Bermuda-based specialty P&C insurer Argo has written to its shareholders in an effort to garner support to maintain its current line-up of directors, following calls to instate new ones to address alleged underperformance at the company.
Earlier this month, activist investor Capital Returns Master, Ltd., a Cayman Islands exempted company, and other participants, urged shareholders to elect two new directors at Argo’s upcoming annual general meeting (AGM).
Capital Returns argued that further changes in management were required to restore shareholder confidence, and to help undo “years of underperformance and poor decision-making” at the company.
And further pressure was heaped on Argo the following week, when it emerged that a group of investors are now suing Argo for allegedly misleading them on key performance metrics that led to a huge drop in share price this year.
Argo has since responded to the challenge from Capital Returns in an effort to assure investors that the company has already made the necessary changes to improve its performance and valuation, and to warn that more changes in governance could cause further instability.
Referring to proxy contest initiated by Capital Returns, Argo’s Board wrote: “If successful, we believe this would result in a loss of superior talent and experience on the Board at a critical juncture for the Company and a degradation in the quality of Board dialogue, representing significant risks to your investment.”
The Board also highlighted the “signficant progress” it has made in repositing the company as a focused pure-play U.S. specialty insurer with over $2 billion in premium and renewed momentum.
“We are now better positioned to drive our business strategies and evaluate further strategic opportunities to create shareholder value as a streamlined company,” it stated. “Our Board is committed to maximizing shareholder value and is actively exploring strategic alternatives, including a sale of the Company, for the benefit of all Argo shareholders.”
Argo also claims to have “engaged extensively” with Capital Returns for more than a year to address its concerns, and to have formally interviewed both candidates picked out by the firm, concluding that “neither candidate offers any incremental skills or experience that would be additive to the current Board.”
“However, despite Argo already executing upon the suggestions Capital Returns has previously raised, Capital Returns has insisted on proceeding with a costly proxy contest, and all the while Capital Returns has been selling Argo stock since April 2022,” Argo’s Board noted. “While Argo has moved with speed to best position the Company for long-term success, Capital Returns has failed to present any new ideas with regard to the Company’s strategy or operations that will advance our core objective of maximizing value for shareholders since it filed its preliminary proxy in March 2022.”
The issue will now come to a head at Argo’s annual general meeting scheduled for December 15, 2022, when shareholders will have the opportunity to vote on the composition of the Board, and to show whether they remain convinced of the success of Argo’s current trajectory.
