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Argo considers activist investor board nominations

14th March 2022 - Author: Matt Sheehan

Bermuda-based property and casualty insurer Argo Group has said that it “has interviewed and is in the process of evaluating” two director candidates for its board of directors, nominated by activist investor Capital Returns Management.

argo globalCapital Returns is currently one of Argo’s largest shareholders among actively managed funds and says it lacks confidence in the ability of current leadership to lead the company itowards profitable growth.

The investor has previously urged Argo’s board to conduct a strategic alternatives review and consider a full sale of the company, despite efforts to reform the business over the past two years.

Argo results have continued to struggle, with the company reporting a net loss of $118.8 million in Q4 of 2021, and Capital Returns argues that Argo’s stock price continues to underperform its peers.

“In our view, Argo’s stock price does not accurately reflect its true value because of the Company’s misallocation of capital to international businesses, which have had lackluster performance and are undifferentiated, as well as group-wide dependence on reinsurance and a misguided focus on international growth initiatives,” Capital Returns wrote to Argo shareholders.

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“We believe Argo’s long-established and profitable U.S. specialty business is extremely valuable and possesses significant growth opportunities,” it said, but added: “In our view, the current Board has shown that it is unable to unlock the significant potential of the Company. It has become clear to us that new, capable directors are required if Argo is to reach its potential.”

As such, Capital Returns has put forward two nominees as potential additions to Argo’s Board. These are Capital Returns Founder, President and Chief Investment Officer Ronald D. Bobman and David W. Michelson, President of DWM Consulting.

“In light of the issues we have summarized herein and our unsuccessful attempts at engaging constructively with the Board to enact much-needed change, we have nominated two independent highly qualified director candidates who possess deep experience in the insurance industry and in finance, capital allocation, corporate transactions, strategy and governance,” Capital Returns said.

“If elected, our Nominees will exercise their best judgment and work with the other directors to explore all options to maximize the value of Argo. They will be intensely focused on working to put Argo on the right path.”

In response, Argo has said its board remains open to considering qualified candidates and has is evaluating the nominations of Bobman and Michelson, with a statement due to be presented at its upcoming 2022 AGM.

“While the Company does not comment on discussions with specific shareholders, it is important to note that members of Argo’s Board of Directors and executive leadership team have engaged with Capital Returns numerous times to better understand its perspectives,” Argo added.

“We remain confident in the Company’s strategy for continued growth and will continue to execute our strategic plan and evaluate opportunities to enhance shareholder value.”

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