Argo Group Reports Third Quarter 2017 Results
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 | ||||||||||||
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4.4% |
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↑ 37.5% |
↓ 213.3% |
↓ 5.5% |
↑ 100 basis points |
↑ 2.1% |
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from 3Q 2016 |
from 3Q 2016 |
from 3Q 2016 |
YTD 3Q 2016 |
from |
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“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
HIGHLIGHTS FOR THE THREE MONTHS ENDED
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HIGHLIGHTS FOR THE NINE MONTHS ENDED
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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
- 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
- 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 andBrazil . - 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
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
ABOUT
FORWARD-LOOKING STATEMENTS
This press release may include forward-looking statements, both with respect to
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
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
“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
“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
"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
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CONSOLIDATED BALANCE SHEETS | ||||||||
(in millions, except per share amounts) | ||||||||
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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 | ||||||
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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 |
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FINANCIAL HIGHLIGHTS | ||||||||||||||||||
ALL SEGMENTS | ||||||||||||||||||
(in millions, except per share amounts) | ||||||||||||||||||
(unaudited) | ||||||||||||||||||
Three Months Ended | Nine months ended | |||||||||||||||||
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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 |
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SEGMENT DATA | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||
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2017 | 2016 | 2017 | 2016 | |||||||||||||||||
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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 |
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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 | % |
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(in millions) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||
Net Prior |
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(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 | |||||||||||||||||||
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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 |
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RECONCILIATION OF RATIOS | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||
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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. |
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RECONCILIATION OF RATIOS | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||
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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. |
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RECONCILIATION OF RATIOS | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||
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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. |
|
||||||||||||||||||||
RECONCILIATION OF UNDERWRITING (LOSS) INCOME TO NET INCOME | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||
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|||||||||||||||||||
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 |
|
||||||||||||||||||||
RECONCILIATION OF ADJUSTED OPERATING INCOME TO NET INCOME | ||||||||||||||||||||
(in millions, except per share amounts) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||
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|||||||||||||||||||
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%. |
|
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RECONCILIATION OF SEGMENT (LOSS) INCOME TO NET (LOSS) INCOME | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||
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2017 | 2016 | 2017 | 2016 | |||||||||||||||||
Segment income (loss) before income taxes | ||||||||||||||||||||
|
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 |
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GROSS WRITTEN PREMIUMS BY SEGMENT AND LINE OF BUSINESS | ||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
|
Three months ended | Three months ended | ||||||||||||||||||||||
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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 | ||||||||||||||||||||||
|
|
|||||||||||||||||||||||
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 | ||||||||||||||||||||||
|
|
|||||||||||||||||||||||
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 | ||||||||||||
|
Nine months ended | Nine months ended | ||||||||||||||||||||||
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|
|||||||||||||||||||||||
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 | ||||||||||||||||||||||
|
|
|||||||||||||||||||||||
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 | ||||||||||||||||||||||
|
|
|||||||||||||||||||||||
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 |
|
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COMPONENTS OF NET INVESTMENT INCOME | ||||||||||||||||||||
ALL SEGMENTS | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Three months ended | ||||||||||||||||||||
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|
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|
||||||||||||||||
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 |
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RECONCILIATION OF TOTAL RETURN TO NET INVESTMENT INCOME | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Three months ended | Nine Months Ended | |||||||||||||||||||
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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 |
|
||||||||||||||
SHAREHOLDER RETURN ANALYSIS | ||||||||||||||
(in millions) | ||||||||||||||
(unaudited) | ||||||||||||||
For the nine months ended |
||||||||||||||
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/
Senior Vice President, Investor Relations
Source:
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