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Argo warns ahead of “unacceptable” $114mn Q4 loss

13th February 2020 - Author: Matt Sheehan

Bermuda-based insurer and reinsurer Argo Group International Holdings, Ltd. has issued a statement ahead of the release of its fourth quarter results, which it has warned will likely contain a $114 million underwriting loss.

argo globalArgo Group Interim CEO Kevin Rehnberg said that the company’s results for both the quarter and the full year are “clearly unacceptable,” with prior and current accident year losses eroding profitability.

Prior accident year losses of $77 million are expected to contribute 18.0 points to Argo’s consolidated loss ratio in Q4, following the result of new information relating to claims trends across various lines of business, as well as a continued review of the international business currently in run-off.

Prior year losses also include the conclusion of Argo’s annual review of run-off reserves, which resulted in a $10 million reserve increase.

Furthermore, Q4 results were affected by current accident year losses of approximately $30 million, or an additional 6 points when compared to the Q3 loss ratio of 59%.

Argo explained that the adjustment reflects a change in actuarial estimates based on a more uncertain claims environment and the recalibration of the current year based on prior accident year loss adjustments.

Catastrophe losses and related reinstatement premiums contributed a further $3 million, or 0.5 points, to the Q4 loss ratio, primarily due to Typhoon Hagibis. Losses were partially offset by a modest reduction to estimates for prior quarter losses.

And finally, additional operating expenses of approximately $12 million, or 2.9 points, are anticipated due to a reduction in workforce, an allowance for doubtful accounts related to the European business unit, and adjustments to underwriting expenses.

“The industry is experiencing rising claims severity in several lines of business,” said Rehnberg. “We have taken appropriate action to adjust our current and prior accident year loss ratios in response to these conditions and to specific information received in the quarter. We believe the actions taken strengthen our balance sheet and position us for a more profitable future.”

“We are experiencing substantial rate increases across our platform, with strong double-digit gains in International and certain U.S. liability lines,” he continued.

“Our capital position remains strong, we are continuing to refine our product strategies and we are well positioned to take advantage of opportunities in the specialty commercial insurance marketplace.”

Non-operating charges to be reflected in the Q4 results include a goodwill impairment of $16 million related to Argo’s European business unit, $18 million of expenses related to losses and impairments on certain long-lived assets, and other corporate expenses of approximately $8 million.

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