Argo Group International Holdings, Ltd. has reported a net loss of $25.1 million for the third-quarter of 2019 versus net income of more than $40 million a year earlier, driven in part by an increase in current and prior accident year losses of $51.8 million.
Argo’s Q3 result was impacted by a $10 million increase in current accident year losses and $41.8 million of prior accident year losses. Argo’s net unfavourable prior accident year reserve development jumped significantly from the $0.3 million recorded in Q3 2018, while for the nine month period it climbed to $61.6 million.
Combined, hurricane Dorian, typhoon Faxai and U.S. weather-related events resulted in catastrophe losses of $19.3 million for the firm in Q3, which is down on the $24.6 million posted a year earlier.
The impacts of both current and prior year loss development combined with approximately $3.7 million of expenses related to the proxy solicitation efforts, and pre-tax net losses related to the changes in the fair value of equity securities of $8.8 million, pushing the firm to a net loss in the third-quarter.
Higher investment income somewhat offset the decline, increasing by 16.2% to more than $40 million, compared with $34.5 million in Q3 2018.
Argo’s combined ratio weakened to 111.4% in the third-quarter of 2019 versus 99.7% a year earlier. The combined ratio was comprised of a higher loss ratio of 75.1% and slightly lower expense ratio of 36.3%.
Argo announced recently that CEO Mark Watson had stepped down with immediate effect, and had been replaced by Kevin J. Rehnberg as Interim CEO.
Commenting on his appointment and the company’s results, Rehnberg said: “It’s an honor to lead Argo Group, and I’m optimistic about the future of the company and opportunities to enhance shareholder value. We see potential for much stronger results – we are clearly not satisfied with losses we experienced in the quarter.
“Across the company, we are growing in profitable areas, remediating challenged lines, and taking steps to control our loss and expense ratios. A significant factor driving the U.S. results is the ongoing investments we’ve made in technology, process improvements, and the strong team we have working at Argo. Our ability to respond faster than our competitors will push us to greater levels of success.”
The re/insurer did expand its gross written premiums in the quarter by 5.1% to $882.7 million, with U.S. operations expanding by 9.8%, somewhat offset by a 1.2% decline in International operations.
In the U.S., Argo’s underwriting income declined by 39% to $19.4 million versus $31.8 million in Q3 2018, driven mostly by unfavourable prior year reserve development, an increase in cat losses and the current accident year ex-CAT loss ratio.
In international business, Argo has reported an underwriting loss of $61.8 million compared with an underwriting loss of $7.7 million a year earlier. This was driven by an increase in the current accident year ex-CAT loss ratio, a higher expense ratio, and the quarter-over-quarter change in net unfavourable prior year reserve development.