bermuda team underwrites property CAT,
short tail per risk and proportional treaty
reinsurance worldwide, excess casualty and
professional liability
•
Building diversity through international
expansion:
•
Established primary operations in Brazil
•
Established operations in Euro zone
•
Established regional office in Dubai
•
Distributes through brokers
GWP by Business Unit –
TTM 9/30/12
Property
CAT
38%
Casualty
23%
Professional
8%
Other
6%
Property
Pro
Rata
5%
Gross Written Premium
Pre-Tax Operating Income and Combined Ratio
200%
’3Q/12*
‘10
‘09
‘08
‘07
‘06
13.
160%
80%
0%
120%
40%
Combined
Ratio
Total
PTOI
NII
AY U/W
Results
PYD
CATS
77.9%
52.3%
72.8%
178.5%
86.1%
82.1%
‘11
*Data is based on TTM as of Sept.30, 2012.
Property
Risk
XS
3%
Emerging
Markets
17%
Brazil 14%
Dubai/Other 3%
82.1%
’3Q/12*
‘10
‘09
‘08
‘07
‘06
‘11
*YTD as of Sept. 30, 2012. |
 14.
3Q 12 vs. 3Q 11
YTD 3Q 12 vs. YTD 3Q 11
Gross Written Premiums
$485.5
$448.5
$1,356.0
$1,203.0
Net Written Premiums
364.3
295.1
967.0
822.8
Earned Premiums
304.3
270.9
871.8
804.0
Losses and LAE
186.3
199.6
527.9
664.4
Other Reinsurance-Related Expenses
7.0
2.7
20.8
3.1
Underwriting, Acquisition and Insurance Expenses
118.0
104.2
346.3
314.7
Underwriting Income / (Loss)
($7.0)
($35.6)
($23.2)
($178.2)
Net Investment Income
28.9
30.0
90.3
96.3
Fee Income, net
3.0
1.4
4.8
1.8
Interest Expense
5.8
5.6
17.0
16.5
Operating Income / (Loss)
$19.1
($9.8)
$54.9
($96.6)
Foreign Currency Exchange Gain / (Loss)
(9.7)
1.9
(2.8)
(11.1)
Net Realized Investment Gains
8.3
3.9
18.7
37.7
Pre-Tax Income / (Loss)
$17.7
($4.0)
$70.8
($70.0)
Income Tax Provision
4.3
6.8
13.8
13.3
Net Income / (Loss)
$13.4
($10.8)
$57.0
($83.3)
Operating
Income
(Loss)
per
Common
Share
(Diluted)
1
$0.59
($0.31)
$1.68
($3.00)
Net Income (Loss) per Common Share (Diluted)
$0.52
($0.39)
$2.18
($3.04)
Loss Ratio
2
62.6%
74.5%
62.0%
83.0%
Expense Ratio
3
39.7%
38.8%
40.7%
39.3%
Combined Ratio
102.3%
113.3%
102.7%
122.3%
1
Per diluted share at assumed tax rate of 20% in 2012 and 15% in 2011. Tax
rate adjusted in the current quarter to reflect the distribution of results.
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). All data in millions except for per
share data and ratio calculations. 3Q
&
YTD
Operating
Results
-
2012
vs.
2011
14. |
 15.
ROE (Major Drivers)
Higher U/W margins required to offset low investment yields
ROE Sensitivity Table
1.0%
0.5%
2.9%
5.3%
7.6%
10.0%
0.0%
1.3%
3.7%
6.0%
8.4%
10.8%
-1.0%
2.1%
4.4%
6.8%
9.2%
11.5%
-2.0%
2.8%
5.2%
7.6%
9.9%
12.3%
-3.0%
3.6%
5.9%
8.3%
10.7%
13.0%
-4.0%
4.3%
6.7%
9.1%
11.4%
13.8%
-5.0%
5.1%
7.5%
9.8%
12.2%
14.6%
-6.0%
5.8%
8.2%
10.6%
13.0%
15.3%
-7.0%
6.6%
9.0%
11.3%
13.7%
16.1%
-8.0%
7.4%
9.7%
12.1%
14.5%
16.8%
-1.0%
0.0%
1.0%
2.0%
3.0%
Change in Investment Yield
15.
** Based on the latest 2012 consensus estimate and Sept. 30, 2012 shareholders
equity. |
 17%
16.
Conservative Investment Strategy
As of September 30, 2012
•
Duration of 3.2 years
•
Average rating of ‘AA-’
•
Book yield of 3.5%
•
Very liquid
•
Conservatively managed
Portfolio Characteristics
Equity Investments by Sector
10% Healthcare
Energy
23%
3% Industrials
11% Funds
5% Financials
9% Info Tech
4% Materials
6% Consumer
Discretionary
Consumer Staples
Asset Allocation
7% Other
Fixed
73%
Maturities.
9% Short Term Invest.
12% Equities
Total:
$4.3B
Total:
$0.5B
Fixed Maturities by Type
11%
Short
Term
Corporate
30%.
21% Gov.
20% Structured
State/Muni
18%.
Total:
$3.2B
16.
29% |
 Argo
Group - Recap of Major Highlights
Argo is an established carrier in the international specialty
insurance and reinsurance markets
•
U.S. and international platforms well-positioned to take advantage
of improving market
•
International platform supports diversification and future growth strategy
•
Recent strategic initiatives are beginning to yield results
•
Underwriting focus and talent are key competitive advantages
Management is committed to maximizing shareholder value
•
Achieved double digit book value per share growth since 2002
•
Quality of capital and balance sheet is excellent
•
Will continue to return capital as appropriate
17. |
 Argo
Group - A Compelling Valuation
Current stock price does not reflect strength of balance sheet
or underwriting platform
•
AGII’s stock price trading at approximately half of book value
Balance sheet characteristics:
•
Adequately reserved
•
Excellent asset quality
•
Average rating of fixed maturity portfolio is ‘AA-’
•
Exposure to questionable sovereigns is immaterial
•
Average rating of reinsurance recoverable balances is ‘A’
•
Intangibles and goodwill less than 4% of total assets
•
Use of financial leverage is modest at 21% (9/30/12)*
18.
*pro
forma
for
expected
redemption
of
Trust
Preferred
securities
in
November
of
2012
Management is an active buyer of the stock |