Argo slips to Q3 loss after asset sales, claims growth in rump business

Argo slipped to a deeper Q3 underwriting loss of $4.8 million with a combined ratio up to 101.1% after a series of asset sales skewed the P&L read, Argo said in its first statement of earnings as a new and slimmer group.

"Argo's third quarter financial performance benefited from growth in earned premiums in attractive business lines, reduced underwriting volatility, and lower expenses," CEO Thomas Bradley said.

"In particular, our U.S. operations produced a strong current accident year performance primarily driven by disciplined underwriting and positive rate continuing to earn through," Bradley said of results he claimed showed the benefits of cat reductions.

Gross written premium is down 14.2% year on year and net earned premiums were down 6.7%, both in excess of the 4.1% decline in loss and loss adjustment expense.

In September, Argo signed off on a deal to sell Argo Underwriting Agency Limited and its Lloyd's Syndicate 1200 as it repositions to be a pure-play U.S. specialty insurer.

Earned premiums increased roughly 13.1% in the ongoing business lines not affected by the asset disposals.

The Q3 loss ratio of 65.7% was up 1.7 percentage points on the prior year period, including a 0.9 percentage point increase on the current-year accident ratio ex-catastrophe.

Total catastrophe losses of $23.4 million came in at 5.1% of net earned premium, up from a 5.6 percentage point contribution to the loss ratio in the year prior period.

Prior year reserve development offered a headwind at 2.6% of net earned premium, up from a 1.3 percentage point drag in the prior year period.

The acclaimed US operations managed underwriting profits of $9.3 million in the quarter, down 38% from the prior year period. Gross written premium is down 11%, ahead of a 1.8% increase in earned premiums. Rates on average were up in the low-single digits for the third quarter, management said.

The combined ratio rose 1.8 percentage points to 97.2%, but on claim that most of the decline came on adverse prior year period reserve development in business lines since evacuated.

By the bottom line, group attributable net losses of $51.4 million contrasted poorly to a prior year period gain of $19.8 million.

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