Argo Group US, Inc. 6.5% SR NTS 42 (ARGD) 18 Feb 212020 Q4 Earnings call transcript

Good day, and welcome to the Argo Group Fourth Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Brett Shirreffs. sir. ahead, go Please

earnings, morning. quarter Argo market of issued on night, good for website closed Jay available was www.argogroup.com Officer. Bullock, conference on the call we our release Chief press filed fourth XXXX. of a is Welcome Chief and Group's Rehnberg, Presenting and is SEC. to Financial call at last which Thanks After Kevin in the Executive section the today's Investors our with Officer, and the

call this mentioned, operator being recorded. the As is

more As publicly expectations statements. a call, statements obligation subsequent of undertakes no management may or future. result generally, inherent forward-looking of of this update Group Argo expectations their forward-looking future such results, and the actual from or materially Argo to may conference reflect differ that risks as this intentions, call. developments future make events surrounding and are Such a for statements to comments qualified by beliefs result one uncertainties involving and the any

For we measures see that earnings Argo the More financial a with regarding and within uncertainties, provided of now to note filings Also to of Group. please discussion Argo information the SEC. Rehnberg, release. over Chief be non-GAAP more I Kevin financial Group's referring non-GAAP certain the information. risks our will turn are will such detailed call Executive Officer

of challenges for living. as all new a have Brett. months had to Welcome of we adapt has introduction, everyone of through ways you to we call. opportunities change of the a this have been XX to working manage thank The period the us number and created our advanced And last challenges, our morning. of and Good on dramatic This opportunities, as progress continued for have as as have of impacted these on challenges not we the number position by Argo reinforcing a key strategic customers with I'm last objectives XX Despite impeded our focus over team's proud and specialty go-to These a these months. producers, and insurer. period. effective engagement the embracing or

serve refreshed and reins This a streamlined The was the with Scott is our new to and leadership along Argo. the refocused are joining we take to certain profitable about about strategy. and the business with eliminate we the as over energized CFO. we senior excited the promotions. week with capped opportunity excited our positions and We're have today internal market Kirk is strategy hires positioned will than last off of in been streamlining the able The is better the team under work he leadership have we bring team leadership experiences, simpler environment. of for to First, perspective ever senior team team number current and to growth

bottom exit believe strong have line. our transactions focused on These specialty contribute underperforming number that emphasis returns businesses and to executed our we our to primary strategy meaningfully to time, Second, our on of focused insurance. non-strategic deploying can actions resources, our capital a and can businesses, we go-forward on or and strength, have US demonstrate

are will over shareholders costs benefit to lingering transactions, in there our While time. achieve with be outcome, will our we these necessary some exits believe these which associated desired steps

continue has next expand underwriting announced with and two expense We better invest we over drive organization where processes margin. efficient initiative. costs. targets that to to a made reduce Third, formal the us will to is an reduce valuable expenses We've designed manual area on the allow Scott more removing technology in and experience. years and to this already plan and progress systems staffing

to to those bring practices Argo. him So, we're very excited for best

highly is leadership invaluable to team. Board of in counsel reconstituted providing Directors the Lastly, engaged the

and season goals closely the by a COVID there enhancing be been value and ensure policy impact have by but board, strength number and and compensation I'm our financial led financial governance, our shouldn't we with the the our our catastrophe the confident positive pleased enhancements the active aligned not XXXX, highly These results had overshadowed for in results future. a on shareholders. are steps addition, in underwriting positioned for year. targets underlying in all of did of how In to are targets for We achieve

service underwriting Our we talent, seeing to outstanding today. are many capitalize on us market expertise and will opportunities allow the

and fourth to conditions. quarter, improved the During continued for push terms we rate

improving, row, to in above are the in increases we For rate average terms lines. pricing business and were and several And a both while XX% achieved double-digit our US able reduce International segments. third in was exposed we our conditions quarter and limits

our For our XX% premium and with in to XX% underwriters XXXX respectively limit average was versus US down more approximately exposed and risk. example, excess XX% where were commercial casualty dramatic reduction more in The books, lead less actions exposure XXXX. average in these approximately by by D&O, Bermuda combination at XXXX. will our limits of we The even reduced during

expect these claims quarters this few as next are years. to better We loss as and earn over over our paid through ratios the several results produce next changes the

suggest underwriting not signs Importantly, continue, and cooling. to interest that plan this deploy where we of have shown lower The opportunities. that capital macro rates is best on market the pressure having the investment we momentum find any environment, conditions including our income, should

have up terms actions XX quarter strategic line in to the growth of for International, top to US Overall, months past reflects the X.X%, was were been in top while premiums focus quarter. areas. XX XX.X%. the result longer. growth underway continued reflect our about declined growth, In or line our X% gross the underwriting International that on In primarily

growing where back other pulling exiting in we confidence results and or carefully in have areas. are our We

more these Marine Inland such Casualty, than grocery in feel the as fourth achieved some all is in and such and, growth we have growth the in strong our where in cases, businesses the in US US, We the well XX% these quarter which as Argo retail good business Excluding the been fourth by Premiums and over underwriting investing Pro. about. we in very quarter, and above that. lines up adding were talent XX% tools in in businesses

We also our of saw growth focused encouraging trends areas. in some submission

example, up and the more pockets Casualty confidence us submissions our outlook submissions were growth positive high in submission Inland growth and XXXX. was Marine XX% also trends XX%. up strength in than were give fourth of For had These quarter Construction single-digits. the in for

windstorms XXXX fifth costliest the COVID. as was our the impacted I the associated as were the results including catastrophe No year for several events catastrophe by well were us, the named but of Swiss record a As mentioned, US for significant. in on additional surprise to wildfires event a mainly catastrophe events, frequency with Re, financial number industry, losses US. natural natural of According single and record to was quarter storms

will key of One with in and Ariel started Re and on our portfolio This with our of our beyond XXXX is initiatives exposure. insurance as sale reduce actions catastrophe to aggregate continue our well.

well wildfire-prone property We in property areas. as certain exiting large line are reducing as accounts sizes

to months. is see to gradual loss to results for of The underwriting businesses we over allocate underwriting us the to next catastrophes XX reduce goal a the This our XX as stable process volatility of the with and the an impact of the returns. impact pushed Our be the and actions more quarter will our capital year.

were an signs. very positive some However, on there basis, underlying

more quarter quarter. loss current than X ex-cat year accident ratio fourth accident The the XXXX current included by points improved Our strengthening. from prior-year of year some

related ago. was So, of US primarily more which ratio improvement and the improved X.X underwriting representative the I result, segments, XX.X%. quarter the of expense is The both The full-year International was minute and X.X spoke actions comparison to in fourth a in the points better points. about to seen rate

for a total announced in we continue of noted the approximately items to non-recurring to about our our and to costs initiatives point X items that to professional we severance during This to and expense and quarter for platforms. release, number related targets. future These and are make the actions other are savings infrastructure there some strategic X As our fees our for expense discussed points transactions the lead full on to includes have we part of as costs of year. quarter progress earnings we ratio right-size the expense were added expected

the businesses. our Some us important improvement. Italian are allow Re, operations quarter, grocery expense and run-off US the pending exit of sale to businesses took in during areas We returning actions will of fourth and of ratio Malta business, exited cost and the steps in resources quarter toward our continued several we better These decisions on including high retail focus Ariel our certain business. the the sale

event certain go-forward we months. are time changes strategy of As to our I deeper announced of a the we number mentioned last to also forward a due dive linear to the into week, use a announced virtual hosting like on trying of the clarifying and look will plan single investor our March we what we improvement after businesses forward extraordinary We highlight not actions. are explain not have we a looks where be Argo expense some in to costs as the our form trade XXth. in quarter. We that recent movement associated with quarter, to Last

you team. introduce and give members heading some additional more where also will the on expenses with detail We of we're

So, more please to you over in turn Jay results call to I'll now the if can. our join us discuss detail.

over our results a then Thanks, take few Kevin. questions. spend going and I'll your minutes we'll

Argo XXXX, reported a of of operating share. common last $XX.X improvement $X.XX result of $X.XX loss year's of quarter shareholders per from per net fourth the million loss an share, For to or a

activity per For different. investment was losses driving per the while in by in XXXX XXXX. much of period factors, reflected full XXXX loss $X.XX our catastrophe operating significant $X.XX compared a year, materially namely COVID-related a each our being challenges. lower driven natural external to results financial share internal are yields, and The of number share With loss and factors

The the optimism a not faced year provide be have was we renewed Importantly, issues less half underlying in XXXX future. at with should than as point And Argo's a very in XXXX. focused of more development for XXXX the outlook. reserve confidence a modest this for strategy, a in lot results resurfaced there

the gross premiums This line. top fourth $XXX quarter. the approximately on up written million was reported of from We prior-year First X% quarter. the in

rates were the continuing third in that which the much of approximately from been line average as US we conditions continues pulling our and a is across In professional that business with negative the to the professional seen market There up XX% as and were net benefit strongest has premiums This has Rates lines. way. for also were on just X% XX% good lead certain from quarter, US up favorable segment lines, primarily consecutive being been property International insured gross for targeted written growth Growth up quarter. in exposures under and for over net earned in we prior-year have offset the areas, just an quarter. US back to a lower the stronger primarily in pandemic. areas premiums lines in our full approximately premium As the impact ceded a some a growth earned payrolls present result respectively the and have the XX% and impacted fourth XX% been and segment. US, year more adjustment in of is basis, year, figures net to from representative amplified in that by a in pattern. the by is On gross at with the growth was casualty time, the story

property was broad-based. the premiums was this primarily were the high-teens XX.X% fourth On in decline International partially The in side, offset segment on lines, International was by average Rates – strength gross the and across in declined in growth up strength specialty the liability. and quarter.

nature and of our in initial XXX.X% an XXXX The in Sally was that would now. to in related balance notably the natural of XX% captured we process combined wildfires. of losses fourth and the these the catastrophe points September, the quarter the difficult catastrophes note prior-year XX.X portion which The believe underwriting certain Our catastrophe compared loss of the late events these of and result period. Hurricane total the quarter. natural quarter COVID-related catastrophe losses us but made to the to most that losses, a estimates events occurred reflect was for from and loss for to updated was we ratio have I everyone, drove in estimation included losses. the About related nature timing XXX% fully

in overall, reserve much Our with our the in a next development, our On year in catastrophes and fourth to in losses have Throughout improvement. primarily year-over-year prior of the from a quarter combined exposures been to this regards excluding COVID we event year an loss continue underlying the were and prior-year COVID-related have magnitude losses level fourth very With lower we're were movements operations. million quarters. pleased declined strong and our year subsequent losses pattern cancellation $XX.X related will in International expect and into anticipated basis, modest. net for ratio quarter row, that ratio showed prior development, year,

ratio quarter. X.X accident improved from XXXX points year loss ex-cat Our fourth the

the during mentioned, year-to-date points performance the year. of marker of profitability improvement and a Kevin As better X.X is improvement our

As our some year International of of we you accident XXXX, adjusted in recall, in the pressure quarter years. recent ratios to fourth reflect from accident

as a Additionally, in XXXX giving noted our reinsurance operation, we insurance and us in forward. transaction years for reason in previously, confidence completed close to Lloyd's prior XXXX in

from fourth fourth XX.X%, Our quarter ratio the year. of quarter in the expense X.X of improvement points last was an

at flat For our the full year, roughly was ratio expense XX.X%.

our beginning One range to segments. challenging it catastrophes, of And result. Corporate thought natural incurred expenses, and COVID-related. other office for impacted XXXX. the X operating by than most combined a personnel ratio X for year, full a the At higher and quarter, we and the due target impacted for doubt established non-recurring No each on negatively points last final ratio reside business year. during expense XX% exit strategic of year. and costs this the during mentioned, These Kevin and but transactions, of of much early International some segment, the the The in expenses costs certain related point to severance unusual to quarter we and non-recurring missed and the anticipated both was XX% primarily facilities. As roughly we the consolidated

costs you if that and in other transaction remove be to catastrophes might the and related for the and performing COVID what However, losses was non-recurring certain of range. initiatives, expense year out expected adjust natural an the take business

our even pleased XX about with potential. performance and are prospects than and we feel underlying today months We underwriting did our profitability better ago

small both Turning underwriting loss were activity, underwriting segments, in we reported the now combined catastrophe higher International reported both XXX.X%. to results underwriting a the our as combined for In with a has our US, heightened year an movements year US basis, In X.X ratio of losses operations relatively some fourth improved non-renewed; we X prior are this a our moment points fourth small quarter. XX.X%. liability in to the One, public other, a me, added property International, In large in the large terms we've a time and conditions reported approximately underlying are during improvements losses we're in for have Included momentum to accident result ratio. an levels. of encouraged two year, this full our particularly Including seeing by the large strong – trends, excuse in for points to ex-cat XX% of catastrophe reserve was to segments. favorable period offset the year. points fourth a ratio Despite from account loss ratio profit development. and the quarter. quarter that of prior market fourth year-to-date the from fell by ratio two the to already year XXXX for and the we're Overall, International improved loss improved quarter on compared in strong strengthening as last prior what year business. loss margin a segment reported entity year come. accident of appear X.X XX.X% significant some larger-than-expected XX.X%, the from And ex-cat

to investments. Turning

continued X.X% in offset down our fixed quarter. pressure the was total income investments, equity our reflected strong portfolio. Our hedge performance million fund This investment fourth and on private just reduced income to from $XX.X by

credit deterioration the to year months excluding accounted prior against spreads. which portion was for approximately decisions these seen we've in continue gains held value. our repositioning as assets focus also new continues offset Part lower dollar the underwriting by we to foreign we reflects million. alternatives, Note currencies, attractive value there this quarter several book decline year, income, Investment this US of tighter is other for XX on from A opportunities. as capital year of down loss issue Our yields XX% sizable in $XX.X of portfolio deployment the the each was made the was currencies. core a the reflect through and in to of exchange throughout last in

Finally, capital. on

$XX.XX. be paid. per for to the $XXX at refinancing was share active year flat market the take completing half grow preference during continue the September second This with Book in XXXX, of continued year. remain share the when Overall, We well-capitalized value dividends roughly portfolio. to million of the adjusting conditions and we the ended XX advantage to

result per tangible questions. my now best sale. concludes good a we're the say In wish $X prepared on friends to share support almost would thanks things saw I ready the take increase Argo. expect an like I a as everyone Operator, and all basis, come. remarks of in of Ariel that to the closing, for While to we from our and

And come Instructions]. the question with James. [Operator from Raymond Greg Peters first will

launch just of before the should wish I guess I onto Jay. couple you the questions, I best,

good You've in know and it's done good your future. behalf been company, the times on tough job I luck a of

you the guys not is the first actively engaged, be happy that But is your So, Board is everything. said tough – and know going are to with this. you I Board you resetting question going upfront, question, a be Kevin, to

board I to make that what see of statement, you any there don't seen the much of higher One of Argo at the anything not level observations that I'm is can running but wanted at I peers. And board's or looking if I've to many feedback. compensation that know comment out I than be just its on have the is that. seems a not, sure

and of the a independent reset. and basis have board it engaged relative peers was compensation looked they where at the overall on for third with do compensation our We that's parties review the to

independents for and used we best advisors So, practices.

a you've written so, there, premium, look written your been $X.XXX look billion premium. has a that's I at full-year net parts, thing. There at $X.XXX transactions. reinsurance I If billion of announced moving gross so disposals, good reset of of just guess, and let's numbers, announced you've US Lot first, XXXX

kind announced You $XXX for numbers forma apply can the how is the the talked you've pro changes look made these top with International, gross, that of If question, we adjustments, to same would about of think I see we several do grocery the these at XXXX base on line in How what you've what the look so all get all a market. on this And basis or with business. net, US? of billion would look just I $X.X is results million course, of that sort to XXXX, as use transactions I and about XXXX? XXXX a of

there. these we're grocery and million a about question to the of and with book. good for ability business, at thinks, That earned the year be as – off at we right? out of Investor always back to will $XX.X the year some retail the not some of didn't tell in ended the those things come out of will I the sell that is in one detail as is And so places more these of see, easy get there going $X.X certainly We at of let's end you things some but aren't premium But million, where cyber, the moving that Day. were the on we books, the and which of if can you we the size terms think

may be think that lot a premium some on. more there. Greg, there going reunderwriting written $XX of there's that baseline, always be to goes it a you is million as in there. So, But about

we what did the exactly as and we're helped, how reunderwriting in it's have we book, obviously And of with to business, that P&Ls, property went but rates. But still us still the new big the stuff to we year, shrink right? well property left. hurt as last So, away a to get hard much of which quantify write

that specificity you. some question back board for and on I'm of come with weeks So, to we'll in take couple a going

do side, want us there International the On markers any give you do...? to or

you. but we'll right don't for that we I make color the get here that, sure out. have Thank

did we the that in businesses coming third exiting. quarter call, the of amount the premium Greg, Although, were and net highlight out of was that gross we

it be out be you things those Ariel basis. due just if easier a our as go of will And forward what will there gives on some that sense to back that, little to where So, annual a an carries again, timing we way to figure bit were out. work

I'm be XXXX, in when And get you on second through? XXXX, I I borderline question for how reasonable others look along ratio changes think guess the expense International, International but ask at sure these at the US think the it's ratios, the ratios But when chugging maybe operations you do look like are. going but expense then, high crazy. ratio you XXXX, seeing expense just My International and Clearly, – I'll not it's of let I think XX.X%. your what finished just questions, on like International. expense the are you're full driving year should about the when you that all about with would

to we'll there. think stuff right of I came the the was out actions on on clarity more that but the where of almost ratio million that International related now, is I on we $XX say Again, segment, half it took that will XXth, expense that give

the overall in expense things of got consumed some we And more the of, out organization.

see this would expense we'll give We'll time. the there on savings be some of of goes benefit we'll the years' if of away. some majority XXth. in And are clarity year, a see good the of in again, but So, some that couple in that XXXX coming out on you the

how capital consolidated out like offering the at question line or I top of you think how that about throw the company? the the where do looks for based you want numbers what of on can give the to your you are a And year-end? last us a least the structure company, where sense excess guess closed capital of the year, we you is not Jay the at half here. second growing, in think I When mentioned about

the because what of The we ratios would reason it's by a right? is, dealing of question we've a capital pay challenging I capital – and beholder, to years the capital the defined And meet to eye simple to move rating quantify XXXX capital is we of we got we generate too capital I is be I what market we word, levels excess put and have guess measure plans I what things the a we that excess some So, today both external think the that important arbitrary want were attention that think at we arbitrary of in as capital. of of with. XXXX strong would the and through regulators trying would our challenging way I as to through internally, that defined that look it and to an is the agencies capital several the don't those against was through my we see. call over more the question. our and as by maintain That an lot consider the ratios. next opportunities even

I'd Well, an and thought I answer. get try

So anyways, of best luck.

Scattergood. come Instructions]. Boenning Farnam from our next question with [Operator And Bob & will

non-continuing the I Can than you know, some that of expenses? because think going ratio quantify still higher you lingering to might be how do still much Kevin, forward expenses, you mentioned expected the expense you're costs. – with have going

me sort the of question. Let dissect

end $XX be is that at XXXX, at XXXX looking million, wondering, it it? – You're roughly if in end a we're of to what might targeted XX

to – linear, you just how but going might I'm I'm just not of out curious know be still trying of say, it's think much Yeah, there? I these be costs kind still to

there, it's full million this the year. million about $XX for fair $XX being mid think to I to think in year it of get range We'll sort the right.

things may two-year in be quarter that they or a particular that buyouts, things do, occur they it come look there right? lease expensive, of Some may up, over be other that period is to but expensive these worth are the

from third quarter's not Jay, that that I is to third were the idea an losses but if there Cat related sure quarter. came a have, were the Do from am you much fourth development quarter? you of mentioned some detail the how you this of numbers have

Bob, right incurred natural quarter of on That's quarter. at literally the in catastrophes, the fourth On the catastrophes. the end half half were were about the and natural third

question-and-answer our to turn I over sir. would remarks. go Please the ahead, back concludes to closing like Rehnberg conference session. Kevin for This any

Jay. endeavors advice knows, we wish I new I This the Scott, would thank and personally as to but And like the again. is welcome in and him I and his use to we had appreciate want we've last call partnership worked his well counsel to together. time everybody as some a people couple for of thank are and all the of and your next of other conferences and over support occurring our that the at to he interest will so the be the investors get all employees weeks, with chance interested interact him. I continued parties.

good a So, day. very Have much. thank you

Thank The for today's attending conference has you now presentation. concluded.

disconnect. may You now