Argo Group International Holdings, Ltd. (Exact name of registrant as specified in its charter)

Transcription

1 Section 1: 8-K (8-K) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): November 15, 2013 Argo Group International Holdings, Ltd. (Exact name of registrant as specified in its charter) Bermuda (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) 110 Pitts Bay Road Pembroke HM 08 Bermuda (Address, Including Zip Code, of Principal Executive Offices) P.O. Box HM 1282 Hamilton HM FX Bermuda (Mailing Address) Registrant s telephone number, including area code: (441) Not Applicable (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: Written communications pursuant to Rule 425 under the Securities Act (17 CFR ) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR e-4(c))

2 ITEM REGULATION FD DISCLOSURE. Argo Group International Holdings, Ltd. ( Argo Group ) may make presentations to members of the investment community from time to time using the presentation materials attached hereto as Exhibit 99.1 to this Current Report on Form 8-K. Note: The information in this report and Exhibit 99.1 attached hereto are furnished pursuant to Item 7.01 and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section. This report will not be deemed an admission as to the materiality of any information in the report that is required to be disclosed solely by Regulation FD. FORWARD-LOOKING STATEMENTS This press release contains certain statements that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are qualified by the inherent risks and uncertainties surrounding future expectations generally and also may materially differ from actual future experience involving any one or more of such statements. For a more detailed discussion of such risks and uncertainties, see Argo Group s filings with the SEC. The inclusion of a forward-looking statement herein should not be regarded as a representation by Argo Group that Argo Group s objectives will be achieved. Argo Group undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. ITEM FINANCIAL STATEMENTS AND EXHIBITS. (d) Exhibits: 99.1 Argo Group International Holdings, Ltd. Presentation

3 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ARGO GROUP INTERNATIONAL HOLDINGS, LTD. Dated: November 15, 2013 By: /s/ Jay S. Bullock Name: Jay S. Bullock Title: Executive Vice President and Chief Financial Officer (Back To Top) 2 Section 2: EX-99.1 (EX-99.1) Exhibit Q 2013 Investor Presentation November 2013

4 Forward-Looking Statements This presentation contains forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of The forward-looking statements are based on the Company's current expectations and beliefs concerning future developments and their potential effectson the Company. There can be no assurance that actual developmentswill be those anticipated by the Company. Actual results may differ materially from those projectedas a result of significant risks and uncertainties, including non-receipt of the expected payments, changes in interest rates, effect of the performance of financial markets on investment income and fair values of investments, development of claims and the effect on loss reserves, accuracy in projecting loss reserves, the impact of competition and pricing environments, changes in the demand for the Company's products, the effect of general economic conditions, adverse state and federal legislation, regulations and regulatory investigations into industry practices, developments relating to existing agreements, heightened competition, changes in pricing environments, and changes in asset valuations. The Company undertakes no obligation to publicly update any forward-looking statements as a result of events or developments subsequent to the presentation. 2.

5 Argo Group at a Glance Exchange / Ticker: NASDAQ / AGII Share Price: $41.38 Market Capitalization: $1.1 billion Annual Dividend / Yield: $0.60 per share / 1.4% Gross Written Premium: Capital: $1.9 billion $1.9 billion Analyst Coverage: Macquarie (Outperform) - Amit Kumar Raymond James (Outperform) - Greg Peters William Blair (Outperform) - Adam Klauber Dowling & Partners (Neutral) - Kyle LaBarre Compass Point (Neutral) - Ken Billingsley Guggenheim (Neutral) - Bijan Moazami Atlanta Bermuda Boston Brussels Chicago Dallas Denver Dubai Houston London Los Angeles Malta New York Paris Portland Richmond Rio de Janeiro Rockwood San Antonio San Francisco Sao Paulo Scottsdale Seattle Zurich Note: Market information as of November 01, 2013 and annual performance figures as of TTM September 30,

6 Strong & Focused Specialty Franchise Global underwriter of specialty P&C insurance and reinsurance through four segments Broad footprint strategically located in major insurance centers U.S., Bermuda, London and Brazil Focused on specialty insurance & casualty lines Leader in U.S. Excess & Surplus Lines Top quartile Lloyd s Syndicate by stamp Deep relationships with retailers, wholesalers and Lloyd s brokers A.M. Best rating of A (excellent financial strength) Proven track record of active capital management 3Q 2013 TTM GWP 4.

7 Strategy Aligned Toward Shareholder Value Sustain competitive advantage through superior customer service, product innovation and underwriting knowledge Opportunistically grow organically and/or through strategic acquisitions throughout the underwriting cycle Manage capital and risk appropriately / maintain strong ratings Proven ability to attract talent Maximize shareholder value through growth in book value per share 5.

8 Evolution of Growth and Diversification 2,000 1,600 1, Total Risk Management (sold renewal rights in 2005) International Specialty Syndicate 1200 Commercial Specialty $1,153 $1,182 Excess & Surplus Lines $1,056 $903 $788 $622 $1,605 $1,987 $1,530 $1,544 $1,744 $1,864 16% 30% 23% 400 $272 31% /3Q TTM BVPS $24.75 $27.60 $30.45 $35.53 $41.05 $39.62 $47.00 $52.56 $50.55 $55.22 $57.38 Total Capital (Millions) $567 $717 $860 $992 $1,754 $1,763 $1,975 $1,986 $1,840 $1,915 $1, Acquired Colony and Rockwood Founded Trident (Public Entity) 2005 Sold Risk Management business 2007 Rebranded Argo Group Completed acquisition in Bermuda Formed Argo Re 2008 Acquired Lloyd s Syndicate Established local presence in Brazil *Excludes GWP recorded in runoff and corporate & other. 6.

9 Argo Group Business Mix ($1.9B in GWP) Syndicate 1200 International Specialty GWP by Segment 30% 16% 23% 31% GWP by Business Type Reinsurance Excess & Surplus Lines Commercial Specialty Emerging Mkts 8% Mining 4% Alteris 3% Marine & Aerospace Public Entity Specialty Property Bermuda GWP by Product 6% 6% Emerging Markets 4% 22% 31% 18% GWP by Geography 12% Surety 2% Excess & Surplus Lines Other Commercial Primary Insurance London 31% 53% United States *Data is based on TTM as of September 30, Excludes GWP recorded in runoff and corporate & other. 7.

10 Multi-Channel Distribution Strategy 8.

11 Maximizing Shareholder Value BVPS Growth * Book value per common share outstanding: - Adjusted for June 2013 stock dividend restated to reflect adoption of ASU (related to accounting for costs associated with acquiring or renewing insurance contracts); 2007 and prior not restated and prior years adjusted for PXRE merger includes impact of Series A Mandatory Convertible Preferred on an as-if converted basis in. Preferred stock fully converted into common shares as of Dec. 31, Price / book calculated at 52-week high and most recent book value per share. Stock price adjusted for PXRE merger for 2006 and prior years. 9.

12 Substantial Growth and Financial Strength Scale TTM 3Q'13 '00-3Q'13 Factor Gross Written Premiums $186.1 $1,155.6 $1, x Net Written Premiums , x Net Earned Premiums , x Financial Strength TTM 3Q'13 '00-3Q'13 Factor Total Assets $1,565.8 $3,721.5 $6, x Total Investments 1, , , x Shareholder's Equity , x Total Capital , x Debt / Total Capital 0.0% 14.5% 20.8% A.M. Best Rating A A A 10.

13 Overall 3Q YoY Premium Growth Reflects impact of strategic initiatives taken, rate increases and improved retention Excess & Surplus Lines Commercial Specialty $200 $200 $175 $175 $150 $150 $125 $125 $100 $75 $131.7 $139.4 $100 $75 $144.8 $138.6 $ $ International Specialty Syndicate 1200 $100 $200 $90 $175 $80 $70 $60 $50 $60.2 $ $150 $125 $100 $75 $50 $148.2 $ Consolidated GWP up 2.0% in 3Q 2013 vs. 3Q

14 Excess & Surplus Lines Segment (31% of TTM GWP) GWP by Business Unit (TTM 9/30/13) Management Liability 4% Errors & Omissions 5% Allied Medical 5% Environmental 5% Contract 23% Property 12% Casualty 32% Transportation 14% About Us Leader in U.S. Excess & Surplus Lines Strong relationships with national, local and regional wholesale brokers Seasoned U/W expertise is a competitive advantage Target all sizes of non-standard (hard-to-place) risks, with focus on small/medium accounts Underwrites on both admitted & non-admitted basis and across all business enterprises via two brands: Colony Specialty Argo Pro Pre-Tax Operating Income & Combined Ratio $83.2 $140.0 Combined Ratio $120.0 $112.7 PTOI $100.0 $98.3 $80.0 $64.7 $69.1 $74.4 $65.2 $60.0 $40.0 $ % 93.3% 99.6% 97.8% 95.5% 91.9% 90.0% /3Q* *Data is based on YTD as of September 30, Gross Written Premium $726.5 $684.3 $642.3 $573.4 $522.6 $513.5 $ /3Q* 12. *Data is based on TTM as of September 30, 2013.

15 Outperformed E&S Peers in % 103.9% 100.0% New segment management team is formed. 97.8% Year of restructure and implementation of new strategy. 95.7% 98.6% Year of execution on the newly restructured platform. 95.0% 92.7% 91.9% 92.5% 90.0% 87.2% 85.0% 84.4% 80.0% 75.0% Argo E&S Peer Average Top Quartile Peer Average Peers include: WR Berkley Specialty Segment, Alterra US Segment, American Safety E&S Segment, Aspen Insurance Segment, Axis Insurance Segment, Endurance Insurance Segment, HCC US P&C Segment, Markel E&S Segment, Navigators InsuranceSegment, RLI P&C Segments, Arch InsuranceSegment, United NationalInsurance Segment. Top quartile peersincludethe above mentioned segments from WR Berkley, RLI, and HCC. 13.

16 Commercial Specialty (23% of GWP) GWP by Business Unit (TTM 9/30/13) Alteris Managed Premium 25% State Workers Comp Funds 15% Self Insured Public Entity 6% Transportation 3% Other 1% Public Entity (Trident) 25% Pre-Tax Operating Income & Combined Ratio $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $ ($10.0) ($20.0) ($30.0) $61.3 $43.0 $45.8 U.S. Retail (Argo Insurance) 19% Surety 10% Other 3% $33.1 $1.4 Combined Ratio PTOI ($18.9) Grocery 8% $ % 96.5% 96.5% 99.0% 108.3% 115.1% 98.0% Restaurants 5% Dry Cleaners 3% Other Industries 2% About Us Business primarily placed through retail distribution partners Argo Insurance Designs customized commercial insurance programs for grocers, dry cleaners, restaurants and other specialty retail clients Trident 2 largest provider of insurance to small and midsize U.S. public entities Rockwood 2 largest provider of commercial insurance to coal mining industry Alteris fee based business where Argo or others accept the risk $510.9 $475.7 $420.7 $428.1 $428.8 $437.0 $ /3Q* /3Q* 14. *Data is based on YTD as of September 30, Mining (Rockwood) 18% nd nd Gross Written Premium *Data is based on TTM as of September 30, 2013.

17 Syndicate 1200 (30% of GWP) Liability 35% General Liability 16% Prof. Indemnity 13% Directors & Officers 2% Int l Casualty Treaty 2% Other 2% Specialty 14% Cargo 2% Offshore Energy 6% Onshore Energy 4% Yachts & Hulls 2% GWP by Business Unit (TTM 9/30/13) Aerospace 5% Property 47% Property Fac 17% N. Am. & Int l Binders 11% Personal Accident 10% Int l Property Treaty 1% Other 8% About Us Well-established multi-class platform at Lloyd s of London Ranks among the largest Syndicates at Lloyd s by Stamp Capacity Lloyd s market ratings: A (Excellent) by A.M. Best A+ (Strong) by S&P Pre-Tax Operating Income & Combined Ratio $40.0 $30.0 $31.8 $29.1 $ ($5.2) ($20.0) ($40.0) ($28.1) Combined Ratio ($60.0) PTOI ($63.8) ($80.0) 112.3% 95.8% 115.3% 131.7% 96.2% 93.7% /3Q* *Data is based on YTD as of September 30, Gross Written Premium $706.0 $567.6 $533.4 $438.5 $389.9 $ /3Q* 15. *Data is based on TTM as of September 30, 2013.

18 International Specialty (16% of GWP) Brazil 22% Marine Cargo 8% Property & Engineering 5% Motor 5% Financial Lines 4% Excess Casualty 19% GWP by Business Unit (TTM 9/30/13) Professional Liability 11% Reinsurance 48% Property Cat 32% Property Pro Rata 8% Property Risk XS 3% Other Assumed Re 5% About Us Bermuda team underwrites Property cat, short tail per risk and proportional treaty reinsurance worldwide Excess casualty and professional liability for Fortune 1000 accounts Building diversity through international expansion: Established primary operations in Brazil Established operations in Euro zone Established regional office in Dubai Distributes through brokers Pre-Tax Operating Income & Combined Ratio $60.0 $40.0 $ ($20.0) ($40.0) ($60.0) ($80.0) $50.3 $35.7 $23.6 Combined Ratio PTOI $15.7 $10.5 ($67.7) 77.9% 52.3% 72.8% 177.5% 97.1% 95.9% /3Q* *Data is based on YTD as of September 30, Gross Written Premium $301.2 $260.2 $188.9 $198.2 $162.9 $ /3Q* 16. *Data is based on TTM as of September 30, 2013.

19 3Q Operating Results 3Q Q 2012 Gross Written Premiums $495.1 $485.5 Net Written Premiums Earned Premiums Losses and LAE Other Reinsurance-Related Expenses Underwriting, Acquisition and Insurance Expenses Underwriting Income / (Loss) $8.3 ($7.0) Net Investment Income Fee Income, net Interest Expense Operating Income / (Loss) $27.6 $19.1 Foreign Currency Exchange Gain / (Loss) (3.8) (9.7) Net Realized Investment Gains Pre-Tax Income / (Loss) $32.9 $17.7 Income Tax Provision Net Income / (Loss) $31.0 $13.4 Operating Income (Loss) per Common Share (Diluted)¹ $0.80 $0.54 Net Income (Loss) per Common Share (Diluted) $1.12 $0.47 Loss Ratio² 58.6% 62.6% Expense Ratio³ 38.9% 39.7% Combined Ratio 97.5% 102.3% All data in millions except for per share data and ratio calculations. (1) Calculated using an assumed tax rate of 20%. (2) Defined as Losses & LAE / (Earned Premiums less Other Reinsurance-Related Expenses). (3) Defined as Underwriting, Acquisition and Insurance Expenses / (Earned Premiums less Other Reinsurance-Related Expenses). 17.

20 Conservative Investment Strategy As of September 30, 2013 Portfolio Characteristics Duration of 3.0 years Average rating of 17% AA- Book yield of 3.1% Very liquid Conservatively managed Fixed 70% Maturities. Asset Allocation Total: $4.1b 14% Equities 9% Short Term 7% Other Corporate 35%. Fixed Maturities by Type Total: $3.1b* 17% Structured 19% Gov. Equity Investments by Sector 4% Industrials 4% Materials 6% Financials 7% Discretionary 10% Technology Total: $0.6b 2% Utilities & Telecom Energy 23% State/Muni 20%. 9% Short Term 18. *$2.81b in fixed maturities, $0.29b in short term 10% Health Care 10% Funds Consumer Staples 24% 18.

21 Active Capital Management Through share repurchases and dividends, we have returned nearly $300 million of capital and repurchased 24% of shares outstanding from 2010 through Q Q1 13 Q2 13 Q3 13 YTD Q3 13 Total Shares O/S 31,206,796 31,285,469 31,384,271 31,463,460 33,970,108 34,028,008 34,028,008 Less: Treasury Shares 3,363,560 4,971,305 6,459,613 6,785,438 7,213,189 7,408,601 7,408,601 Net Shares 27,843,236 26,314,164 24,924,658 24,678,022 26,756,919 26,619,407 26,619,407 Shares Repurchased 3,265,992 1,607,681 1,488, , , , ,988 7,310,969 As % of Beg. Net Shares 11% 6% 6% 1% 2% 1% 4% 24% Avg. Repurchase Price/sh $32.46 $30.67 $29.97 $37.68 $41.61 $44.01 $40.76 $32.63 Total Repurchased ($mm) $106.0 $49.3 $44.6 $12.3 $17.8 $8.6 $38.7 $238.6 Dividends/sh $0.48 $0.48 $0.48 $0.15 $0.15 $0.15 $0.45 Dividend Payments ($mm) $15.3 $14.2 $13.4 $4.1 $4.0 $4.0 $12.1 $55.0 Repurchases + Dividends ($mm $121.3 $63.5 $58.0 $16.4 $21.8 $12.6 $50.8 $293.6 Note: Not adjusted for June 2013 stock dividend. 19.

22 Stock Price Performance Last 12 Months +60.0% Argo Group Peer Group S&P % +40.0% +36% +30.0% +20.0% +24% +22% +10.0% +0.0% (10.0%) Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Source: SNL Financial (as of 11/1/13). Note: Peer Group consists of: AlliedWorld, American Financial, Arch Capital, Aspen, AXIS Capital, Endurance, Global Indemnity, HCC, Markel, Navigators, OneBeacon, RLI Corp, Selective Group, Tower Group, W.R. Berkley. 20.

23 Compelling Valuation vs. Peer Group 2.0x 1.8x 1.6x Price/Book Jan-00 Nov-13 Argo 0.70x 0.74x Peer Avg. 1.17x 1.16x Difference 0.47x 0.42x 1.4x 1.2x 1.16x 1.0x 0.42x Difference 0.8x 0.74x 0.6x 0.4x 0.2x - Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Argo Peer Group Source: SNL Financial (as of 11/1/13). Note: Price to book is average price/bookacrossallpeer companies. Peer Group consistsof: AlliedWorld, AmericanFinancial, Arch Capital,Aspen, AXIS Capital, Endurance, GlobalIndemnity, HCC, Markel,Navigators,One Beacon, RLI Corp, SelectiveGroup, Tower Group,W.R. Berkley. 21.

24 Well Positioned for Value Creation in 2013 and Beyond We believethat Argo Group has potentialto generatesubstantialvaluefor new and existing investors. Significant changes to premium composition completed Results of re-underwriting and efficiency efforts are emerging in financials Modest pricing increases expected to favorably impact growth and loss ratios Continue to employ and attract some of the best talent in the industry Brazil has traction and is beginning to scale Building more revenue from non-risk bearing MGA strategy Incremental yield improvements can have a favorable impact on ROE Moderate financial leverage Strong balance sheet with adequate reserves and excellent asset quality Compelling investment case Stock trading at a discount to book value and below peers Upside potential as past and ongoing efforts continue 22. (Back To Top)