Argo Group predicts 'unacceptable' Q4 operating loss of $114m

Argo Group International Holdings (Argo) has said that it expects to report an underwriting loss of approximately $114 million for the fourth quarter of 2019. It said these “unacceptable” results were adversely affected by certain loss and expense items and several non-operating charges.

These include corporate expenses of approximately $8 million, which primarily resulted from costs related to the previously announced independent directors’ review of certain governance and compensation matters and Argo’s cooperation agreement with Voce Capital.

The results will also reflect a goodwill impairment of approximately $16 million related to Argo’s European business unit and expenses of approximately $18 million related to losses and impairments on certain long-lived assets that are held for sale, primarily a corporate aircraft and real estate properties; the cancellation of contracts related to certain sponsorships and marketing services; and to severance costs associated with separation from Argo’s former CEO.

Other factors influencing the results include prior accident year losses of approximately $77 million or 18.0 points on Argo’s consolidated loss ratio for the fourth quarter and current accident year losses of approximately $30 million, or an additional 6 points when compared to the third quarter 2019 year-to-date current accident year loss ratio of 59 percent.

The adjustment reflects a change in actuarial estimates based on a more uncertain claims environment and the recalibration of the current year based on prior accident year loss adjustments.

Also significant were catastrophe losses and related reinstatement premiums of approximately $3 million, or 0.5 points on Argo’s consolidated loss ratio for the fourth quarter. Catastrophe losses were primarily related to Typhoon Hagibis and were partially offset by a modest reduction to estimated losses for prior quarter events.

The results were also impacted by additional operating expenses of approximately $12 million or 2.9 points related to costs associated with a reduction in workforce, an allowance for doubtful accounts related to our European business unit, and adjustments to underwriting expenses based on certain costs previously allocated to investment functions and trade capital providers.

“Argo’s results for the 2019 fourth quarter and full year are clearly unacceptable,” said Argo Group interim CEO Kevin Rehnberg. “The industry is experiencing rising claims severity in several lines of business. We have taken appropriate action to adjust our current and prior accident year loss ratios in response to these conditions and to specific information received in the quarter. We believe the actions taken strengthen our balance sheet and position us for a more profitable future.

"We are experiencing substantial rate increases across our platform, with strong double-digit gains in International and certain US liability lines. Our capital position remains strong, we are continuing to refine our product strategies and we are well positioned to take advantage of opportunities in the specialty commercial insurance marketplace.”

The company will release fourth quarter 2019 financial results after the close of US financial markets on Monday, February 24, 2020.

Get all the latest re/insurance industry news with our daily newsletter -  sign up here.

Zurich exceeds targets with strong 2019 results driven by P&C book
Lancashire’s bullish 2019 results is evidence of ‘harder cycle’
Coronavirus affecting China's economy, earnings - AM Best analysts
Prudential's Eastspring completes Thanachart Fund acquisition
Trisura combined ratio holds steady; income falls
Kemper reports income boost in 2019
SkyWatch.AI and Starr launch drone insurance product in Canada

Don't miss our insurtech email newsletter - sign up today