Argo CEO Watson says 2019 Q2 / H1 results show ‘strong shareholder value creation’

Argo Group’s 2019 second quarter and half year results deliver “strong shareholder value creation” despite some claims volatility in the second quarter of 2018, said CEO Mark E Watson III.

The results showed that in 2019, second quarter net income was $28.8 million down from $41.8 million for the 2018 second quarter. Argo said the Q2 219 figure “included pre-tax charges of $32.3 million related to an increase in current and prior accident year losses of $10 million and $22.3 million, respectively”.

The Q2 result also included around $7.5 million of expenses associated with “proxy solicitation and related activities”, the insurer added. “These expenses are included in ‘Other corporate expenses’ in the consolidated financial highlights… given the unique and non-recurring nature of the events that gave rise to these expenses, these costs are not included in the company’s definition of adjusted operating income and as such, not included in the calculation of the combined ratio as presented in the financial highlights… there were no comparable costs incurred during the 2018 second quarter.”

In contrast, net income for the first half of the year was $120 million up from $66.6 million for the same six months in 2018. Argo said H1 2019 included pre-tax net gains related to changes in the fair value of equity securities of $66.8 million, while in H1 2018 the results were affected by pre-tax net losses related to changes in the fair value of equity securities of $26.6 million, which created a year over year improvement of $93.4 million. However, the H1 2019 period was also “adversely impacted” by the increase in current and prior accident year losses of approximately $32.3 million, the insurer said.

Q2 2019 gross written premiums (GWP) grew 10 percent to $772.9 million compared with $702.8 million for the 2018 second quarter. US Operations increased by 10.6 percent to $453.6 million, compared with $410 million for the 2018 second quarter, while International Operations grew 9.1 percent to $319.2 million compared with $292.6 million for the 2018 second quarter.

For the first six months of 2019 GWP increased by 8.5 percent to $1.5 billion, compared with $1.4 billion for the same 2018 six month period. US Operations increased 10.4 percent to $864.3 million compared with $782.8 million for the same period a year before. And International Operations grew 6.2 percent to $669.3 million compared with $630.3 million for the 2018 six month period.

The combined ratio worsened in the second quarter of 2019 to 103.4 percent compared with 96.3 percent for the same three months a year before. While the combined ratio for H1 2019 was also up to 99 percent from 96.1 percent for H1 2018.

Argo’s Watson said: “For the first half of the year, Argo’s book value per share growth plus dividends paid was 10.6 percent and our annualised return on shareholders’ equity was 13.1 percent, which reflects strong contributions from our investment portfolio. We continue to deliver strong shareholder value creation despite some isolated claims volatility impacting the second quarter of 2018.

“Our focus on increasing efficiency through digital enhancements and growing profitable business lines continues to yield positive results, with 10 percent GWP growth in the quarter.”

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