Argo Group International Holdings, Ltd. has reported its financial results for Q1 of 2023, a combined ratio of 108.1% which has increased by 13.1% points, driven by a higher loss ratio. The loss ratio of 73.0% increased by 14% points, compared to 59.0% in Q1 2022.
The company saw reduced catastrophe losses of about $3.6 million, 59% lower than the Q1 of 2022, this reflects volatility reduction efforts through exiting businesses with property catastrophe exposure. The company’s expense ratio of 35.1% improved by 90 basis points from Q1 of 2022, driven in part by ongoing cost reduction efforts.
On February 2 2023, the company completed the previously announced sale of Argo Underwriting Agency Limited and its Lloyd’s Syndicate 1200 to Westfield. The company’s financial highlights include results for Argo Underwriting Agency Limited and its Lloyd’s Syndicate 1200 up to the closing date.
The company saw gross written premiums of $596.7 million which was a decrease of $123.9 million, or 17.2%, primarily due to businesses the company has exited and sold. The company’s gross premium written within the ongoing business was in line with Q1 of 2022. Earned premiums of $389.9 million decreased by $90.7 million, or 18.9%.
The earned premiums saw an increase of approximately 6.7% within the company’s ongoing business reflecting a business mix shift towards lines of business where the company retains more risk.
In the current accident year, excluding catastrophes loss ratio of 59.6% increased 3.1% points. Although total catastrophe losses were $3.6 million or 0.9% points on the loss ratio. In comparison, catastrophe losses in the Q1 2022 were $8.7 million or 1.8% points on the loss ratio.
The company’s expense ratio of 35.1% saw an improvement of 0.9% points. This improvement was driven by lower underwriting expenses of $35.9 million. The net investment income of $29.7 million decreased by $8.0 million.
While investment income, excluding alternatives, increased $5.8 million due to higher reinvestment rates, the reduction in investment income was attributed to a $13.8 million decrease in alternative investment income compared to Q1 2022.
Net loss attributable to common shareholders was $36.4 million for Q1 2023, compared to a net loss attributable to common shareholders of $3.6 million, for Q1 2022.
The company’s pre-tax net realized investment and other losses for Q1 2023 were mainly attributed to the realization of unrealized investment losses associated with the sale of Argo Underwriting Agency Limited and its Lloyd’s Syndicate.
In addition, the net loss attributable to common shareholders in the Q1 2023 included $11.6 million of non-operating expenses, which were mainly attributed to non-operating legal fees. Q1 2022 reported $7.4 million in non-operating expenses.
Operating loss for the quarter was $10.8 million, compared to operating income of $43.4 million. Annualized operating return on average common shareholders’ equity was (3.9%), a decrease of 15.3 percentage points year-over-year.
Argo’s Executive Chairman and Chief Executive Officer, Thomas A. Bradley commented on the upcoming merger, “We are pleased with the overwhelming shareholder support received for the announced merger with Brookfield Reinsurance at Argo’s special meeting of shareholders held on April 19, 2023. The level of shareholder support reflects investor confidence that this transaction maximizes shareholder value and represents the best path forward for Argo. As we have started working closely with Brookfield Reinsurance on integration planning, we have developed an even greater appreciation for how this partnership will enhance our strong franchise and future growth prospects. While preparations for the merger’s closing move ahead, we remain focused on responding to the needs of customers and business partners. We continue to expect to complete the merger in the second half of 2023, subject to customary closing conditions, including receipt of required regulatory approvals.”
U.S. Operations earned premiums decreased by 3% from Q1 of 2022, while earned premiums from U.S. ongoing business grew approximately 6%, primarily attributed to business lines where the company retains more of the risk on a net basis.
