Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Argo Group International Holdings, Ltd. | d539524d8k.htm |
 1Q
2013 Investor Presentation May 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:
$45.26
Primary Market Capitalization:
$1.1 billion
Annual Dividend / Yield:
$0.60 per share / 1.3%
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 May 14, 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
Casualty
~60%
Property
~40%
Insurance
84%
Reinsurance
16% |
 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.
Maximize shareholder value through growth in book value per share
|
 6.
Evolution of Growth and Diversification
2001
•
Acquired Colony
and Rockwood
•
Founded Trident
(Public Entity)
2005
•
Sold Risk
Management
business
2007
•
Rebranded Argo Group
•
Completed merger
into Bermuda
•
Formed Argo Re
•
Acquired Lloyd’s
Syndicate 1200
2011
•
Established local
presence in
Europe,
Brazil & Dubai
(part of Int’l Specialty)
6.
*Excludes GWP recorded in runoff and corporate & other.
2008
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
’13/1Q
TTM
BVPS
$27.22
$30.36
$33.50
$39.08
$45.15
$44.18
$52.36
$57.82
$55.60
$60.75
$62.67
Total Capital (Millions)
$567
$717
$860
$992
$1,754
$1,782
$1,996
$1,986
$1,840
$1,915
$1,948 |
 7.
Argo Group Business Mix ($1.8B in GWP)
7.
GWP by Segment
Excess &
Surplus Lines
Commercial
Specialty
Syndicate
1200
International
Specialty
30%
16%
30%
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. 24%
17%
Excess &
Surplus Lines
30%
Other
Commercial
Specialty
Property
Public Entity
22%
7%
6%
Marine &
Aerospace
Surety 2%
Alteris 5%
Mining 4%
Emerging Mkts 7%
Emerging Markets 7%
54%
9%
30%
16%
84% |
 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.
$45.15
$44.18
$52.36
$57.82
$60.75
$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
=
Price/Book
1
8.
0.7x
$55.60
$62.67
0.7x
2008
2009
2010
2011
2006
2007
2005
2004
2003
2002
1Q ‘13
2012
-
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00 |
 9.
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 |
 10.
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 10. |
 11.
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 underwritten on both an
admitted and non-admitted basis
GWP by Business Unit (TTM 3/31/13)
Casualty
32%
Transportation
16%
Environmental
4%
Allied Medical
5%
Management Liability
Property
10%
Contract
23%
Errors & Omissions
7%
Excess & Surplus Lines Segment (30% of TTM GWP)
11.
Combined Ratio
PTOI
99.6%
97.8%
95.5%
91.9%
93.3%
89.3%
’13/1Q*
‘11
‘10
‘09
‘08
‘07
‘12
95.6%
Gross Written Premium
Pre-Tax Operating Income & Combined Ratio
’13/1Q*
‘11
‘10
‘09
‘08
‘07
‘12
*Data is based on TTM as of March 31, 2013.
*Data is based on YTD as of March 31, 2013.
3%
|
 12.
Outperformed E&S Peers in 2012
New segment management
team is formed.
Year of restructure and
implementation of new strategy.
Year of execution on the newly
restructured platform.
97.8%
95.7%
91.9%
92.7%
98.6%
103.9%
84.4%
87.2%
92.5%
75.0%
80.0%
85.0%
90.0%
95.0%
100.0%
105.0%
2010
2011
2012
Argo E&S
Peer Average
Top Quartile Peer Average
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.
|
 13.
Commercial Specialty (24% of GWP)
About Us
•
Argo Insurance –
Designs customized
commercial insurance programs for grocers,
dry cleaners restaurants and other specialty
retail clients
•
Trident –
2
nd
largest provider of commercial
insurance to small and midsize U.S. public
entities
•
Rockwood –
2
nd
largest provider of commercial
insurance to coal mining industry
•
Distributes products directly through
wholesalers and independent agents
GWP by Business Unit (TTM 3/31/13)
Argo
Insurance
(U.S.
Retail)
21%
Restaurants 5%
Grocery 9%
Dry Cleaners 5%
Other Industries 2%
Rockwood (Mining)
18%
Commercial
10%
Programs
(1)
...…
Argo
Surety
9%
Trident
(2)
28%
96.5%
99.0%
108.3%
115.1%
96.5%
88.7%
98.6%
Gross Written Premium
Pre-Tax Operating Income & Combined Ratio
Combined Ratio
PTOI
’13/1Q*
‘11
‘10
‘09
‘08
‘07
‘12
’13/1Q*
‘11
‘10
‘09
‘08
‘07
‘12
*Data is based on TTM as of March 31, 2013.
*Data is based on YTD as of March 31, 2013.
AARS / Corporate
Accounts
(2)
14%
(1)
Includes
GWP
from
programs
which
were previously shown in Alteris’
results
(2)
GWP
previously
included
in
Alteris’
results |
 14.
General Liability 13%
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%
NA & Int’l Binders 10%
Personal Accident 10%
Int’l Property Treaty 2%
Other 6%
14.
Gross Written Premium
Pre-Tax Operating Income & Combined Ratio
115.3%
131.7%
95.8%
112.3%
‘12
‘10
‘09
‘08
‘11
96.2%
‘12
‘10
‘09
‘08
‘11
93.3%
’13/1Q*
’13/1Q*
*Data is based on TTM as of March 31, 2013.
*Data is based on YTD as of March 31, 2013. |
 15.
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
•
Building diversity through international
expansion:
•
Established primary operations in Brazil
•
Established operations in Euro zone
•
Established regional office in Dubai
•
Distributes through brokers
15.
Gross Written Premium
Pre-Tax Operating Income & Combined Ratio
GWP by Business Unit (TTM 3/31/13)
Property CAT
35%
Casualty
20%
Professional
10%
Other
6%
Property Pro Rata
6%
Property Risk XS
3%
Brazil
20%
Cargo Marine 6%
Property & Engineering 5%
Motor 5%
Financial Lines 4%
‘12
‘10
‘09
‘08
‘11
’13/1Q*
‘12
‘10
‘09
‘08
‘11
’13/1Q*
72.8%
177.5%
52.3%
77.9%
97.1%
89.6%
Combined Ratio
PTOI
*Data is based on TTM as of March 31, 2013.
*Data is based on YTD as of March 31, 2013. |
 16.
1Q Operating Results
16.
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 Ratio
2
57.0%
61.3%
Expense Ratio
3
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) |
 17.
17%
17.
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
Total:
$4.1B
Total:
$0.6B
Fixed Maturities by Type
7% Short Term
Corporate
35%.
19% Gov.
18% Structured
State/Muni
21%.
Total:
$3.2B*
*$2.97b in fixed maturities, $0.23b in short term
Conservative Investment Strategy |
 18.
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 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 |
 19.
Stock Price Performance –
Last 12 Months
Source: Thomson.
Peer Group consists of: Allied World, Alterra, American Financial, American Safety,
Arch Capital, Aspen, AXIS Capital, Endurance, Global Indemnity, HCC, Markel,
OneBeacon, RLI Corp, Selective Group, Navigators, Tower Group, W.R. Berkley
-10%
0%
10%
20%
30%
40%
50%
60%
70%
Argo Group
Peer Group
S&P 500
+58%
+25%
+23% |
 20.
Price/Book
Jan-00
May-13
Argo
0.70x
0.72x
Peer Avg.
1.17x
1.16x
Difference
0.47x
0.44x
-
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
0.72x
1.16x
0.44x
Difference
Note: Price to book is average price/book across all peer companies. Peers include: Arch, AmTrust,
W.R. Berkley, Axis, Markel, HCC, American Financial, Allied World, Aspen, Endurance, RLI,
OneBeacon, Selective, Navigators, Tower, Global Indemnity. Source: Thomson, SNL, internal analysis. |
 21.
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
•
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
We believe that Argo Group has potential to generate substantial value for new and existing
investors. |