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Advisors ISS and Glass Lewis lend support to Argo Board picks

5th December 2022 - Author: Matt Sheehan

Argo has announced that Institutional Shareholder Services (ISS) and Glass Lewis & Co have both recommended that Argo shareholders vote in support of all director nominees put forward by the company for election at its upcoming annual general meeting (AGM).

argo globalArgo has faced pressure from activist investor Capital Returns in recent months, which has campaigned to convince shareholders to replace two members of Argo’s Board.

Capital Returns charges that Argo continues to underperform and remains severely undervalued in its share price, despite numerous efforts to reposition its management and strategy.

The two firms have been publicly battling to convince shareholders to install their Board picks at the AGM on December 15th.

For Argo, then, this endorsement from ISS and Glass Lewis – the two largest proxy advisory firms – will come as a welcome relief and a sure boost to its sway with investors, who often trust in the judgement of these independent parties to advise on voter issues.

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And in further positive news for Argo, Voce Capital Management, which owns approximately 9.5% of Argo’s common shares, has confirmed that it has voted for all of Argo’s nominees ahead of the AGM.

Voce was itself in the role of activist investor through 2019, when it pressured Argo into making several changes to its Board amid the corporate expense scandal that led to a subpoena by the US Securities and Exchange Commission and the departure of CEO Mark Watson.

On the latest call for change from investors, ISS commented: “The dissident has not made a compelling case for change. The highest priority for ARGO is the ongoing strategic review. There is no reason to believe that the process is not being conducted to advance the best interests of shareholders, and there is no indication that a key competency or perspective is absent from the strategic review committee.”

It added that Argo “appears to have emerged from the tumult of 2019 with a more focused strategy,” and noted that the transition has likely contributed to improved operations.

Likewise, Glass Lewis stated: “Overall, we recognize that steps taken by the incumbent board and management have significantly transformed Argo into a focused U.S. specialty commercial insurance business and the resulting company appears stronger, more efficient and better positioned to generate value for shareholders than the legacy structure, in our view.”

Analysts further suggested that Capital Returns has not offered alternative suggestions to improve Argo beyond pursuing a sale of the whole company, which is already an option under review by Argo.

“Given the level of operational as well as board and management change that has already taken place at Argo over the last several years, we do not believe a further shakeup of the board would be a favorable development at this time,” Glass Lewis concluded.

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