Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Argo Group International Holdings, Ltd. | d631051d8k.htm |
 3Q
2013 Investor Presentation November 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:
$41.38
Market Capitalization:
$1.1 billion
Annual Dividend / Yield:
$0.60 per share / 1.4%
Gross Written Premium:
$1.9 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
Guggenheim (Neutral) -
Bijan Moazami
Atlanta
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 November 01, 2013 and annual performance figures as
of TTM September 30, 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
3Q 2013 TTM GWP |
 Maximize shareholder value through growth in book value per share
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
2001
•
Acquired Colony
and Rockwood
•
Founded Trident
(Public Entity)
2005
•
Sold Risk
Management
business
2007
•
Rebranded Argo Group
•
Completed acquisition
in Bermuda
•
Formed Argo Re
2008
•
Acquired Lloyd’s
Syndicate 1200
2011
•
Established local
presence in Brazil
6.
*Excludes GWP recorded in runoff and corporate & other.
$272
$622
$788
$903
$1,056
$1,153
$1,182
$1,605
$1,987
$1,530
$1,544
$1,744
$1,864
400
800
1,200
1,600
2,000
Total
Risk Management (sold renewal rights in 2005)
International Specialty
Syndicate 1200
Commercial Specialty
Excess & Surplus Lines
16%
30%
31%
23%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
’13/3Q
TTM
BVPS
$24.75
$27.60
$30.45
$35.53
$41.05
$39.62
$47.00
$52.56
$50.55
$55.22
$57.38
Total Capital (Millions)
$567
$717
$860
$992
$1,754
$1,763
$1,975
$1,986
$1,840
$1,915
$1,929 |
 7.
Argo Group Business Mix ($1.9B in GWP)
7.
GWP by Segment
Excess &
Surplus Lines
Commercial
Specialty
Syndicate
1200
International
Specialty
30%
16%
31%
GWP by Product
GWP by Geography
United
States
London
Bermuda
*Data is based on TTM as of September 30, 2013. Excludes GWP recorded in runoff and
corporate & other. 23%
18%
Excess &
Surplus Lines
31%
Other
Commercial
Specialty
Property
Public Entity
22%
6%
6%
Marine &
Aerospace
Surety 2%
Alteris 3%
Mining 4%
Emerging Mkts 8%
Emerging Markets 4%
53%
12%
31%
GWP by Business Type
Primary
Insurance
Reinsurance |
 8.
Multi-Channel Distribution Strategy |
 Maximizing Shareholder Value –
BVPS Growth
* Book value per common share –
outstanding:
-
Adjusted for June 2013 stock dividend
-
2008-2011
restated
to
reflect
adoption
of
ASU
2010-26
(related
to
accounting
for
costs
associated
with
acquiring
or
renewing
insurance
contracts);
2007
and
prior
not
restated
-
2006 and prior years adjusted for PXRE merger
-
2003-2006
includes impact of Series A Mandatory Convertible Preferred on an as-if
converted basis in. Preferred stock 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 adjusted for PXRE merger for 2006 and prior years. 9.
|
 10.
Substantial Growth and Financial Strength
Scale
2000
2006
TTM 3Q'13
'00-3Q'13 Factor
Gross Written Premiums
$186.1
$1,155.6
$1,865.2
10.0x
Net Written Premiums
163.9
847.0
1,321.2
8.1x
Net Earned Premiums
124.6
813.0
1,276.9
10.2x
Financial Strength
2000
2006
TTM 3Q'13
'00-3Q'13 Factor
Total Assets
$1,565.8
$3,721.5
$6,650.6
4.2x
Total Investments
1,085.6
2,514.1
4,050.2
3.7x
Shareholder's Equity
501.1
847.7
1,527.4
3.0x
Total Capital
501.1
992.0
1,929.4
3.9x
Debt / Total Capital
0.0%
14.5%
20.8%
A.M. Best Rating
A
A
A |
 11.
$144.8
$138.6
$50
$75
$100
$125
$150
$175
$200
2012
2013
Commercial Specialty
$131.7
$139.4
$50
$75
$100
$125
$150
$175
$200
2012
2013
Excess & Surplus Lines
$148.2
$147.7
$50
$75
$100
$125
$150
$175
$200
2012
2013
Syndicate 1200
$60.2
$68.8
$50
$60
$70
$80
$90
$100
2012
2013
International Specialty
Consolidated GWP up 2.0% in 3Q 2013 vs. 3Q 2012
Overall 3Q YoY Premium Growth
Reflects impact of strategic initiatives taken, rate increases and improved
retention 11. |
    12.
$726.5
$684.3
$642.3
$522.6
$478.9
$513.5
$573.4
-
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
$112.7
$98.3
$64.7
$69.1
$74.4
$83.2
$65.2
-
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
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:
GWP by Business Unit (TTM 9/30/13)
Casualty 32%
Transportation 14%
Environmental 5%
Allied Medical 5%
Management Liability 4%
Property 12%
Contract 23%
Errors & Omissions 5%
Excess & Surplus Lines Segment (31% of TTM GWP)
12.
Combined Ratio
PTOI
99.6%
97.8%
95.5%
91.9%
93.3%
89.3%
’13/3Q*
‘11
‘10
‘09
‘08
‘07
‘12
90.0%
Gross Written Premium
Pre-Tax Operating Income & Combined Ratio
’13/3Q*
‘11
‘10
‘09
‘08
‘07
‘12
*Data is based on TTM as of September 30, 2013.
*Data is based on YTD as of September 30, 2013.
Colony Specialty
Argo Pro |
 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.
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 |
    14.
$420.7
$510.9
$475.7
$428.1
$428.8
$437.0
$422.1
-
100.0
200.0
300.0
400.0
500.0
600.0
$61.3
$43.0
$45.8
$33.1
$1.4
($18.9)
$20.1
($30.0)
($20.0)
($10.0)
-
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
Commercial Specialty (23% 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
96.5%
99.0%
108.3%
115.1%
96.5%
88.7%
98.0%
Gross Written Premium
Pre-Tax Operating Income & Combined Ratio
Combined Ratio
PTOI
’13/3Q*
‘11
‘10
‘09
‘08
‘07
‘12
’13/3Q*
‘11
‘10
‘09
‘08
‘07
‘12
GWP by Business Unit (TTM 9/30/13)
U.S. Retail (Argo Insurance) 19%
Restaurants 5%
Grocery 8%
Dry Cleaners 3%
Other Industries 2%
Public Entity
(Trident) 25%
Surety 10%
Mining
(Rockwood) 18%
Other 3%
Alteris Managed Premium 25%
Other 1%
Transportation 3%
State Workers’
Comp Funds 15%
Self Insured Public Entity 6%
*Data is based on TTM as of September 30, 2013.
*Data is based on YTD as of September 30, 2013.
nd
nd |
    15.
($5.2)
$30.0
($28.1)
($63.8)
$31.8
$29.1
($80.0)
($60.0)
($40.0)
($20.0)
-
$20.0
$40.0
General Liability 16%
Prof. Indemnity 13%
Directors & Officers 2%
Int’l Casualty Treaty 2%
Other 2%
$282.9
$706.0
$389.9
$438.5
$533.4
$567.6
-
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
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 9/30/13)
Property 47%
Liability 35%
Specialty 14%
Aerospace 5%
Property Fac 17%
N. Am. & Int’l Binders 11%
Personal Accident 10%
Int’l Property Treaty 1%
Other 8%
15.
115.3%
131.7%
95.8%
112.3%
‘12
‘10
‘09
‘08
‘11
96.2%
Gross Written Premium
Pre-Tax Operating Income & Combined Ratio
‘12
‘10
‘09
‘08
‘11
Combined Ratio
PTOI
93.7%
’13/3Q*
’13/3Q*
Cargo 2%
Offshore Energy 6%
Onshore Energy 4%
Yachts & Hulls 2%
*Data is based on TTM as of September 30, 2013.
*Data is based on YTD as of September 30, 2013. |
    16.
$23.6
$50.3
$35.7
($67.7)
$15.7
$10.5
($80.0)
($60.0)
($40.0)
($20.0)
-
$20.0
$40.0
$60.0
$126.4
$162.9
$188.9
$198.2
$260.2
$301.2
-
50.0
100.0
150.0
200.0
250.0
300.0
350.0
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 9/30/13)
Excess Casualty 19%
Professional Liability 11%
Brazil 22%
Marine Cargo 8%
Property & Engineering 5%
Motor 5%
Financial Lines 4%
‘12
‘10
‘09
‘08
‘11
’13/3Q*
‘12
‘10
‘09
‘08
‘11
’13/3Q*
72.8%
177.5%
52.3%
77.9%
97.1%
95.9%
Combined Ratio
PTOI
Reinsurance 48%
Other Assumed Re 5%
Property Risk XS 3%
Property Pro Rata 8%
Property Cat 32%
*Data is based on TTM as of September 30, 2013.
*Data is based on YTD as of September 30, 2013. |
 17.
3Q Operating Results
17.
3Q 2013
3Q 2012
Gross Written Premiums
$495.1
$485.5
Net Written Premiums
374.5
364.3
Earned Premiums
330.5
304.3
Losses and LAE
190.9
186.3
Other Reinsurance-Related Expenses
4.6
7.0
Underwriting, Acquisition and Insurance Expenses
126.7
118.0
Underwriting Income / (Loss)
$8.3
($7.0)
Net Investment Income
24.1
28.9
Fee Income, net
0.3
3.0
Interest Expense
5.1
5.8
Operating Income / (Loss)
$27.6
$19.1
Foreign Currency Exchange Gain / (Loss)
(3.8)
(9.7)
Net Realized Investment Gains
9.1
8.3
Pre-Tax Income / (Loss)
$32.9
$17.7
Income Tax Provision
1.9
4.3
Net Income / (Loss)
$31.0
$13.4
Operating Income (Loss) per Common Share (Diluted)¹
$0.80
$0.54
Net Income (Loss) per Common Share (Diluted)
$1.12
$0.47
Loss Ratio²
58.6%
62.6%
Expense Ratio³
38.9%
39.7%
Combined Ratio
97.5%
102.3%
All data in millions except for per share data and ratio calculations.
(1) Calculated using 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.
18.
As of September 30, 2013
Conservative Investment Strategy
17%
18.
Portfolio Characteristics
•
Duration of 3.0 years
•
Average rating of ‘AA-’
•
Book yield of 3.1%
•
Very liquid
•
Conservatively managed
Asset Allocation
7% Other
Fixed
70%
Maturities.
9% Short Term
14% Equities
Total:
$4.1b
Equity Investments by Sector
10% Health Care
Energy 23%
6% Financials
4% Industrials
10% Technology
10% Funds
4% Materials
7% Discretionary
Consumer
Staples
24%
Total:
$0.6b
2% Utilities & Telecom
Fixed Maturities by Type
9% Short Term
Corporate
35%.
19% Gov.
17% Structured
State/Muni
20%.
Total:
$3.1b*
*$2.81b in fixed maturities, $0.29b in short term |
 19.
Active Capital Management
Through share repurchases and dividends, we have returned nearly
$300 million
of capital and repurchased 24% of shares outstanding from 2010 through Q3 2013
2010
2011
2012
Q1 13
Q2 13
Q3 13
YTD 13
2010-Q3 13
Total Shares O/S
31,206,796
31,285,469
31,384,271
31,463,460
33,970,108
34,028,008
34,028,008
Less: Treasury Shares
3,363,560
4,971,305
6,459,613
6,785,438
7,213,189
7,408,601
7,408,601
Net Shares
27,843,236
26,314,164
24,924,658
24,678,022
26,756,919
26,619,407
26,619,407
Shares Repurchased
3,265,992
1,607,681
1,488,308
325,825
427,751
195,412
948,988
7,310,969
As % of Beg. Net Shares
11%
6%
6%
1%
2%
1%
4%
24%
Avg. Repurchase Price/sh
$32.46
$30.67
$29.97
$37.68
$41.61
$44.01
$40.76
$32.63
Total Repurchased ($mm)
$106.0
$49.3
$44.6
$12.3
$17.8
$8.6
$38.7
$238.6
Dividends/sh
$0.48
$0.48
$0.48
$0.15
$0.15
$0.15
$0.45
Dividend Payments ($mm)
$15.3
$14.2
$13.4
$4.1
$4.0
$4.0
$12.1
$55.0
Repurchases + Dividends ($mm
$121.3
$63.5
$58.0
$16.4
$21.8
$12.6
$50.8
$293.6
Note: Not adjusted for June 2013 stock dividend. |
 20.
Stock Price Performance –
Last 12 Months
(10.0%)
+0.0%
+10.0%
+20.0%
+30.0%
+40.0%
+50.0%
+60.0%
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Argo Group
Peer Group
S&P 500
+24%
+36%
+22%
Source: SNL Financial (as of 11/1/13).
Note:
Peer
Group
consists
of:
Allied
World,
American
Financial,
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
Nov-13
Argo
0.70x
0.74x
Peer Avg.
1.17x
1.16x
Difference
0.47x
0.42x
-
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
0.74x
1.16x
0.42x
Difference
Source: SNL Financial (as of 11/1/13).
Note:
Price
to
book
is
average
price/book
across
all
peer
companies.
Peer
Group
consists
of:
Allied
World,
American
Financial,
Arch
Capital,
Aspen,
AXIS
Capital,
Endurance,
Global
Indemnity,
HCC,
Markel,
Navigators,
One
Beacon,
RLI
Corp,
Selective
Group,
Tower
Group,
W.R.
Berkley. |
 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
|