Argo Group International Holdings, Ltd., the Bermuda based insurance and reinsurance company, has said that it is anticipating net losses of between $10 million and $20 million related to COVID-19 to be recorded in its second quarter earnings.
The company fell to a net loss of $18.8 million in Q1 due to $26.2 million of claims related to the pandemic.
At that time, Argo predicted that the magnitude of future losses related to COVID-19 would be lower than the Q1 figure, and the latest comments now seem to further support that thought.
Most of Argo’s pandemic losses in Q2 are expected to come from contingency business lines primarily in its international operations that provide event cancellation coverage.
The company added that reserving for its COVID-19 losses will also present a unique challenge in of the lack of comparable events.
And these difficulties will be further compounded by the developing nature of the event and emerging claims and coverage issues, including potential judicial, legislative and regulatory risk that could expand coverage beyond what had been contemplated by policy language.
Argo’s latest loss estimates are worth considering in the context of our latest COVID-19 survey results, which asked the market which quarter was likely to see the highest level of reported virus losses.
Roughly a quarter of respondents felt that the highest levels of claims would be seen in the second quarter of the year, while 39.6% forecast the highest losses in Q3, and 19.4% in Q4, with others putting the heaviest impact even into 2021 and 2022.
It’s also notable that this second quarter of elevated losses comes at an already tumultuous time for Argo, following a $900,000 fine by the Securities and Exchange Commission (SEC) last month.
The fine related to $5.3 million in undisclosed benefits paid to former CEO and President Mark E. Watson III, who has since retired from leadership.
Since then, Argo has announced an update to its senior leadership team responsibilities, as well as the departure of its Chief Financial Officer Jay Bullock.