Argo Group US, Inc. 6.5% SR NTS 42 (ARGD) 3 May 222022 Q1 Earnings call transcript

Good morning. Thank you for attending today’s Argo Group First Quarter 2022 Earnings Call. My name is Amber and I will be your moderator for today’s call. All lines will be muted during the presentation portion of the call with the opportunity for questions-and-answers at the end. [Operator Instructions] I will now have the pleasure handing the conference over to our host, Gregory Charpentier with Argo. proceed. please Greg,

our on morning. the good the Argo conference press Group’s closed in is Thanks www. Officer Chairman the Executive section quarter Financial SEC. Chief was Executive Welcome ended for the Scott argogroup.com and filed Kirk, Officer. Group release of Investors a on issued first Bradley, today’s night, Argo After and with earnings, and Chief Presenting call March call website which at is Tom last available and we to our XX, market Interim XXXX.

being As the operator mentioned, this call is recorded.

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

Executive regarding non-GAAP risks information. now a Group’s Argo release. turn we uncertainties, discussion to Bradley certain Executive detailed over be of Tom and more will non-GAAP these that our provided Group with is in such note our and referencing the please filings see information SEC. Officer. For More Chief measures I Also will Argo financial Interim earnings the call Chairman

And Greg. to Thank you today. for thank you us everybody joining

for announcement week. take moment our a our last Before to I to jump the quarter, results like I’d into discuss

growth that analysis, the profitability. team, a however, and and The actions board maximize that these to our exploration review and board considerable in of potential initiatives path number valuation. alternatives. strategic not of company do are with current the In a directors the of our deliberate term market including sale, the long will consistent has Over initiatives, After discussion reflected wide thoughtful our company, things, of strategy, its long assistance the end, we a advisors the among the the adequately range shareholders. for and or much company’s initiated a to other believe of options of an value management all strategic company process, has term other the strategic this positioned last simple; for potential benefit instituted Argo consider and substantive year, believe merger clear have prospects is for transaction. of objective To board stable and

that assurance determines this As it not completion in for is intend appropriate or unless disclosure process. outcome. typical no that in set a result particular or to until it And developments, process this of transaction a has be company will pursuing necessary. The and these timetable can a further tight is strategic situations, there company not disclose does other further

remains company as with alternatives. evaluate board lead Kevin and the will this leave, serve CEO range strategic interim to to As on the potential a privilege forward. I lead It’s the of efforts

for I’m leave. and and leadership been impressive their a dedication honor We to dynamic continue has speedy to such our with work to associates Argo team and recovery. employee on hard Kevin all And an full work he while base. a wish grateful It’s

results You strategy. for continued to our need no than further look our focus their implementing to on this see quarter

about reported the last the strong to results happy night. we to quarter, turning Now I’m today speak

margins, the a and of expenses. reducing the XXXX improving to quarter first of underwriting managing our of performance is start year solid strategic Our volatility representative execution provided continued priorities and

directly losses. operations, per Argo’s reduction XX.X% equity Our U.S. on both strategic was was attributable the XX% Argo, and our combined for driven in initiatives, of objectives. have and financial This positions we quarter, return improvements in achieving well our is to the $X.XX from us operating international XXXX was and significant in the a and catastrophe operating reflecting ratio. by ratio annualized earnings common share loss contributions both strong implemented a expense and

to our with year, more reduce quarter for for volatility the XXXX. capital decreased past have allocate to strategy Total million businesses quarter results losses of the and Over underwriting three first the X.X stable our cap X.X we highlighted returns. of the of million

resulted cat year-over-year to losses efforts in four for reduce Our property straight exposure in cat quarters. has improvements

today, to ratios we significant and net for have exposure the Ukraine, view contained our do our expected information the quarter. is we ongoing loss the some conflict believed loss exposure to do While in be given not available in

to thoughts by affected continue that those monitor our who We closely the are the war. been those and situation will have

as explore continue in for and for the options objective, market. loss are of take a to majority portfolio to transaction opportunities shareholder the entering XXXX that with value into advantage We of transfer Consistent a all syndicate XXXX we reserves maximize years XXXXs vast and years as manage of way not the of this finalize years provides volatility to account. result reserved through with to against a begin and a an account. of We This do transaction. us statement capital income anticipate for these coming effective these charge protection

expenses. to turning Now

ratio the our quarter. from We our driving expense of evident forward simplifying was progress efforts. first reduction make operations XX% two quarter as prior improved continue in results our year points and our first This nearly to towards expense

spend create as Importantly, to seeing efforts administration and and our simpler benefits continue general a strategic from are reduction materialize. to we linear a in Argo

we are ability Our the to ratio XX% throughout we’re areas our in year full drive And continued efforts expense expense strong there and additional reach not complete. confident focusing first for expense savings target reduction XXXX. quarter that results Giving to on our year. our reduction several are efforts remain expense

as execute a we focused Brazil. becoming leading continue We our completed of us to insurer Seguros, specialty on sale the Argo of priority

respond of attractive in journey favorable changes conditions the what We well-positioned across comprises continue and today. most are to of view, confident our review of in In we as platform. underlying benefits the market business in initiatives ongoing to ninth inning environmental and our that remain take business marketplace. our remain are margins our continuously We strategic from to and hold, lines generate

actions take lines less to underwriting shown remediate have viewed proactively in We the or we ability favorably.

terms of line that to businesses objectives for top want to quarter forth Consistent year XX.X%. strategic reflect earn businesses premium was the continue we growth grow. underlying set net we our in financial ongoing this In in in with growth, the our growth the

pleased across We the continues and increased continue And strategic turn we objectives. for on on discuss we’ve results to over seeing the the about to to portfolio. to our digit the I’ll inflation results markets. or able Scott rate very our the make range in feel costs expectations. the mid call the are rates progress above we’re direction now I’m Overall, Rates good the achieving the average at in with the loss detail. importantly, quarter been trend to more of and single

Yes. Thank you, everyone. Tom and good morning

$XX.X underwriting first operating for the $X.XX quarter annualized by return of Our expenses. at while quarter, and operating XXXX million from was of increased improved diluted improved driven equity first on the from ago. year prior Operating $X.XX X.X% lower a earnings per results in our year strong income XX.X% share of common

the small did $X.X report we million. a XXXX of of Now net first loss for quarter however,

the quarter as This it of reclassification of Brazil shareholders comprehensive out the in losses in difference the loss the to and foreign quarter. a equity, not our reclassification is accumulated Argo into losses the historical did impact net primarily reported sale. income first exchange was with Now attributable between for operating realize transfer income other associated our Seguros, statement income the

of decreased quarter X.X% XXXX. to written gross in the our consolidated first premiums now Turning by operating results. Reported

quarter. our grow segment And in participation premiums profitable However, improvement approximately ongoing with write written digit our growth international growth remain X,XXX. year we syndicate focused on to increased approach. compared Gross business in disciplined and our in our by X.X% remain prior and strongly continued written driven has first in increased premium the double underwriting

and and respectively. net reported written premium premiums earned net decreased at grew While X.X% X.X%, gross written

increased points ratio we premium the percentage retention in net divided after for ratio retention to X.X quarter. worth XX% calculated noting Our points U.S., percentage that written that increased by business adjusting premium fronting our gross to as the And in its write X.X XX%. the written

discussed ratio the catastrophe reduced cap combined the reported or of the losses, ratio $X.X XXXX, lines. percentage million, in business were million we improvement the losses seven totaled ratio quarter. ratio XX% points of combined quarter As retention higher of to In driver’s prior our first year of cap the and premium The first period. loss loss percentage and two quarter result losses of $XX.X is or prior over the XX we towards of year favorably reported in just compares points this XX% the reflects from XXXX. the in This in just under mix previously, of improvement points a shifts first main

first international $X in prior of in adverse quarter implementation in exposures, successful strategy U.S. development. with cat Operations cat combined operations. has QX the in the quarter reserve $X.X The resulted development in XXXX mentioned, lighter a of favorable and Tom As developments our Reserve large in development property losses. both reserve million our XXXX lines reduce cap to with reduction million the related prior run offset quarter partially off by of year included modest adverse totaled a

and worth our XXXX, The small ratio development and our of from by to ratios last higher Now we this reported quarter favorable year that of reserve quarter line And number the on year I’ll favorable important last quarter is the XX.X% our in international in ex-cat this operations of years. over $X U.S. development to color full million and It’s of It the adverse loss business operations. the noting loss current some XXXX. that the quarter to year. development in in year in segment attributable accident on unrelated accident offset ex-cact quarter’s little is have ratio The this was later. year business. included current unfavorable resulted is is ex-cat with accident The U.S. is our additional ratio international note a first a loss losses XX.X% saw of has first up exited. in improvement outcomes marginally large businesses current cap primarily from prior the partially were losses provide we loss that in

Turning now to expenses.

point in Our year prior X.X a improvement quarter. expense compared first ratio of to the was first XX% quarter XXXX percentage the

slightly. expense two G&A XXXX versus points Our ratio of acquisition increased the while improved quarter our first ratio

administrative benefit expenses XXXX, earned throughout of expense to end the this that quarter. XXXX throughout $XX.X ratio from at would of quarter we and dollars this results took to showing million $XX.X net XXXX first is increase was decrease. actions with down to going the general the expenses million premiums said and firstly expense as the an XXXX, in quarter, we also and from And through As in in back reduce

talk me segment let Now, about results. our

economic first respectively increased included written The the and while ratio decrease XX.X% and year first million XX.X% of for is U.S. year and with ongoing loss full was Our frequency ratio the quarter. reported XXXX is million ago. premium in and a premiums Gross prior The to a to quarter a $X and percentage year prior ratio administrative XXXX. business a coupled increased basis the which XXXX combined in in ex-cat that increased the the loss versus quarter The we million primarily XX.X% percentage G&A of points quarter expense of expense by point in first improvement XXXX, G&A general $XX.X QX, The from in we’re driven quarter, XXXX. points from driven expense approximately our decrease with U.S. decreased loss percentage ongoing accident expenses, XX% X.X the The premium was ratio. first and from slowdown income QX, XXXX. X% premiums business X.X X.X lower experiencing increase current the pandemic. the loss XX.X% the written XX quarter, earned in losses. operations by underwriting the first X.X% the current year quarter reduction points of difference net prior earned in ratio the $XX.X from accident the attributable in year benefits XXXX. ex-cat cap from ex-cat ratio of Net increased in ratio line improved from XX.X%, first driven COVID-XX the was in of U.S. XX.X% net by current ratio year The

was a improvement by due the in business X.X point in ratio acquisition partially Now changes mix. to increase percentage this offset

QX from strong now building seeing international were and last profitability our contribution results Turning this to we again to the segment quarter. on year a

$X.X The million reduced Our in in the increased underwriting actions first through net The million earn the points quarter. combined of reported compared favorably premiums is international income improvement due the year first the a in ratio of ex-cat the premium first rates, XX.X ratio due our of the points year which The quarter. operations segment increased compared the X.X written $XX.X $XX.X XX.X% in quarter. to primarily business quarter well a the rate underwriting points versus compared was to increases the prior as first quarter. international approximately in and cat XX.X% international ratio. to written on current losses higher the on ongoing losses, or reduction loss and prior loss improved in This increased million in $XX.X of percentage in million syndicate current year of cap and driven year of in or improved to the undertaken combination XX% ratio by the ratio we’ve underwriting from quarter. XXXX XX.X% during year points XX.X% in of prior increased Gross X.X prior participation to year losses to current to strong improvement the on loss XXXX the results. the prior segment, year quarter expense accident an Catastrophe Net ratio ex-cat first combination premium quarter. improvement X,XXX ongoing business average combined XX% combined of and XX.X achieved percentage respectively earnings first

related storm to view mainly of We current included our Uri in current COVID-XX COVID potential by any quarter change losses in million the related not losses did year XXXX quarter. from impacted current see losses or $X.X pandemic. first of cat The in during exposures our also the quarter Ukraine. and was winter included losses the Catastrophe

aimed of acquisition level we our have the mentioned, improvement of Tom lower on mix, to As business and not decreased net in in at and exiting view loss acquisition higher the benefited significant. we points changes business be ratio expense have ratio X.X with ratio exposure The to G&A based quarter a percentage the by driven the XX.X% costs, the do general information which Ukraine in spend. administrative today, expense prior reflecting

from first investment generated quarter The investments. alternative to investments. in XXXX. now million to income income net million Turning $XX.X of We $X.X decrease of a due reduction the is investment in of

portfolio. to investments Favorably alternative can over they however, while continue by the in challenged to to next investment returns from quarters Now our our Investment predict compared in grade maybe continued in quarter, return recent of and we encouraged portfolio be we bond expect given our quarter few income trend the throughout the and more first income XXXX strong are fixed from have this the volatility be difficult to the markets. the to X% increased contribution grew XXXX.

We reinvestment have the in has that into seen a recovery continued quarter. rates current

at X.XX% to hovering closer For to-date. context are the our yields of around were at now end and X.XX% XXXX reinvestment

average income portfolio talked XXX.X%. you’ll elevated Earlier between difference I tax and short operating net the our in about resulting notice income effective a hold quarter, of income tax duration that was expense to relatively and continue this years. also We an rate X.X

assumed Now tax the would to used XX% current effective to to from point rate the results that rate income sale increase I in the the we’ve associated Brasil. quarter calculate XX% treatment previously. Seguros, for out with losses of also of operating the the our tax Argo foreign increased tax like exchange used from primarily

XXXX other of was to fixed in just decrease largely XX, profits net down due per in from. unrealized of rates. view of of the talk income profits is tax me per end during a quarter shareholders accumulated XX, end. Now believe first portfolio interest will Book at jurisdictions share $XXX.X March about value comprehensive of finally, to increase X% as equity under the And our Book excluding XXXX, increases capital. be the The when at $XX.XX and across $XX.XX this of income year we the million attributable distribution XXXX the of investment value as reduction our to reflects of losses, and XXXX. from generated was from company the of share these let $XX.XX $XX.XX March

our to our A engage IMS and committed with maintaining We reaffirmed strong maintain continue relationships excellent rating. We capital regulators. rating and minus agencies in to rating positions. recently, financial strength communication our regular remain Most and in regulators agencies strong

relations, before the and Andrew Hersom, People’s, over concluding some recently wanted IR Now roles I over new the turn at remarks. I warm investor for Tom welcome a head to offer will Bank turn us of back call previously call Travelers. United now I and to to Tom, joined With to who that, our back held

you, really the pleased year. start Thank with strong Scott. the I’m to

achieving the positions board, results the team, and shareholder progress strong goals. We the The making first is company results future. in evident are across our fully value. leadership solid well in for and building delivering committed Argo quarter to strategic employees This the remain and

our opportunities are growth in remarks, we’re our our that, we concludes and With that ongoing and questions. businesses Amber, pleased objectives. remain achieving forward, with the financial across to prepared ready Looking for confident take XXXX

Thank Peters line Raymond James. question comes now you. Greg Our Greg your from Instructions] open. [Operator is first with

morning, Good calling Greg. This actually for right. everyone. [Indiscernible] in is All

hoping the consider any seasonality start the ratio year? in came of just the XX% the the it given expense through with maintaining to where when looking Is first for we the year. target First, just quarter I’m for should and there balance

bit. nothing of here. we’ve expense ratio, Sid, action certainly We’ve Thanks for in over working on springs the hard Yes. terms the there. Look, a last Scott expense been ratio that obviously Kirk year good question. Hi morning. mind It’s and the taken to

we going on And on to I this forward those at earlier continue will through his additional said work think expenses. to we in we’re Tom hard focus that look remarks as year. opportunities,

I last committed we look the XX% obviously So in that this target it year. ourselves year to set think to remain to get we’ve

feel good that. So about we

note add remarks, I’ll you’ll the G&A that expenses a in are year-over-year real Instead Yes. dollars. Scott actually down mentioned in

with we here good path continue. that growth, with which we a think And combine earned will So run think premium expenses.

Okay, We’ve seeing. elevated And I’m maybe you you’re what that curious, guys retention. are turnover if That maybe could yes, comments underwriters. to with great. sense. carriers recent makes just just some on And seeing heard comment transitioning then

anything the season, but attribute months. post Yes. I’d common what turnover, four of three or past we’ve in say over to we’ve routine seen kind seen wouldn’t or it’s I extraordinary bonus the unusual

Okay, Thanks answers. the great. for

no Sid. this [Operator Instructions] you Thank There with Matt, from Our are currently Matt [Indiscernible] at Morgan. questions further line now question time. next is JP open. comes your

I’ve LPP to really numbers up little more apologize, the we commented terms modeling there I in maybe through it. on couple queue I on is, minute and we get what just show in I and from impacts to should questions. a can color a mean, But forward. going about get late perspective of was getting one that a got the you transaction, expect particular,

at I account going really those RITC do that and years those of income LPT of is reserves, year. of positions the it’s the not account years mean, those XX XX of to, it traditional so. majority be to statement an two to us includes charge a vast end going two it And and the of to not

Scott impact. want don’t if So on to know I comment the talk, you capital

investment bit Tom of an impact that not any statement but erribly there point. of we’re this comes drive along significant is mean, sort said, income that, a expecting at as look Matt it’s income upfront, Yes. really not with I obviously, significant but obviously

us. transaction well think will I this for So work

little I quarter. in up one expenses other a Okay, were was, great. Then saw the the bit non-operating

strategic for in was to to couple that go you elevated something fees. related of we that be from a I expect think ago more through Should it directly _ to advisory the elevated flowed Or That else announcement review. while kind quarter? that you in remain that a would got line the as weeks of a commentary something process? of

not to Matt. they right, that mean, away going think given I I they’re Look, you’re But think situation little predict I are this difficult at They point. certainly a are No, non-operating. quarter-by-quarter. the on a

Appreciate color. Okay, great. it. Thanks the for

Thank you Matt.

with John, now next open. question & John Partners. comes line Dowling Our is from Heagney your

actually think the it, on on LPT a of top I Hi, morning, so question just there an it. I LPT. on if Matt got a that? traditional of ADC But of too Is Very does syndicate Can with actually XXXX? hit walk kind kind And those you of bit? then mechanics that through reinsurance actually, good, in how the close a out work back close? the years little the just it’s the

Hi, RITC if to on is no LPT us John, Basically, if us into it this it’s fit top. and at economics to we roll worked us. here. give the year, for this what end back Traditional which just this Scott roll option an XXXX saw of ADC does allows the the will

RITC third rolled a And back expectation the party into would be not XXXX.

Got it. Got it.

of So a would XXXX, XX, in syndicate all at party reinsurance off all the just books out assume the those one. XXXX, transferring then and end this years it would a I transaction be to of wiped the XX third basically to close

John. Yes,

XX for with XX and now, right. is just it a for XX. But that’s potential So

you. thank Okay,

John. no Thank in questions queue. further you, are currently There

So for to the Tom closing any back over I’ll conference pass remarks. Bradley

everybody your support. Thank your for and you our interest thank shareholders today call and you, you on thank particular Argo Amber, in the for to to

a have day. here good you. Everybody for We’re working

XXXX That concludes participation. quarter you first Thank call. earnings Argo today’s Group for your

disconnect line. You your may now