HAMILTON, Bermuda--(BUSINESS WIRE)-- Argo Group International Holdings, Ltd. (NASDAQ: AGII) today announced financial results for the three and nine months ended Sept. 30, 2017.

2017 Third Quarter Recap

Gross Written

Net Loss

Net Investment

Total YTD Return on

Book Value

Premiums

Per Diluted Share

Income

Average Investments(1)

Per Common Share

$805.1M

$2.04

$30.9M

4.4%

$60.96

↑ 37.5%

↓ 213.3%

↓ 5.5%

↑ 100 basis points

↑ 2.1%

from 3Q 2016

from 3Q 2016

from 3Q 2016

YTD 3Q 2016

from Dec. 31, 2016

“In a quarter dominated by natural catastrophe losses, Argo Group’s risk and capital management framework was effective, together with our underwriting expertise and global platforms, gives us the ability to react to the most attractive market opportunities as market pricing changes in reaction to these events,” said Argo Group CEO Mark E. Watson III. “In addition, we continue seeing growth in many of our business lines as we leverage the ongoing investments in technology and talent.”

HIGHLIGHTS FOR THE THREE MONTHS ENDED SEPT. 30, 2017:   Gross written premiums were up 37.5% to $805.1 million compared to $585.4 million for the 2016 third quarter. Net loss of $61.3 million or $2.04 per diluted share, compared to net income of $55.2 million or $1.80 per diluted share for the 2016 third quarter. Adjusted operating loss(1)(2) was $57.4 million or $1.91 per diluted share, compared to adjusted operating income of $34.4 million or $1.12 per diluted share for the 2016 third quarter. The reported combined ratio was 126.5% compared to 96.2% for the 2016 third quarter. The loss and expense ratios for the quarter were 83.8% and 42.7%, respectively, compared to 57.9% and 38.3% for the 2016 third quarter. Estimated pre-tax catastrophe losses were $104.5 million inclusive of $14.5 million of catastrophe related premium charges. This compared to $13.0 million in the 2016 third quarter. The current accident year ex-CAT combined ratio, as adjusted(1) for certain other discreet catastrophe and risk management reinsurance purchases in the quarter and a one-time expense item was 97.2% The related loss and expense ratios for the quarter were 57.7% and 39.5%, respectively. This loss ratio includes a 3.7 point impact relating to the previously announced $15 million of current accident year losses recorded primarily in Syndicate 1200. There were no similar reinsurance purchases or one-time expenses in the comparable 2016 period. As such, the comparable 2016 third quarter current accident year ex-CAT combined ratio, as adjusted was 93.4% with underlying loss and expense ratios of 55.1% and 38.3%, respectively. Net Investment Income was $30.9 million, compared to $32.7 million for the 2016 third quarter. The result for the 2017 quarter reflects lower income from alternative investments of $5.7 million compared to $9.8 million in the 2016 third quarter. Total return on average investments for the 2017 third quarter was 1.3%, flat with same period in 2016. Net favorable prior-year reserve development was $1.3 million (benefiting the combined ratio by 0.3 points), compared with $2.9 million (benefiting the combined ratio by 0.8 points) for the 2016 third quarter. During the third quarter of 2017, the Company repurchased $33.8 million or 565,534 shares of its common stock.

HIGHLIGHTS FOR THE NINE MONTHS ENDED SEPT. 30, 2017:   Gross written premiums were up 25.5% to $2.091 billion compared to $1.666 billion in the first nine months of 2016. Net income was $21.4 million or $0.69 per diluted share, compared to $113.8 million or $3.68 per diluted share in the first nine months of 2016. Adjusted operating income(1)(2) was $5.2 million or $0.17 per diluted share, compared to $101.3 million or $3.28 per diluted share in the first nine months of 2016. The reported combined ratio was 107.3% compared to 95.2% in the first nine months of 2016. The loss and expense ratios were 66.7% and 40.6%, respectively, compared to 56.8% and 38.4% in the first nine months of 2016. Estimated pre-tax catastrophe losses were $110.9 million inclusive of $14.5 million of catastrophe related premium charges. This compared to $38.9 million in the first nine months of 2016. The current accident year ex-CAT combined ratio, as adjusted(1) for certain discreet catastrophe and risk management reinsurance purchases in the third quarter of 2017 and one-time expenses was 96.0%. The related loss and expense ratios for the nine months ended September 30, 2017 were 57.0% and 39.0%. This loss ratio includes a 1.3 point impact relating to the previously announced $15 million of current accident year losses recorded primarily in Syndicate 1200. There were no similar reinsurance purchases or one-time expenses in the comparable 2016 period. As such, the comparable 2016 third quarter current accident year ex-CAT combined ratio, as adjusted was 93.4% in the first nine months of 2016 with underlying loss and expense ratios of 54.9% and 38.4%, respectively. Net Investment Income was $105.0 million, compared to $89.6 million in the first nine months of 2016. In the nine-month period alternative investments contributed $34.6 million to net investment income in 2017 and $20.8 million in 2016. Total return on average investments for the first nine months of 2017 was 4.4% compared to 4.3% in the first nine months of 2016. Net unfavorable prior-year reserve development was $4.4 million (adversely affecting the combined ratio by 0.4 points). Also included in the nine months of 2017 was an impact of approximately $10.0 million in the first quarter of 2017 from the Ogden rate change and claims from Hurricane Matthew. This compares to net favorable development of $18.8 million (benefiting the combined ratio by 1.8 points) in the first nine months of 2016. During the first nine months of 2017, the Company repurchased $36.6 million or 612,034 shares of its common stock. Book value per share increased to $60.96, up 2.1% from $59.73 at Dec. 31, 2016. Cash and investments at Sept. 30, 2017, totaled $5.0 billion with a net pre-tax unrealized gain of approximately $181.1 million.

Notes

• All references to catastrophe losses are pre-tax, net of reinsurance and estimated reinstatement premiums and inclusive of catastrophe related premium adjustments.
• Point impacts on the combined ratio are calculated as the difference between the reported combined ratio and the combined ratio excluding incurred catastrophe losses and associated reinstatement and other catastrophe related premium adjustments.

(1)		Refer to Non-GAAP Financial Measures below.
(2)		At assumed tax rate of 20%.

FINANCIAL HIGHLIGHTS BY SEGMENT

U.S. Operations

U.S. Operations include the Excess & Surplus Lines and Commercial Specialty businesses.

• Third quarter 2017 gross written premiums growth of 18.9% was driven by executing on strategic growth initiatives across Liability, Professional, and Specialty lines and planned reductions within Property lines due to continued pricing competition.
• Gross written premiums for the first nine months of 2017 were up 16.4% from the same 2016 period and reflect growth in all four business lines.
• The loss ratio for the 2017 third quarter was 61.2% compared to 54.3% for the 2016 third quarter. For the nine-month period in 2017 the loss ratio was 56.8% compared to 55.3% in the same 2016 period.
• Current accident year ex-CAT loss ratio, as adjusted for the 2017 third quarter was 57.3%, compared to 58.5% for the 2016 third quarter, and 57.4% compared to 57.5%, respectively, for the nine-month periods in 2017 and 2016.
• The expense ratio for the 2017 third quarter was 36.5% compared to 33.0% for the 2016 third quarter. For the first nine-months of 2017 the expense ratio was 35.1% compared to 32.2% in the first nine months of 2016.
• The third quarter 2017 expense ratio excluding catastrophe related premium adjustments, other third quarter 2017 catastrophe and risk management purchases and a one-time expense of $3.5 million relating to the final resolution of a premium tax dispute was 34.3%.
• For the 2017 third quarter, U.S. Operations reported underwriting income of $5.6 million, compared to underwriting income of $27.5 million for the 2016 third quarter. For the first nine months of 2017, underwriting income was $55.7 million compared to $78.9 million in the first nine months of 2016.
• For the 2017 third quarter, net favorable prior-year reserve development was $10.7 million, compared to net favorable prior-year reserve development of $13.7 million for the 2016 third quarter. For the nine-month period in 2017 net favorable prior-year reserve development was $28.7 million compared to net favorable prior-year reserve development of $25.6 million for the same period in 2016.
• Catastrophe losses for the 2017 third quarter were $21.0 million (and include $3.8 million of catastrophe related premium charges) compared to catastrophe losses of $4.5 million for the 2016 third quarter. Catastrophe losses for the first nine months of 2017 were $25.9 million (including $3.8 million of catastrophe related premium adjustments) compared to catastrophe losses of $11.5 million for the first nine months of 2016.
• During the third quarter of 2017, the Company received a fee of $8.5 million in connection with the transfer of certain fee based operations.

International Operations

International Operations comprise Syndicate 1200, International Specialty, and the Ariel Re businesses including Syndicate 1910. The Ariel Re transaction closed on February 6, 2017; therefore, Ariel Re results are included in the International Operations results since that date.

• Gross written premiums were up 67.6% in the third quarter and 38.4% for the nine-month period of 2017 versus the same periods in 2016. Growth was driven by acquisition of Ariel Re reinsurance business at Syndicate 1910, and by business in Bermuda and Brazil.
• The third quarter 2017 reported loss ratio was 113.0% compared to 55.4% in the 2016 third quarter. For the nine months of 2017 the loss ratio was 77.7% compared to 55.0% for the same period of 2016. The increase in the third quarter 2017 loss ratio relates to Syndicate 1200 due to approximately $15 million in higher current accident year property losses as was pre-announced in mid-October.
• Current accident year ex-CAT loss ratio, as adjusted for the third quarter of 2017, was 58.3%, compared to 49.9% for the 2016 third quarter. For the nine month 2017 period the current accident year ex-CAT loss ratio, as adjusted was 56.4% compared to 50.9% in the first nine months of 2016.
• The expense ratio for the 2017 third quarter was 43.3% compared to 35.8% for the 2016 third quarter. For the first nine-months of 2017 the expense ratio was 38.7% compared to 37.7% in the same 2016 period.
• The third quarter 2017 expense ratio excluding catastrophe related premium adjustments, other third quarter 2017 catastrophe and risk management purchases was 38.7% compared to 35.8% in the same 2016 period. The nine-month adjusted expense ratio was 37.3% compared to 37.7% in the same 2016 period.
• For the 2017 third quarter, International Operations reported an underwriting loss of $82.7 million compared to underwriting income of $12.5 million for the 2016 third quarter. In the first nine months of 2017 the underwriting loss was $78.1 million, compared to underwriting income of $30.6 million in the first nine months of 2016.
• For the 2017 third quarter, net favorable prior-year reserve development was $2.6 million compared to net favorable prior year reserve development of $0.6 million for the 2016 third quarter.
• Catastrophe losses for the 2017 third quarter were $83.5 million (and include $10.7 million of catastrophe related premium charges) compared to catastrophe losses of $8.5 million for the 2016 third quarter. Catastrophe losses for the first nine months of 2017 were $85.0 million compared to catastrophe losses of $27.4 million for the first nine months of 2016.

CONFERENCE CALL

Argo Group management will conduct an investor conference call starting at Noon EDT (1 p.m. ADT) tomorrow, Friday, Nov. 3, 2017. A live webcast of the conference call can be accessed by visiting https://services.choruscall.com/links/agii171103.html. Participants in the U.S. can access the call by dialing (877) 291-5203. Callers dialing from outside the U.S. can access the call by dialing (412) 902-6610. Please ask the operator to be connected to the Argo Group earnings call.

A webcast replay will be available shortly after the live conference call and can be accessed at https://services.choruscall.com/links/agii171103.html. A telephone replay of the conference call will be available through Nov. 10, 2017, to callers in the U.S. by dialing (877) 344-7529 (conference # 10113943). Callers dialing from outside the U.S. can access the telephone replay by dialing (412) 317-0088 (conference # 10113943).

ABOUT ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

Argo Group International Holdings, Ltd. (NASDAQ: AGII) is an international underwriter of specialty insurance and reinsurance products in the property and casualty market. Argo Group offers a full line of products and services designed to meet the unique coverage and claims handling needs of businesses in two primary segments: U.S. Operations and International Operations. Argo Group's insurance subsidiaries are A. M. Best-rated 'A' (Excellent) (third highest rating out of 16 rating classifications) with a stable outlook, and Argo Group's U.S. insurance subsidiaries are Standard and Poor's-rated 'A-' (Strong) with a stable outlook. More information on Argo Group and its subsidiaries is available at www.argolimited.com.

FORWARD-LOOKING STATEMENTS

This press release may include forward-looking statements, both with respect to Argo Group and its industry, that reflect our current views with respect to future events and financial performance. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can be identified by the use of words such as "expect," "intend," "plan," "believe," “do not believe,” “aim,” "project," "anticipate," “seek,” "will," “likely,” “assume,” “estimate,” "may," “continue,” “guidance,” “objective,” “outlook,” “trends,” “future,” “could,” “would,” “should,” “target,” “on track” and similar expressions of a future or forward-looking nature. All forward-looking statements address matters that involve risks and uncertainties, many of which are beyond Argo Group's control. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, therefore, you should not place undue reliance on any such statements. We believe that these factors include, but are not limited to, the following: 1) unpredictability and severity of catastrophic events; 2) rating agency actions; 3) adequacy of our risk management and loss limitation methods; 4) cyclicality of demand and pricing in the insurance and reinsurance markets; 5) statutory or regulatory developments including tax policy, reinsurance and other regulatory matters; 6) our ability to implement our business strategy; 7) adequacy of our loss reserves; 8) continued availability of capital and financing; 9) retention of key personnel; 10) competition; 11) potential loss of business from one or more major insurance or reinsurance brokers; 12) our ability to implement, successfully and on a timely basis, complex infrastructure, distribution capabilities, systems, procedures and internal controls, and to develop accurate actuarial data to support the business and regulatory and reporting requirements; 13) general economic and market conditions (including inflation, volatility in the credit and capital markets, interest rates and foreign currency exchange rates); 14) the integration of Ariel Re and other businesses we may acquire or new business ventures we may start; 15) the effect on our investment portfolios of changing financial market conditions including inflation, interest rates, liquidity and other factors; 16) acts of terrorism or outbreak of war; and 17) availability of reinsurance and retrocessional coverage, as well as management's response to any of the aforementioned factors.

In addition, any estimates relating to loss events involve the exercise of considerable judgment and reflect a combination of ground-up evaluations, information available to date from brokers and cedants, market intelligence, initial tentative loss reports and other sources. The actuarial range of reserves and management’s best estimate is based on our then current state of knowledge including explicit and implicit assumptions relating to the pattern of claim development, the expected ultimate settlement amount, inflation and dependencies between lines of business. Our internal capital model is used to consider the distribution for reserving risk around this best estimate and predict the potential range of outcomes. However, due to the complexity of factors contributing to the losses and the preliminary nature of the information used to prepare these estimates, there can be no assurance that Argo Group’s ultimate losses will remain within the stated amount.

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere, including the risk factors included in our most recent reports on Form 10-K and Form 10-Q and other documents of Argo Group on file with or furnished to the U.S. Securities and Exchange Commission (“SEC”). Any forward-looking statements made in this press release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by Argo Group will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Argo Group or its business or operations. Except as required by law, Argo Group undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

NON-GAAP FINANCIAL MEASURES

In presenting the Company's results, management has included and discussed in this press release certain non-generally accepted accounting principles ("non-GAAP") financial measures within the meaning of Regulation G as promulgated by the U.S. Securities and Exchange Commission. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain the Company's results of operations in a manner that allows for a more complete understanding of the underlying trends in the Company's business. However, these measures should not be viewed as a substitute for those determined in accordance with generally accepted accounting principles ("U.S. GAAP").

“Underwriting income” is an internal performance measure used in the management of the Company’s operations and represents net amount earned from underwriting activities (net premiums earned less underwriting expenses and claims incurred). Although this measure of profit (loss) does not replace net income (loss) computed in accordance with U.S. GAAP as a measure of profitability, management uses this measure of profit (loss) to focus our reporting segments on generating underwriting income. The Company presents Underwriting income as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information.

“Current accident year ex-CAT combined ratio, as adjusted” is an internal measure used by the management of the Company to evaluate the performance of its’ underwriting activity and represents the net amount of underwriting income excluding catastrophe related charges, the impact of changes to prior year loss reserves and other non-recurring items. Although this measure does not replace the combined ratio it provides management with a view of the quality of earnings generated by underwriting activity for the current accident year.

“Total return on average investments” is an internal measure used by management of the Company to evaluate the performance of its investment and asset management activities and represents the total of net investment income, net realized gains and losses, and the net change in unrealized gains and losses. These returns are analyzed as a percentage of the average investments excluding investments managed on behalf of trade capital providers who are third-parties that provide underwriting capital to our Syndicate operations. This measure does not replace net investment income as a measure of return on invested assets. However, it provides management with an overall view of investment performance.

“Adjusted operating income" is an internal performance measure used in the management of the Company's operations and represents after-tax (at an assumed effective tax rate of 20%) operational results excluding, as applicable, net realized investment gains or losses, net foreign exchange gain or loss, and other similar non-recurring items. The Company excludes net realized investment gains or losses, net foreign exchange gain or loss, and other similar non-recurring items from the calculation of adjusted operating income because these amounts are influenced by and fluctuate in part, by market conditions that are outside of management’s control. In addition to presenting net income determined in accordance with U.S. GAAP, the Company believes that showing adjusted operating income enables investors, analysts, rating agencies and other users of the Company's financial information to more easily analyze our results of operations and underlying business performance. Adjusted operating income should not be viewed as a substitute for U.S. GAAP net income.

"Annualized return on average shareholders’ equity" ("ROAE") is calculated using average shareholders' equity. In calculating ROAE, the net income available to shareholders for the period is multiplied by the number of periods in a calendar year to arrive at annualized net income available to shareholders. The Company presents ROAE as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information.

"Annualized adjusted operating return on average shareholders' equity" is calculated using adjusted operating income (as defined above and annualized in the manner described for net income (loss) available to shareholders under ROAE above) and average shareholders' equity. The assumed tax rate is 20%.

Reconciliations of these financial measures to their most directly comparable U.S. GAAP measures are included in the attached tables.

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
			September 30,				December 31,
			2017				2016
			(unaudited)
Assets
Total investments			$	4,807.5			$	4,324.3
Cash				235.8				86.0
Accrued investment income				23.6				20.7
Receivables				2,780.7				1,849.4
Goodwill and intangible assets				260.5				219.9
Deferred acquisition costs, net				168.8				139.1
Ceded unearned premiums				461.4				302.8
Other assets				319.7				262.8
Total assets			$	9,058.0			$	7,205.0
Liabilities and Shareholders' Equity
Reserves for losses and loss adjustment expenses			$	4,305.9			$	3,350.8
Unearned premiums				1,286.0				970.0
Ceded reinsurance payable, net				822.6				466.6
Senior unsecured fixed rate notes				139.6				139.5
Other indebtedness				184.7				55.4
Junior subordinated debentures				256.5				172.7
Other liabilities				254.7				257.3
Total liabilities				7,250.0				5,412.3
Total shareholders' equity				1,808.0				1,792.7
Total liabilities and shareholders' equity			$	9,058.0			$	7,205.0
Book value per common share			$	60.96			$	59.73

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
FINANCIAL HIGHLIGHTS
ALL SEGMENTS
(in millions, except per share amounts)
(unaudited)
			Three Months Ended										Nine months ended
			September 30,										September 30,
			2017					2016					2017				2016
Gross written premiums			$	805.1				$	585.4				$	2,090.9			$	1,665.8
Net written premiums				473.2					415.3					1,263.7				1,106.7
Earned premiums				389.3					358.7					1,167.8				1,048.5
Net investment income				30.9					32.7					105.0				89.6
Fee and other income				13.0					7.6					20.4				20.2
Net realized investment and other gains				6.0					17.7					25.1				12.8
Total revenue				439.2					416.7					1,318.3				1,171.1
Losses and loss adjustment expenses				326.4					207.8					779.5				596.0
Underwriting, acquisition and insurance expenses				166.1					137.4					474.4				403.0
Interest expense				7.5					4.9					20.4				14.6
Fee and other expense, net				5.0					5.9					12.4				18.1
Foreign currency exchange losses (gains)				0.1					(1.5	)				4.0				4.5
Total expenses				505.1					354.5					1,290.7				1,036.2
(Loss) income before taxes				(65.9	)				62.2					27.6				134.9
Income tax (benefit) provision				(4.6	)				7.0					6.2				21.1
Net (loss) income			$	(61.3	)			$	55.2				$	21.4			$	113.8
Net (loss) income per common share (basic)			$	(2.04	)			$	1.84				$	0.71			$	3.76
Net (loss) income per common share (diluted)			$	(2.04	)			$	1.80				$	0.69			$	3.68
Weighted average common shares:
Basic				30.0					30.0					30.1				30.2
Diluted				30.0					30.7					30.9				30.9

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
SEGMENT DATA
(in millions)
(unaudited)
			Three months ended										Nine months ended
			September 30,					September 30,					September 30,					September 30,
				2017					2016					2017					2016
U.S. OPERATIONS
Gross written premiums			$	428.9				$	360.8				$	1,128.9				$	970.2
Net written premiums				302.6					258.9					781.1					671.8
Earned premiums				242.6					216.3					692.9					629.7
Underwriting income				5.6					27.5					55.6					78.9
Net investment income				18.8					20.3					66.0					55.8
Interest expense				(3.8	)				(2.2	)				(10.3	)				(6.8	)
Fee income (expense), net				8.1					0.3					7.5					(1.7	)
Net income before taxes			$	28.7				$	45.9				$	118.8				$	126.2
Loss ratio				61.2	%				54.3	%				56.8	%				55.3	%
Expense ratio				36.5	%				33.0	%				35.1	%				32.2	%
GAAP combined ratio				97.7	%				87.3	%				91.9	%				87.5	%
INTERNATIONAL OPERATIONS
Gross written premiums			$	376.3				$	224.5				$	962.0				$	695.3
Net written premiums				170.7					156.3					482.6					434.6
Earned premiums				146.8					142.3					474.9					418.5
Underwriting (loss) income				(82.7	)				12.5					(78.1	)				30.6
Net investment income				7.7					7.5					24.4					22.7
Interest expense				(2.8	)				(1.4	)				(7.1	)				(4.0	)
Fee income, net				0.3					1.5					0.7					3.8
Net (loss) income before taxes			$	(77.5	)			$	20.1				$	(60.1	)			$	53.1
Loss ratio				113.0	%				55.4	%				77.7	%				55.0	%
Expense ratio				43.3	%				35.8	%				38.7	%				37.7	%
GAAP combined ratio				156.3	%				91.2	%				116.4	%				92.7	%

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
(in millions)
(unaudited)
			Three months ended										Nine months ended
Net Prior Year Development			September 30,										September 30,
(Favorable)/Unfavorable				2017					2016					2017					2016
US Operations			$	(10.7	)			$	(13.7	)			$	(28.7	)			$	(25.6	)
International Operations				(2.6	)				(0.6	)				17.0					(10.8	)
Run-off Lines				12.0					11.4					16.1					17.6
Total			$	(1.3	)			$	(2.9	)			$	4.4				$	(18.8	)
			Three months ended										Nine months ended
			September 30,										September 30,
				2017					2016					2017					2016
Catastrophe losses
US Operations			$	17.2				$	4.5				$	22.1				$	11.5
International Operations				72.8					8.5					74.3					27.4
Total catastrophe losses				90.0					13.0					96.4					38.9
CAT related premium adjustments
US Operations				3.8					-					3.8					-
International Operations				10.7					-					10.7					-
Total CAT related premium adjustments				14.5					-					14.5					-
Catastrophe losses, inclusive of CAT related premium adjustments			$	104.5				$	13.0				$	110.9				$	38.9

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
RECONCILIATION OF RATIOS
(in millions)
(unaudited)
			Three months ended										Nine months ended
			September 30,										September 30,
US Operations				2017					2016					2017					2016
Earned premiums, as reported			$	242.6				$	216.3				$	692.9				$	629.7
CAT related premiums adjustments				3.8					-					3.8					-
Net earned premiums, net of catastrophe adjustments				246.4					216.3					696.7					629.7
Other CAT and risk management purchases in Q3 2017				1.4					-					1.4					-
Net earned premiums, as adjusted			$	247.8				$	216.3				$	698.1				$	629.7
Losses and loss adjustment expenses, as reported			$	148.4				$	117.5				$	394.2				$	348.1
Catastrophe losses				(17.2	)				(4.5	)				(22.1	)				(11.5	)
Prior accident year reserve development				10.7					13.7					28.7					25.6
Current accident year losses excluding CATs, as adjusted			$	141.9				$	126.7				$	400.8				$	362.2
Underwriting, acquisition and insurance expenses, as reported			$	88.6				$	71.3				$	243.0				$	202.7
Final resolution of premium tax dispute				(3.5	)				-					(3.5	)				-
Underwriting, acquisition and insurance expenses, as adjusted			$	85.1				$	71.3				$	239.5				$	202.7
Loss ratio, as reported				61.2	%				54.3	%				56.8	%				55.3	%
Catastrophe losses (a)				-8.0	%				-2.1	%				-3.4	%				-1.8	%
Prior accident year loss development				4.3	%				6.3	%				4.1	%				4.0	%
Other CAT and risk management purchases in Q3 2017				-0.2	%				0.0	%				-0.1	%				0.0	%
Current accident year ex-CATs loss ratio, as adjusted				57.3	%				58.5	%				57.4	%				57.5	%
Expense ratio, as reported				36.5	%				33.0	%				35.1	%				32.2	%
Final resolution of premium tax dispute				-1.5	%				0.0	%				-0.5	%				0.0	%
Other CAT and risk management purchases in Q3 2017				-0.7	%				0.0	%				-0.3	%				0.0	%
Expense ratio, as adjusted				34.3	%				33.0	%				34.3	%				32.2	%
Combined ratio, as reported				97.7	%				87.3	%				91.9	%				87.5	%
CAY ex-CAT combined ratio, as adjusted				91.6	%				91.5	%				91.7	%				89.7	%
(a) Please refer to Notes for calculation of the point impacts of catastrophe losses on the ratios.

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
RECONCILIATION OF RATIOS
(in millions)
(unaudited)
			Three months ended										Nine months ended
			September 30,										September 30,
International Operations				2017					2016					2017					2016
Earned premiums, as reported			$	146.8				$	142.3				$	474.9				$	418.5
CAT related premiums adjustments				10.7					-					10.7					-
Net earned premiums, net of catastrophe adjustments				157.5					142.3					485.6					418.5
Other CAT and risk management purchases in Q3 2017				6.7					-					6.7					-
Net earned premiums, as adjusted			$	164.2				$	142.3				$	492.3				$	418.5
Losses and loss adjustment expenses, as reported			$	166.0				$	78.9				$	369.2				$	230.3
Catastrophe losses				(72.8	)				(8.5	)				(74.3	)				(27.4	)
Prior accident year reserve development				2.6					0.6					(17.0	)				10.8
Current accident year losses excluding CATs, as adjusted			$	95.8				$	71.0				$	277.9				$	213.7
Underwriting, acquisition and insurance expenses, as reported			$	63.5				$	50.9				$	183.8				$	157.6
Underwriting, acquisition and insurance expenses, as adjusted			$	63.5				$	50.9				$	183.8				$	157.6
Loss ratio, as reported				113.0	%				55.4	%				77.7	%				55.0	%
Catastrophe losses (a)				-53.8	%				-5.9	%				-17.0	%				-6.7	%
Prior accident year loss development				1.7	%				0.4	%				-3.5	%				2.6	%
Other CAT and risk management purchases in Q3 2017				-2.6	%				0.0	%				-0.8	%				0.0	%
Current accident year ex-CATs loss ratio, as adjusted				58.3	%				49.9	%				56.4	%				50.9	%
Expense ratio, as reported				43.3	%				35.8	%				38.7	%				37.7	%
Other CAT and risk management purchases in Q3 2017				-4.6	%				0.0	%				-1.4	%				0.0	%
Expense ratio, as adjusted				38.7	%				35.8	%				37.3	%				37.7	%
Combined ratio, as reported				156.3	%				91.2	%				116.4	%				92.7	%
CAY ex-CAT combined ratio, as adjusted				97.0	%				85.7	%				93.8	%				88.6	%
(a) Please refer to Notes for calculation of the point impacts of catastrophe losses on the ratios.

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
RECONCILIATION OF RATIOS
(in millions)
(unaudited)
			Three months ended										Nine months ended
			September 30,										September 30,
Consolidated				2017					2016					2017					2016
Earned premiums, as reported			$	389.3				$	358.7				$	1,167.8				$	1,048.5
CAT related premiums adjustments				14.5					-					14.5					-
Net earned premiums, net of catastrophe adjustments				403.8					358.7					1,182.3					1,048.5
Other CAT and risk management purchases in Q3 2017				8.1					-					8.1					-
Net earned premiums, as adjusted			$	411.9				$	358.7				$	1,190.4				$	1,048.5
Losses and loss adjustment expenses, as reported			$	326.4				$	207.8				$	779.5				$	596.0
Catastrophe losses				(90.0	)				(13.0	)				(96.4	)				(38.9	)
Prior accident year reserve development				1.3					2.9					(4.4	)				18.8
Current accident year losses excluding CATs, as adjusted			$	237.7				$	197.7				$	678.7				$	575.9
Underwriting, acquisition and insurance expenses, as reported			$	166.1				$	137.4				$	474.4				$	403.0
Final resolution of premium tax dispute				(3.5	)				-					(3.5	)				-
IT outsourcing costs - Q1				-					-					(4.0	)				-
Ariel Re transaction costs - Q1				-					-					(2.5	)				-
Underwriting, acquisition and insurance expenses, as adjusted			$	162.6				$	137.4				$	464.4				$	403.0
Loss ratio, as reported				83.8	%				57.9	%				66.7	%				56.8	%
Catastrophe losses (a)				-25.2	%				-3.6	%				-8.9	%				-3.7	%
Prior accident year loss development				0.3	%				0.8	%				-0.4	%				1.8	%
Other CAT and risk management purchases in Q3 2017				-1.2	%				0.0	%				-0.4	%				0.0	%
Current accident year ex-CATs loss ratio, as adjusted				57.7	%				55.1	%				57.0	%				54.9	%
Expense ratio, as reported				42.7	%				38.3	%				40.6	%				38.4	%
Final resolution of premium tax dispute				-0.8	%				0.0	%				-0.3	%				0.0	%
IT outsourcing costs - Q1				0.0	%				0.0	%				-0.4	%				0.0	%
Ariel Re transaction costs - Q1				0.0	%				0.0	%				-0.2	%				0.0	%
Other CAT and risk management purchases in Q3 2017				-2.4	%				0.0	%				-0.7	%				0.0	%
Expense ratio, as adjusted				39.5	%				38.3	%				39.0	%				38.4	%
Combined ratio, as reported				126.5	%				96.2	%				107.3	%				95.2	%
CAY ex-CAT combined ratio, as adjusted				97.2	%				93.4	%				96.0	%				93.3	%
(a) Please refer to Notes for calculation of the point impacts of catastrophe losses on the ratios.

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
RECONCILIATION OF UNDERWRITING (LOSS) INCOME TO NET INCOME
(in millions)
(unaudited)
			Three months ended										Nine months ended
			September 30,										September 30,
				2017					2016					2017					2016
Net (loss) Income			$	(61.3	)			$	55.2				$	21.4				$	113.8
Add (deduct):
Income tax provision				(4.6	)				7.0					6.2					21.1
Net investment income				(30.9	)				(32.7	)				(105.0	)				(89.6	)
Net realized investment and other gains				(6.0	)				(17.7	)				(25.1	)				(12.8	)
Fee and other income				(13.0	)				(7.6	)				(20.4	)				(20.2	)
Interest expense				7.5					4.9					20.4					14.6
Fee and other expense				5.0					5.9					12.4					18.1
Foreign currency exchange (gains) losses				0.1					(1.5	)				4.0					4.5
Underwriting (loss) income			$	(103.2	)			$	13.5				$	(86.1	)			$	49.5

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
RECONCILIATION OF ADJUSTED OPERATING INCOME TO NET INCOME
(in millions, except per share amounts)
(unaudited)
			Three months ended										Nine months ended
			September 30,										September 30,
				2017					2016					2017					2016
Net (loss) income, as reported			$	(61.3	)			$	55.2				$	21.4				$	113.8
(Benefit) provision for income taxes				(4.6	)				7.0					6.2					21.1
Net (loss) income, before taxes				(65.9	)				62.2					27.6					134.9
Add (deduct):
Net realized investment and other (gains) losses				(6.0	)				(17.7	)				(25.1	)				(12.8	)
Foreign currency exchange losses (gains)				0.1					(1.5	)				4.0					4.5
Adjusted operating (loss) income before taxes				(71.8	)				43.0					6.5					126.6
(Benefit) provision for income taxes, at assumed rate (1)				(14.4	)				8.6					1.3					25.3
Adjusted operating (loss) income			$	(57.4	)			$	34.4				$	5.2				$	101.3
Adjusted operating (loss) income per common share (diluted)			$	(1.91	)			$	1.12				$	0.17				$	3.28
Weighted average common shares, diluted				30.0					30.7					30.9					30.9
(1) At assumed tax rate of 20%.

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
RECONCILIATION OF SEGMENT (LOSS) INCOME TO NET (LOSS) INCOME
(in millions)
(unaudited)
			Three months ended										Nine months ended
			September 30,										September 30,
				2017					2016					2017					2016
Segment income (loss) before income taxes
U.S. Operations				28.7					45.9					118.9					126.2
International Operations				(77.5	)				20.1					(60.1	)				53.1
Run-off Lines				(12.7	)				(10.0	)				(16.4	)				(14.6	)
Corporate and Other				(10.3	)				(13.0	)				(35.9	)				(38.1	)
Realized investment and other gains				6.0					17.7					25.1					12.8
Foreign currency exchange (losses) gains				(0.1	)				1.5					(4.0	)				(4.5	)
Net (loss) income before income taxes				(65.9	)				62.2					27.6					134.9
(Benefit) provision for taxes				(4.6	)				7.0					6.2					21.1
Net (loss) income			$	(61.3	)			$	55.2				$	21.4				$	113.8

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
GROSS WRITTEN PREMIUMS BY SEGMENT AND LINE OF BUSINESS
(in millions)
(unaudited)
U.S. Operations			Three months ended												Three months ended
			September 30, 2017												September 30, 2016
			Gross Written				Net Written				Net Earned				Gross Written				Net Written				Net Earned
Property			$	68.1			$	45.5			$	26.8			$	69.2			$	42.8			$	28.6
Liability				277.2				196.9				160.2				226.7				164.2				146.3
Professional				46.2				32.1				30.8				35.3				28.6				21.3
Specialty				37.4				28.1				24.8				29.6				23.3				20.1
Total			$	428.9			$	302.6			$	242.6			$	360.8			$	258.9			$	216.3
International Operations			Three months ended												Three months ended
			September 30, 2017												September 30, 2016
			Gross Written				Net Written				Net Earned				Gross Written				Net Written				Net Earned
Property			$	177.1			$	64.1			$	48.8			$	76.6			$	58.3			$	53.2
Liability				56.3				25.1				22.6				40.5				23.0				24.3
Professional				42.8				27.9				22.7				39.7				25.9				22.3
Specialty				100.1				53.6				52.7				67.7				49.1				42.5
Total			$	376.3			$	170.7			$	146.8			$	224.5			$	156.3			$	142.3
Consolidated			Three months ended												Three months ended
			September 30, 2017												September 30, 2016
			Gross Written				Net Written				Net Earned				Gross Written				Net Written				Net Earned
Property			$	245.1			$	109.5			$	75.5			$	145.8			$	101.1			$	81.8
Liability				333.5				222.0				182.8				267.3				187.3				170.7
Professional				89.0				60.0				53.5				75.0				54.5				43.6
Specialty				137.5				81.7				77.5				97.3				72.4				62.6
Total			$	805.1			$	473.2			$	389.3			$	585.4			$	415.3			$	358.7
U.S. Operations			Nine months ended												Nine months ended
			September 30, 2017												September 30, 2016
			Gross Written				Net Written				Net Earned				Gross Written				Net Written				Net Earned
Property			$	193.4			$	104.9			$	85.8			$	188.6			$	102.4			$	93.7
Liability				715.4				511.3				454.8				613.2				440.8				429.1
Professional				119.9				89.3				85.5				98.9				71.7				56.8
Specialty				100.2				75.6				66.8				69.5				56.9				50.1
Total			$	1,128.9			$	781.1			$	692.9			$	970.2			$	671.8			$	629.7
International Operations			Nine months ended												Nine months ended
			September 30, 2017												September 30, 2016
			Gross Written				Net Written				Net Earned				Gross Written				Net Written				Net Earned
Property			$	390.3			$	161.9			$	168.9			$	273.1			$	170.4			$	153.8
Liability				126.6				61.3				60.1				109.9				62.1				65.8
Professional				120.4				72.3				70.4				111.2				70.7				71.8
Specialty				324.7				187.1				175.5				201.1				131.4				127.1
Total			$	962.0			$	482.6			$	474.9			$	695.3			$	434.6			$	418.5
Consolidated			Nine months ended												Nine months ended
			September 30, 2017												September 30, 2016
			Gross Written				Net Written				Net Earned				Gross Written				Net Written				Net Earned
Property			$	583.7			$	266.8			$	254.7			$	461.7			$	272.8			$	247.5
Liability				842.0				572.6				514.9				723.4				503.2				495.2
Professional				240.3				161.6				155.9				210.1				142.4				128.6
Specialty				424.9				262.7				242.3				270.6				188.3				177.2
Total			$	2,090.9			$	1,263.7			$	1,167.8			$	1,665.8			$	1,106.7			$	1,048.5

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
COMPONENTS OF NET INVESTMENT INCOME
ALL SEGMENTS
(in millions)
(unaudited)
			Three months ended
			September 30				June 30				March 31				December 31				September 30
			2017				2017				2017				2016				2016
Net investment income, excluding alternatives			$	25.2			$	23.0			$	22.2			$	22.4			$	22.9
Alternative investments				5.7				20.6				8.3				3.1				9.8
Total net investment income			$	30.9			$	43.6			$	30.5			$	25.5			$	32.7

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
RECONCILIATION OF TOTAL RETURN TO NET INVESTMENT INCOME
(in millions)
(unaudited)
			Three months ended										Nine Months Ended
			September 30,										September 30,
				2017					2016					2017					2016
Net investment income			$	30.9				$	32.7				$	105.0				$	89.6
Add (deduct):
Net realized investment and other gains				6.0					17.7					25.1					12.8
Net unrealized gains				21.1					2.8					63.8					72.6
Total return			$	58.0				$	53.2				$	193.9				$	175.0
Average investments (1)			$	4,560.6				$	4,111.5				$	4,431.3				$	4,062.7
Total return on average investments				1.3	%				1.3	%				4.4	%				4.3	%
(1) excludes investments managed on behalf of syndicate's trade capital providers

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
SHAREHOLDER RETURN ANALYSIS
(in millions)
(unaudited)
			For the nine months ended September 30,
				2017					2016				% Change
Net income			$	21.4				$	113.8				(81.2	%)
Adjusted operating income (a)				5.2					101.3				(94.9	%)
Shareholders' Equity - Beginning of the period			$	1,792.7				$	1,668.1				7.5	%
Shareholders' Equity - End of current period				1,808.0					1,788.4				1.1	%
Average Shareholders' Equity			$	1,800.4				$	1,728.3				4.2	%
Annualized return on average shareholders' equity				1.6	%				8.8	%
Annualized adjusted operating return on average shareholders' equity				0.4	%				7.8	%
(a) at assumed 20% tax rate

View source version on businesswire.com: http://www.businesswire.com/news/home/20171102006762/en/

Argo Group International Holdings, Ltd.

Susan Spivak Bernstein, 212-607-8835

Senior Vice President, Investor Relations

Source: Argo Group International Holdings, Ltd.

When a longtime client contacted George Pickett this summer about a long-term care insurance rate increase, the conversation left him with lingering concerns.

For starters, Pickett, as the agent/advisor of record, was not informed of the rate increase. Pickett, now a principal with The Centerpoint Group in Madison, Miss., wrote many LTCi policies decades ago.

Many of the past clients are older now, some no doubt battling various mental and physical illnesses that come with old age.

Pickett is pushing for a uniform regulation requiring insurance companies to notify the agent/advisor of record whenever they raise the premium on an in-force policy.

But he isn’t sure that life insurers would welcome the idea.

“If somebody has a severe cognitive impairment and they get a letter notifying them of a rate increase, they may be inclined to throw it in the trash,” Pickett said. “And I frankly think that if the line of business is not profitable, the carrier might like for people to throw it in the trash.”

Pickett took the issue to the National Association of Insurance and Financial Advisors and leaders opted to back the expanded notification. In a Sept. 16 post on its Advocacy Action blog, NAIFA called for changes to client communication.

“When a company is permitted under law or regulation to raise a premium or any expense charge on an in-force policy, that increase should only take effect after timely and clear notice is given to the policyowner, and only when a copy of that same notice is sent at the same time to the policy’s writing and/or servicing agent,” the blog post reads.

Contacted earlier this month, NAIFA CEO Kevin Mayeux said the issue is likely “too narrow in scope” to be a candidate for a model law from the National Association of Insurance Commissioners.

“However, NAIFA will communicate the importance to commissioners as well as engage in discussions with other state lawmakers to ensure policyowners in all states have information and professional support they need to make sound financial decisions,” Mayeux added via email.

Communication breakdown

Bringing the agent/advisor of record into the premium hike can help things go smoother, Pickett said. In Mississippi, and in other states, a premium increase requires approval of the insurance commissioner, he noted. So, it would not be a big step to condition that approval on mandatory concurrent notice to the agent/advisor.

“If the agent receives a copy of that rate increase letter, the agent can contact the insured to discuss it and seek to prevent an impulsive, detrimental act,” he said.

InsuranceNewsNet contacted the top three U.S. life insurance companies by premium – New York Life, Northwestern Mutual and MetLife. New York Life "communicates directly with policy owners and agents regarding changes to their policies," a spokeswoman said.

Pickett's client has a MetLife policy. MetLife no longer offers individual life or long-term care insurance to new customers in the United States, but MetLife Holdings continues to service in-force policies. It is standard business practice for MetLife to send the servicing agent of record an advance copy of premium change notices and notify them of other significant policy activity.

While that is the MetLife policy, Pickett said it isn't being routinely followed by third-party providers. Pickett shared a June email exchange with a TPP servicing the MetLife policy. In it, the account representative explained that premium increase information is only shared with the advisor/agent of record upon request.

"Because plan details, rates, and applicable information can change, issuing them upon request helps ensure that what is provided is up to date and relevant, rather than sending materials automatically that may no longer apply," the account rep said in the email.

But if the agent doesn't know the insurer has increased a client's premium, Pickett said, how would they know to request that information?

Northwestern Mutual did not respond in time for this story.

Big stakes for policyholders

States do require eventual notification for LTCi policies based on the NAIC’s “unintentional lapse” provision contained in its Long-Term Care Insurance Model Regulation. Insurers must allow applicants to name at least one secondary person to receive a backup notice of termination for nonpayment.

Federal law mandates that for any long-term care insurance policy to be considered a "tax-qualified" contract, it must explicitly satisfy the consumer protection requirements of the NAIC regulation, specifically including the unintentional lapse provision.

With straightforward life insurance, it’s another story.

That lack of secondary notification nearly had devastating financial consequences for an 82-year-old Chicago woman earlier this year.

Dolly Janowiak had her $100,000 life insurance policy canceled by Transamerica after she accidentally missed a $56 monthly premium increase. CBS News Chicago was the first to report the story.

Janowiak lost her long-held coverage in April following a notice from the insurer stating she had failed to pay the increased premium amount for two months, resulting in a $112 delinquency. Her family contended that she never received any warning notices mailed by the company.

"What about all the money that I spent on it?" Janowiak said in an interview with CBS News Chicago.

Her son, Greg Janowiak, said his mother had paid her policy "religiously every single month for 20-plus years." He added that because of her age and current health struggles, the cancellation effectively left her uninsurable.

Transamerica reinstated Janowiak's policy after CBS News got involved but mandated a $1,581 payment to restore the coverage.

In a statement to Moneywise, Transamerica cited privacy policies preventing them from discussing specific policyholder details. The company stated they contacted Janowiak directly to resolve the matter so she could maintain her coverage.

Janowiak died Oct. 4.

State notification rules vary

InsuranceNewsNet contacted insurance regulators from the top 10 most-populous states in the United States to gauge how states handle notification of premium increases. The ten states – California, Texas, Florida, New York, North Carolina, Pennsylvania, Georgia, Michigan, Ohio and Illinois – are home to roughly 184.8 million Americans.

Only the Georgia Office Of Insurance and Safety Fire Commissioner did not respond to multiple messages.

Policies vary greatly and not always along the expected ideological lines. For example, a spokesman said New York has no requirement for an insurer to notify the agent/advisor of record when raising a client’s life insurance premium payments. New York is generally recognized as a very policyholder-friendly state.

The California Insurance Code does not require notice to the agent/advisor of record when premium increases. However, an individual life policyholder can designate at least one person to receive notices of a lapse or termination for nonpayment of premium.

Highlights from other states include:

Florida: The insurer is required to send a copy of any lapse notification to the agent/advisor of record at least 21 days before the effective lapse date. The requirement for secondary lapse notifications applies to life insurance contracts in force for at least one year and cover a person aged 64 or older.

However, an insurer is exempt from this requirement if they provide an online portal for agents to track policy status, maintain a system confirming notice transmission, have no record of the current agent, or if the agent is a direct employee of the insurer.

Pennsylvania, Illinois, Texas, Ohio, Michigan and North Carolina: No law requiring agent notification of an impending life insurance premium increase.

‘Nowhere to turn’

NAIFA President Christopher L. Gandy called the lack of consistent agent notification a real and persistent gap in the regulatory landscape.

“When an agent is left out of important communications, a policyholder who receives notice of an increase has nowhere to turn to understand what the change means, how it affects the policy’s long-term outlook, or what options may be available,” he said.

“The result is that consumers are often forced to interpret the correspondence on their own, at precisely the moment when professional guidance is needed the most.”

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